HC Deb 31 July 1873 vol 217 cc1389-417

Order for Committee read.


I rise, Sir, for the fifth time, to make the Indian Financial Statement, and am happy to state that that Statement will show a more prosperous condition of affairs in India than it has ever been my lot to describe in this House.

I must, perforce, according to custom and the necessities of the case, divide my subject into three parts, and speak first of the year of Actuals—that is, the year which ended on the 31st of March, 1872; secondly, of the year of the Regular Estimate—that is, the year which ended on the 31st of March, 1873; and thirdly, of the year of the Budget Estimate—that is, the year which will end on the 31st of March, 1874; but I shall endeavour to give those who have hitherto censured me for being too long in my exposition, the contrasted, but doubtless equally keen, satisfaction of censuring me for being too short.

In the year of Actuals—the year ending 31st of March, 1872—we received as income, £50,110,215, and we paid, on account of our Ordinary Expenditure, £46,986,038. Thus our surplus was no less than £3,124,177, the largest ever known in Indian annals since the abolition of the East India Company's monopoly of the China trade in 1834. For this great surplus we have to thank chiefly two things, one within, and one not within our own control—economy and opium.

I come now to the year ending 31st of March, 1873—that is, the year of the Regular Estimate, in which we expect to receive as income, £49,914,000, and to have to pay, on account of our Ordinary Expenditure, £48,422,000, which will leave a surplus of £1,492,000, thanks, again, partly to economy, partly, to a season favourable to the agriculturalist, partly to that mysterious but for the present, friendly opium. [An hon. MEMBER: And providence.] Under providence, no doubt. These expectations are founded, of course, on the approximate accounts for periods of the year ranging from nine to eleven months, on which the Regular Estimate which we submitted to Parliament in May is based; but our latest advices from India do not lead us to believe that they are too sanguine.

I come now to the year passing over our heads, the year of the Budget Estimate. Sir Richard Temple expected, on the 27th of March last, to receive this year £48,286,000, and to have to pay £48,066,000. That is, he expected an equilibrium, supported, as he puts it, by a small surplus of £220,000. A smaller surplus, it must be admitted, than the Secretary of State leas, on various Occasions, pointed out as desirable, and even that surplus must be reduced by the sum of £80,000, omitted in India from the Transport Charges, and the estimated surplus is then £140,000 only. The cause of the smallness of the surplus is the abolition of the Income Tax, which, re-imposed by Lord Mayo in 1869, has, after various vicissitudes familiar to those who watch Indian affairs, been surrendered, at least for the present, by Lord Northbrook. The Income Tax of 1 per cent was expected to bring in £561,000 net in the year of the Regular Estimate, and, taking the same sum as its produce in 1873–4, would have given us a surplus of £692,000 for the year now in progress; just the sort of surplus for which successive Secretaries of State have wished the Government of India to budget. Nevertheless, it has been given up, and the Secretary of State in. Council has sanctioned the policy of the Viceroy. The hon. Member for Brighton (Mr. Fawcett), in replying to me last year, quoted a long chain of authorities against the Income Tax. Some hon. Gentlemen will remember that I carefully guarded myself from saying one word in favour of the maintenance of the Income Tax, having, indeed, a shrewd suspicion that Lord Northbrook would not maintain it; but I disputed most strongly the statement contained in the hon. Member's Motion, that its unsuitability was admitted, and I said, that for every opinion he could cite against it, I could cite another just as good in favour of it. Let us see if that is so. Lord Mayo was sometimes in favour of, sometimes doubtful about, the Income Tax, so we will not count him as on either side; but against Lord Northbrook you may put Lord Lawrence; against Sir Charles Trevelyan you may put Sir Richard Temple; against the hon. Member for Orkney (Mr. Laing) you may put Sir Bartle Frere; against the right hon. Member for Tiverton (Mr. Massey) you may put Mr. Ellis; against Lord Hobart you may put Sir Philip Wodehouse; against Mr. Bayley you may put Lord Napier of Magdala or Sir John Strachey, and so I might go on almost ad infinitum. There is a habit of mind which is a most convenient one in considering financial, and, indeed, all other matters. The habit, I mean, of seeing facts exactly as one would like to see them. That habit is possessed to perfection by those who talk of the extraordinary consensus of opinion against the Income Tax. I can see no such consensus, and have rarely had to consider a question on which there was so much to be said on both sides. Not that I wish to doubt or dispute the wisdom of the course which has been pursued by Lord Northbrook. The line taken by a portion of the Anglo-Indian press, the dislike of many of our own officers to a tax which fell largely on themselves; the auger of the wealthy natives, who desired that the misera contribuens plebs, to use the famous old Hungarian phrase, should continue to be contribuens and misera; lastly, the course taken in this House on more than one occasion by the hon. Member for Brighton, have thrown a heavy weight into the scale against the Income Tax. In a country like India, political considerations—and these the political considerations not of the distant future, but of the passing hour—must often overpower the lessons of merely financial wisdom. Destiny may have in store for us in India a far more brilliant financial future than I dare venture to anticipate; but unless she has, indeed, great surprises for us, I should be extremely sorry to guarantee that the Income Tax will not be re-imposed by some Viceroy or other within the next 10 years. For the moment, however, it has vanished from the number of controverted Indian questions—I wish I could say, abiit ad plures—and so I pass to the last item of information which it is necessary to set forth before the broad outlines of our actual pecuniary position are made apparent to hon. Members—the statement—namely, of the balances which India had at her bankers in England and in India on the 31st of March, 1873.

India had at her bankers in England £2,998,444, or about her normal balance. In India she had 18 crores and 91 lacs of rupees, a sum which, if the rupee were worth 2s., as it used to be, would represent £18,910,000; but as the rupee is only worth 1s. 10½d. or thereabouts at present, does not, of course, represent nearly so much money. Still, it is a larger cash balance than we want, thanks chiefly to our great surpluses, and to our small expenditure on Public Works Extraordinary in the last two years of Actuals; so we propose to bring it down to normal proportions by paying out of it all the remunerative works of the current year to the amount of nearly £4,000,000. It results from what I have said that our pecuniary position for the moment is as follows:—We have a large surplus in the last year of Actuals; a good surplus in the year of the Regular Estimate; an equilibrium supported by a nominal surplus in the year now passing over us; and a large balance at our bankers. The fact of the matter is, that so far as money is concerned, the lines have fallen to us in pleasant places; and it is particularly amusing to observe, that the quasi-panic about the perilous state of Indian finance, of which the hon. Member for Brighton has made himself the mouthpiece, did not begin until after the measures were taken which have ended in sweeping away the deficit that had accumulated in the unlucky three years which ended with the spring of 1869, and originated that quasi-panic. In these three years the deficit on the actual accounts was no less than £6,299,216, while in the three years that followed them—namely, 1869–70, 1870–71, 1871–2, the surpluses on the actual accounts were no less than £4,725,836; so that the year ending 31st March, 1873, the year of the Regular Estimate, in which we expect a surplus of £1,492,038, will very nearly redress the balance, and sweep off the traces of the three years of deficit altogether. That is satisfactory, but there is better behind. If we take the whole series of Indian accounts from the time when Mr. Wilson first took the finances in hand—that is, from 1860 down to the end of the year of the Regular Estimate—we find a surplus of Income over Expenditure during the 13 years of £324,885.

I showed last year, in some detail, that we have, out of income, since 1st May, 1861, expended something like £30,000,000 in roads, canals, harbours, civil buildings, military buildings, State railways, and other works of a permanent character absolutely necessary to India, if she is to rank as a civilized country; so that India's position is that of a landed proprietor who, looking back on the management of his estates for 13 years, finds that he has enormously improved those estates out of his ordinary income, and has also laid by a few thousand pounds in hard cash, a position which cannot be described as an unendurable one. Of course, the enemies of the Indian Government will immediately say—Oh, you are quite forgetting that you have appropriated and used as ordinary income a number of sums which you call windfalls, but which a mercantile concern, if managed according to proper mercantile principles, would have treated as capital, and not have used as income at all. To that I reply—Well, suppose I admit for the sake of argument that what you say is true, as to all these items to which you object, it is indisputable that we have charged against income sums to a very much greater amount than the amount of these disputed items, all of which sums a mercantile concern would have charged against capital and not against income; so that when I only claim to have a surplus of £324,000 on the finances of India, since Mr. Wilson took them in hand, I confess I wonder at my own moderation.

Now, then, that we have a surplus, let us look around and see what there is to make us uneasy for the future, and what there is to re-assure us in the present state of Indian finance. And, first, I will take the dark side of our affairs, and begin with the Guaranteed Railways. The return from these has of late shown hardly any tendency to increase. The passenger traffic improves somewhat, but the goods traffic is nearly stationary, and the worst feature of the case is, that no one seems quite clear about the reason. The most plausible explanation that has come before me is this—that Indian exports consisting chiefly of heavy goods, the railways are not used except when time is an object, and time is only an object when the demand for Indian merchandize is unusually great. It is obvious, however, that this explanation will only apply to railways which have to compete with water carriage. I shall be glad if, in the discussion of to-night, the hon. Member for London (Mr. Crawford), or any other hon. Member, can throw some light on this matter. The heavy charge for Guaranteed Railway interest, estimated at nearly £1,800,000 for the year passing over our heads, is, to my mind, the least satisfactory clement in our financial affairs. But, after all, £1,800,000 is not an intolerable price to pay for the enormous advantages which both Natives and Europeans derive from the Indian railway system, even if the charge were certain to be permanent. Considering that till the other day the average return from the capital invested in English railways was only 4 per cent, a return of 3 per cent from Indian railways can hardly be called disastrous. It is easy to be wise after the event, and to wish that we had laid down all our Indian railways on a narrow gauge. But it is not fair to charge our predecessors with improvidence; because they made the arrangements which it was natural they should make in what may be called the infancy, or at least the youth, of railway enterprise.

Next comes Opium, with regard to the return from which, although, as I have already said, the sales have been in recent years very favourable to us, I cannot rid myself of a certain vague feeling of apprehension. No doubt the analogy of the claret and champagne vineyards may hold good, but that remains to be proved, though certainly up to the present time the most sanguine anticipations have been those most jus- tified by events. On this subject, also, I trust any hon. Member who has special knowledge of the question from the Chinese side may say a word.

Then there are the growing charges of Furloughs and of the Pension List, more especially in relation to uncovenanted civilians—necessary, no doubt, but not the less financially disagreeable. I do not add the prospective demands for military allowances, about which so much has been said; because, as I explained last week, I believe many of the assertions which pass current on this subject are founded on misapprehension, and if peace continues, I feel convinced that considerable though cautious reductions in our military expenditure will be not the least characteristic feature in the rule of Lord Northbrook. Sure I am that nothing can be stronger than the desire of my noble Friend the Secretary of State and of his Council to strengthen the Viceroy's hands on this vital matter. Reckless statements, not to use a stronger term, have been made to the contrary in India, under the veil of the anonymous; but nothing would be easier than to prove by a long catena of Despatches, that military reduction was one of the very first things to which the present Secretary of State called the attention of the Government of India, and that he has gone on pressing it on its attention.

Then it is said that many of the irrigation works will not pay immediately. Of course they will not. No one over dreamt that some of them could pay immediately, unless the people who owned irrigable lands were forced to take the water. Lord Mayo and his Council thought that they should be forced to take the water. The Secretary of State in Council objected to this, thinking it a too despotic measure, and being convinced that it would be better to wait till experience and education had taught the people the value of an insurance against scarcity or famine. But in a country where the Governors are some hundred years at least in advance of the governed in intelligence, must we make no public works till the people can see their advantages and pay for them? That may be right policy; but if it is, nearly everything we have been doing for the last 30 years, with reference to public works, has been wrong. The talk about developing the resources of India has been moonshine. This House has been hopelessly mistaken, and the most obstructive members of the most obstructive days of the old Court of Directors were utterly right. There is every reason to believe that our irrigation works, taken as a whole, will sooner or later, directly or indirectly, pay a handsome percentage on the money they have cost; but, whether they will or not, they must be made, for the very people who now shake their heads over the unprofitable expenditure would be the first to shriek and rage if a new famine caught us napping. Our position in India is an anomaly, and must have many anomalous results.

I turn now to the brighter side of our affairs, and first I will take the elasticity of our Revenue. The hon. Member for Brighton does not agree with me in thinking that our Revenue is elastic; but what are the facts? The Land Revenue has increased since 1868–9 by £594,166; the Salt Revenue has increased by £378,355; the Opium Revenue has increased by £800,494; the Excise Revenue has increased by £85,373; and all this increase has been natural, not the result of new taxes, except in so far as the total is swelled by an increase under salt, the duty on which was, during the Viceroyalty of Lord Mayo, increased at Madras and Bombay by 5 annas a maund, say 7½d. on 82 lbs. That increase accounts for about £200,000. There is no important decrease of Revenue to be set against this increase of about £1,800,000 per annum, or £1,600,000, if we put out of sight that part of the increase under salt to which I have just alluded.

So much for improved probabilities of receipt. Turning to the other side of the account, I am again so unfortunate as to take precisely the opposite view to that taken by the hon. Member for Brighton. That hon. Member informed the House last year that our expenditure is very elastic. I am happy to say that some of it is very elastic; because if we are not in India to civilize and raise India—things which cannot be done without spending a great deal of money—we had better leave it as soon as we can wind up our affairs. But is all our expenditure so very elastic in the sense of rising? If so, how comes it that we spent £52,036,721 in 1868–9, and only £46,986,038 in the last year of Actuals. Partly, of course, because £700,000 of expenditure, which used to be paid out of the Imperial Exchequer, are now paid out of provincial Exchequers, which receive corresponding receipts. Still, when we have allowed for that fact, our expenditure in the last year of Actuals is less than the expenditure of 1868–9 by more than £4,250,000.

Here are the figures for the last four years. In the year ending 31st March, 1869, there was spent £52,036,721; in the year ending 31st March, 1870, we spent £50,782,412; in the year ending 31st March, 1871, we spent £49,930,696; and in the year ending 31st March, 1872, we spent £46,986,038. So that the expenditure of India was less in the year ending 31st March, 1872, than it was in the year ending 31st March, 1869, by £5,050,683. Deduct from this the £700,000 for Provincial Services, and the result is a net decrease of £4,350,683. Look even at our Military expenditure—the most troublesome part of our expenditure. In the financial year ending 31st March, 1869, £16,269,581 were spent, but in the last year of Actuals only £15,678,112 were spent—that is to say, the expenditure was less by £591,469, or say £600,000, and the estimated decrease in the year of the Regular and Budget Estimate is even greater.

Look now at our transactions with the Railways, as affected by the exchanges. I mentioned on the 3rd of August, 1869, that, whereas we had for many years been losing heavily in our transactions with the Guaranteed Railway Companies, by loss on exchange, our annually recurring drain on that account would ere long be replaced by an annual influx. And so it has turned out, for the very next year showed £40,000 to the good under this head. The next year showed £131,000, and the last year of Actuals £209,000, while the estimated gain in the year of the Regular Estimate is still higher.

Take, then, the interest on the Debt. In 1871–2 it amounted to nearly £6,000,000, that is to say, to £5,966,299. In 1873–4 it is estimated at £5,770,000; and in 1874–5 an additional £450,000 will come off; so that it will be something like £5,320,000 for that year, or less than it was in 1867–8 by a good deal over £400,000.

I have now put before the Committee our actual position at this moment, and have selected, in rapid outline, what appear to me to be the least hopeful and what appear to me to be the most hopeful features in our Indian financial situation. I think that most persons will agree with me that the more hopeful features predominate. I know that. I have been accused of being unduly sanguine, and of taking a couleur de rose view of Indian finance. Nothing would be easier, if it were worth while, than to show, by reference to Hansard, that there is not a shadow of truth in such an accusation; but that, on the contrary, I have, on more than one occasion, protested in so many words against taking a couleur de rose view of Indian finance, and have dwelt upon the dangers likely to arise from doing so. In truth, one who holds the office that I hold has no temptation to do otherwise. The fact that Indian subjects are to most people so ghastlily dull has its advantages, in that the person who deals with them in this House on behalf of the Government is forced, by the very nature of things to pique himself upon being right, not upon being in accordance with those who imagine that they reflect public opinion in relation to Indian affairs. Imagine, I say, that they reflect it; for those do public opinion much wrong who confound it with the capricious ebb and flow of speculative exaggeration about India, with which we are familiar on platforms and in the Press. The truest gauge of public opinion about India is to be found, after all, in the state of the market for our securities, and that, I am happy to say, is all we could desire. We have the second host credit in the world—and that, considering what was the state of India before we went there, and at what rate the Company, in the old days, sometimes had to borrow, is surely something to be proud of.

And, now, I will beg hon. Members to look at the, clock, and to bear me witness that I have not spoken three hours and a-half in making my Indian Financial Statement in 1873, as I was said, with equal correctness, to have done in 1872. For I have now finished the Indian Financial Statement properly so called, and what I shall add will refer to the Motion which the hon. Member for Brighton has put upon the Paper.

Hon. Gentlemen will observe that the course which the hon. Member has taken this year, and took last, puts me in a dilemma; for either I must allow our discussion to be taken without laying before the House the actual facts of the Indian financial situation, or I must combine my Financial Statement with observations upon the hon. Member's Motion. Again, if I follow the hon. Member, the necessities of debate would oblige me to put what I have to say about the existing financial situation in a different form from that which I deliberately believe to be the most proper form for submitting it the House, while if I precede the hon. Member I can only give a general answer to his speech. So true it is that the forms of this House, strange as they often appear to be, are usually the result of much thought and experience, and that any departure from our Parliamentary convenances, however convenient it may be to an individual, is hurtful to that transaction of Public Business which is the object of our coming together. Without further preface, then, I turn to the hon. Member's Motion, the words of which are as follows:— That, in the opinion of this House, the present constitution of the Government of India fails to secure an efficient or economical management of its finances, and that this House views with apprehension the state of local taxation in that Country, and is of opinion that its financial condition must be regarded as unsatisfactory so long as the Income Tax forms its only financial reserve. First, then, as to the present constitution of the Government of India failing to secure an efficient or economical management of its finances. Now, that sweeping proposition must refer either to the Government of India in India, or to the Government of India at home, or to both of these bodies. I admit that with regard to the Government of India in India, the control of the Financial Member of Council over the other Departments is not so great as that of the Treasury in England; but the House must recollect that the Government of India, unlike the Government of England, is a personal Government, and that it pre-supposes that the power in the last resort to control all Departments must be in the hands of the Governor General. I do not say that that is an ideal Government for India or for any other country; but it is clearly the only possible Government for India at this moment. In the old days of the Company, finance was much the weakest part of our Indian affairs; but it has been steadily getting into better and better order, and I defy anyone to point to any moment in our history when it has been so well organized as it is now. The whole tendency of things in India is towards increased watchfulness over the finances and increased economy. The figures which I have laid before the House prove it to demonstration, and greater care is being constantly given not only to the larger questions of finance, but to the form of the accounts. I do not say that they have arrived at perfection even now. I think it is more than probable that some good suggestions will be made by, and some improved practices date from, the Committee which is now sitting; but I do say, that the progress from better to better has been steady, and during the last 13 years has been without a check. I confess that, looking at the working of the Indian Government in its relation to finance, I do not see any improvement that can be introduced which is not in the way of being introduced. I am not talking of the distant future, and in a country which is changing so rapidly as India, 10 years hence is the distant future; but for the present, for the next few years, I see nothing that is not in the way of being done with regard to our finance which it would be at once wise and possible to do. If the Committee now sitting, when it has taken all its evidence, has any suggestions to make, of course whatever Government is in power will give them most careful and respectful attention; but no new suggestions of any value have to the best of my knowledge and belief been made by witnesses who have come before the Committee; for those hon. Members who sit upon that Committee are aware that the improved form of the accounts laid before Parliament is due to the Committee itself, and, above all, to my right hon. Friend the Chairman (Mr. Dodson), who has, if I may venture to express an opinion, so admirably presided over our deliberations.

Turning next to the allegation that the Government of India in England fails to secure an efficient or economical management of its finances—if that allegation is intended to be made, I entirely deny the truth of the proposition. I think the form of Government which was settled by Parliament in 1858 was in most respects a wise Government. In the constitution of that Government there was one very serious mistake, and that was that members of Council were appointed for life. Against that unfortunate provision of the Act of 1858, I divided, as a private Member at the time, and it was my agreeable duty eleven years afterwards to pass a Bill through this House which put it and some other matters on a better footing. Making allowance, however, for this one serious error, I should say that the Council had worked extremely well, and that it had exercised a very efficient supervision over the finances of India, except in the very few cases in which Parliament has stepped in and overruled it. Hon. Members should refer to the statements that were made upon this subject to the East India Finance Committee by Lord Lawrence, than whom no man had so good a right to express an opinion, because he spent five years as a Member of Council, and then spent five years as Governor General, so that he saw the working of the Council both from the inside and from the out. I will not, however, say anything more on this head. If anyone, after reading what Lord Lawrence told us on the subject, can attach any importance to the statements against which Lord Lawrence's remarks upon this head are principally directed, he will naturally not attach much importance to anything that I can advance. But the hon. Member goes on to say, that the House views with apprehension our local taxation. Well, all I can reply is, that if the House views with apprehension our Indian local taxation, it must be very easily frightened. Why, what does our local taxation in India amount to? What is the local taxation raised in that vast continent from a population which we are learning to believe, as the results of the recent Census come out, numbers something like 200,000,000 in British territory alone. Our local taxation amounts to only £2,500,000 per annum, including all our municipalities and all our Presidency towns, and our provincial taxation—that is, the taxation which was transferred by Lord Mayo from the Imperial to the Provincial Budgets—amounts to about £700,000. Can that seriously be said to be a heavy local and provincial taxation to be raised upon a country as large as Europe without Russia? Last year, to be quite safe, not having the exact figures, I said it was on an outside estimate, under £5,000,000; but it is really very much under £4,000,000.

Have hon. Members ever read the Revenue Law of Menu, as quoted by Mr. Wilson in his great speech of the 18th of February, 1860?— The revenue consists of a share of grain and of all other agricultural produce; taxes on commerce; a very small annual imposition on petty traders and shopkeepers; and a forced service of a day in each month by handicraftsmen. The merchants are to be taxed on a consideration of the prime cost of their commodities, the expense of travelling, and their net profits. On cattle, gems, gold, and silver, added each year to the capital, one fiftieth, which, in time of war or invasion, may be increased to one-twentieth. On grain, one-twelfth, one-eighth, one-sixth, according to the soil, and the labour necessary to cultivate it. This also may be raised in cases of emergency, even as far as one-fourth, and must always have been the most important item in public revenue. On the clear annual increase of trees, flesh meat, honey, perfumes, and several other natural productions and manufactures, one-sixth. The King is also entitled to 20 per cent on the profit of all sales. Escheats, for want of heirs, have been mentioned as being his, and so also is all property to which no owner appears within three years proclamation. Besides possessing mines of his own, he is entitled to half of the precious metals in the earth. After this, is it surprising that Mr. Wilson should add— I should imagine the revenue laws of the ancient Hindoos must have been contributed to the sacred compiler by some very needy finance minister of the day. And yet we are accused of being unduly severe in our taxation, when from a country where a taxation like this is permitted in the books of the golden age, in a country where every financial device was adopted before our coming even by the most virtuous minister, we raise a taxation spent exclusively in increasing the prosperity of the country, of about 3s. 10½d. per head, even if you consider the rupee to be worth 2s., but at present, remember, it is only worth 1s. 10½d. That makes a difference of about 3d. Three shillings and sevenpence-halfpenny per head is the whole amount of the taxation raised in India by the British, inclusive of the land revenue. That is a fact which seems to me one of the most creditable that has ever been told of any nation. What we do in return for that taxation, the annual "Statement of Moral and Material Pro- gress" is there to show. Then the hon. Member proceeds to say that the financial condition of India must be regarded as unsatisfactory, so long as the Income Tax remains our only financial reserve. But in the first place, the Income Tax is not our only financial reserve; and in the next place, if it were, I do not for a moment admit that the Income Tax is a bad financial reserve. I have already said all I care on this occasion to say about the Income Tax; because the controversy having been settled for the time, I do not want to stir its embers. It is an open secret that the Governor General's Council was very much divided indeed upon the subject. But it will be time enough to defend the Income Tax when it is again introduced. For the present, I am quite willing to allow those who are opposed to it to seem to have the best of the argument. It must, however, be within the knowledge of the hon. Member, that some of the people who were most hostile to the Income Tax were strong partizans of other taxes by which they hoped to fill the deficit caused by the abolition of the Income Tax. Mr. Hunter, for example, a violent opponent of the Income Tax, has advocated a tax upon pân, the leaf which is chewed along with the betel nut. Others are in favour of a tobacco tax, and we have seen licence taxes and certificate taxes actually in force. Others, again, would raise the salt tax in Madras and Bombay, while succession duties, and a capitation tax, like that in Burmah, have all had their advocates. I have no hesitation in saying that I prefer the Income Tax to any of these; but then I am distinctly a friend to the Income Tax, and if the Governor General could have been guided by mere financial as distinguished from political considerations, I should like to have seen him abolish the inland duties on sugar, deal with the Salt Tax, thereby greatly curtailing the salt line, and perhaps even abolish the export duty on rice, before he had reduced the Income Tax below 2 per cent. Our information from India leads us to believe that it is the intention of Lord Northbrook to grapple with several of these questions during his term of office. For obvious reasons I will not say which; but I mention the fact, in order to show that neither he nor we share the hon. Member's alarm about the state of our finances. Now, as ever since I have been at the India Office, I have looked with great hope towards the possibility of further military reduction, and the latest news which we have about Opium gives us every reason to hope that that important resource will not fail us just at the moment when the sudden loss of the Income Tax makes us feel grave, though not uneasy.

These are the general considerations which I have to offer to the House in reply to the hon. Member who is about to intervene in order to prevent us going into Committee. I have no doubt he will ransack the evidence that has been produced before the Finance Committee, to find what he supposes to be mistakes on the part of the Indian Government hero and in India during the last 15 years, and doubtless he will hit some blots. No one pretends that the Indian Government does not make mistakes; but I shall be surprised indeed if he can bring forward anything of sufficient importance to support the huge superstructure of the Resolution which he proposes to build up, and to build up while the Committee of which he is a Member is painfully engaged in collecting evidence through which it may arrive at some conclusion. For what possible object that Committee exists at all, if the hon. Member is to ask the House to take out of its hands the question which the House directed the said Committee to investigate is more than I can understand. That, however, the hon. Member should propose so strange a course to the House is a matter which the House and the Committee and the hon. Member must settle between them. It is no affair of mine, except in so far as I form a fractional part both of the House and of its much-enduring Committee. I move, Sir, that you do now leave the Chair.

Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—(Mr. Grant Duff.)


moved the adjournment of the debate.

Motion made, and Question proposed, "That the Debate be now adjourned."—(Mr. Fawcett.)


urged that the discussion upon this most important subject ought not to be stopped at a quarter-past 11. He thought his hon. Friend might very well proceed to address the House at that period.


appealed to the Speaker whether he should lose his right of speaking on the main subject if he made one or two observations to explain why he moved the adjournment of the debate. He made that Motion simply to consult the convenience of the House.


said, the hon. Gentleman would be entitled to speak on the Motion he had made for the adjournment of the debate, but he could not speak again on that question. If the House allowed the hon. Gentleman to withdraw his Motion he might then speak on the Main Question.

Motion, by leave, withdrawn.

Question again proposed.


said, the reason why he wished for the adjournment of the debate was because he felt it impossible to confine his remarks within such a time as would suit the convenience of the House. He had a great deal to say upon India, and he felt it his duty to say it. Some 13 years ago the Queen, in the name of the English nation, laid down the principle that they were bound by the most sacred of all obligations to attend to the interests of her Indian subjects. The announcement of that principle was accepted with the greatest satisfaction from one end of India to the other. Had they acted on that principle? On the contrary, Indian affairs were treated with a contemptuous neglect which he ventured to say would not be shown towards the most insignificant question in that House. From a quarter past 10 o'clock in the fag-end of the Session, that being the only evening which was allotted to Indian affairs, was all that was vouchsafed by the Government of the time of the House for the consideration of this subject. The news would spread throughout the length and breadth of India, and the House might depend upon it that they had better postpone any subject of legislation than give the people of India the impression, which it would be very difficult to remove, that they did not give adequate consideration to their affairs. The Under Secretary had been kind enough to describe him as the spokesman of financial panics. He was not the spokesman of financial panics; but he would tell the Under Secretary what he meant to do in future as long as he was a Member of the House—he would do everything that an independent Member could do to arouse an adequate amount of interest in Indian affairs. They might depend upon it that if they went on in the future as they had done in the past, they would not be able to maintain their Empire in India, but would alienate the Indian people. Last year he promised that he would devote all the time at his disposal to Indian affairs, and the result had been that he could not now remain silent, although he was unwilling to trespass on the indulgence of the House. He would proceed in the course of these remarks to prove, in spite of what had been said by the Under Secretary, that the situation of the Government of India at the present time was such as to offer no adequate guarantee for efficiency and economy, and that extravagance ensued. He would also bring forward facts to show that the state of Local Taxation in India should excite their grave apprehension, and if he wanted a witness to that he could confidently appeal to the right hon. Gentleman who had presided over the East India (Finance) Committee (Mr. Ayrton) with so much courtesy, urbanity, and impartiality. Although that right hon. Gentleman had been the Chairman of another Committee, he, unlike the Under Secretary, had never been absent from the Finance Committee. Again, this other conclusion had been impressed upon his mind—that the financial position of India could not be regarded as satisfactory, the Income Tax being the only financial reserve. He (Mr. Fawcett) was not going to dispute the accuracy of the Under Secretary's figures; he would only say this much—that many different conclusions could be deduced from the same figures. He would begin with the subject of the Income Tax. If there was any truth in the doctrines which the Under Secretary laid clown last year with reference to the Income Tax, then the Government had been guilty of one of the grossest of financial blunders. Last year the Under Secretary said that the income Tax was the only means of taxing the rich, and now he said that he had given it up, not for financial, but for political reasons, in consequence of the abuses attending its collection, and in consequence of the discontent it produced. There could not be a grosser blunder than to assume that because a certain tax was suited to one country that therefore it was suited to another, and there was overwhelming evidence to prove that the Income Tax was entirely unsuited to India. If that tax were suitable to the country then the Government had been guilty of a gross blunder in repealing it. The Under Secretary had cited authorities of Indian Financiers in favour of the tax, and in reply he would cite the authority of three men who were successively Finance Ministers in India. The first abandoned an office, second only to that of the Governor General, rather than be a party to levying the Income Tax on the people of India; the next had stated that it was impossible to conceive a more obnoxious and objectionable tax; and his successor had declared that no power on earth would induce him to remain in office if he were compelled to impose the Income Tax as a permanent source of revenue. The Tinder Secretary had quoted the authority of Lord Lawrence in favour of the tax; but he had omitted to mention that Lord Lawrence had added, no other tax had produced more discontent in India. The Income Tax in the past had been constantly varying in India, and that accounted for the discontent of which Lord Lawrence spoke. The Indian people never knew from one year to another what Income Tax they would have to pay. The Under Secretary had said that in a few years it might be necessary to re-impose the tax; but he was prepared to show that if the present extravagance of financial administration continued, the re-imposition of that tax would be not merely possible but absolutely certain. The Under Secretary had taunted him that evening with being the spokesman of financial panic; and although he last year announced that what he should have to say upon the subject would not be of the slightest importance, this year he appeared to entertain a contrary opinion. About four years since he (Mr. Fawcett) attempted to arouse more interest in Indian affairs in that House than had previously existed, by the proposal to appoint a Select Committee, and from that time there had been a reduction of expenditure to the amount of £6,000,000 per annum, which was an inducement to him to persevere in the course he had marked out for himself. The Under Secretary had greatly overstated his ease in stating that the watchfulness of Parliament had led to the reduction, for he ventured to assert that the ablest financier in the country—not even the Prime Minister himself—could tell, if he devoted six months attention to Indian accounts, to what extent the expenditure of India had been reduced during the last three or four years. Indian finance had a confusion cast over it, owing to the unintelligible distinction that was made between Public Works Ordinary and Public Works Extraordinary, and to the appropriation of capital to income. Then, again, the fluctuations of cash balances to the extent of £16,000,000 within the same period of time, gave an unbounded field for exploits in financial ingenuity, and until they knew the nature of the cash balances it was impossible to place any confidence in the statements of expenditure and revenue. Nobody had been able to give an intelligible explanation of what the cash balances were—they were, in fact, a hotch-potch into which everything was thrown. Then the proceeds of the sale of Government land in India had been improperly transferred to the revenue account in defiance of the special Act which declared that under no circumstances should the proceeds of land be appropriated to income. That Act was disregarded, and it seemed to him that the appropriation of capital to income which, according to the evidence given before the Committee, was practised in India was not characteristic of the conduct of a prudent Government, but rather of the conduct of a spendthrift who grasped every farthing on which he could lay hand to meet his current expenditure. A great sensation had been created lately in this country by what was known as the Post Office scandal, which simply consisted of the transference of capital in one form to capital in another. Yet so serious was the appropriation considered to be that the Government expected a Vote of Censure upon it. Now, Governments had before to-day resigned on a less Vote of Censure, and if the present Government thought the proceeding to which he was referring so wrong that they submitted to be censured like lambs, what language, he should like to know, could properly characterize the far more grave proceedings which happened every year in India of appropriating capital to income? The Committee would now, he thought, understand why the subject had been passed by so lightly by the Under Secretary of State. But there was another reason why no confidence could be placed in the existence of a surplus in any particular year in India. Nobody, he believed, could tell to what an extent a comparatively favourable balance between expenditure and revenue was created by the suspension for a time of public works. No Department in India had been characterized by so much waste, mismanagement and extravagance as the Public Works Department, and nothing had contributed so much to that result as the impulsiveness with which public works had been undertaken, and the suddenness with which they had been abandoned in order to obtain a favourable balance of expenditure and revenue. The Under Secretary had stated that during the present year £4,500,000 out of the cash balances had been expended on Public Works Extraordinary. But the Government would not have that resource next year, and where then, he should like to know, was the money to be procured to continue those works unless it was by borrowing? The resource, in short, was simply temporary, and there would be a deficiency of £4,500,000 next year unless the system of borrowing were to be resorted to. The Under Secretary had, he might add, recommended to hon. Members a certain course of reading during the Recess. He had advised them to read the evidence of Lord Lawrence. That reading would, he hoped, be supplemented by an examination of the evidence of General Strachey. He could multiply instances out of number of the waste and mismanagement of the Department of Public Works, and he would give one short narrative, every fact of which was proved by official testimony. The Sanger Barracks were constructed by the Department. They cost £150,000, and it took four years and a half to complete them. When they were finished it was found out that they were so badly constructed that the Government found the best thing they could do was to pull them down. And what led to that inevitable result? Those works were watched over by an European Engineer officer with two European subordinates. Now, it appeared that not one of those persons had the slightest experience in masonry work, and it was for that reason, ap- parently, that they had been selected. The works were found to be so rotten that one could stick a walking-stick into them up to the arm, and the mortar dropped away like corn from a hopper. Indeed, the Committee could have no idea of the amount of officialism connected with the subject. Above the European Engineer there was a Superintendent Engineer, who visited the works only three times while they were being constructed, and who wrote only one report. He, again, was presided over by the local Engineer of the district, who never visited the works once, and who had not thought it worth while to write a report at all. Not a bit of the work, he might add, was undertaken by contract. It was all committed to the hands of the Public Works Department, to which it was now proposed to intrust the expenditure of £70,000,000 of the money of the people of India. But, leaving that point, he would direct his observations to some more general principles bearing upon the financial position of India. There was a broad distinction between the financial position of that country and that of England. In England the revenue went on increasing so rapidly that the income derived from the Income Tax was 100 per cent more than when the tax was originally imposed, while the tea, spirit, sugar, and tobacco duties brought in a greatly larger amount. The result was that the great expenditure of this country, as had frequently been pointed out by the Prime Minister—and no one could deal with the figures in a more masterly way—had been accompanied by a reduction of taxation. So that while we were spending £70,000,000 the country was, he believed, less heavily taxed to the extent of £40,000,000 than when we were spending only £50,000,000. That, however, was not the ease in India, although, no doubt, there was an increase in the land revenue. He would quote the words of one the loss of whom they all regretted, and who many of them knew intimately—Lord Mayo was no alarmist; he was a man of courage, and not the spokesman of a financial panic; but he declared that the increase of expenditure in India, unlike that of England, was producing a wide feeling of discontent from one end of the Empire to the other. That testimony had been supplemented by Lord Napier, who declared that in consequence of the increase of expenditure there was probably no time in the history of our dominion when we had so small a hold on the affections of the people. The military expenditure of India was to a great extent under the control of the War Office and the Horse Guards, and what might be an excusable piece of expenditure in a rich country like this would be a monstrous act of extravagance in the case of a poor country like India. Any day, from some emergency arising from war or unpropitious seasons, we might have to raise £5,000,000 of additional revenue in India. But suppose we had to raise such a sum in England, there were 20 different ways in which it might be done. A Minister who had the confidence of this country might, in case of a great emergency, raise £10,000,000, £15,000,000, or £20,000,000 additional revenue without for one moment affecting the stability of the Government. But how could they raise £5,000,000 of additional revenue in India? He had examined Lord Lawrence at length on this point, and what did he say? The land revenue was only susceptible of a very small increase. He next referred to the tax on opium; but Lord Lawrence said the opium revenue was much more likely to decrease than to increase. The Under Secretary had stated that in regard to opium we had Providence on our side; he (Mr. Fawcett) thought it was exactly the reverse. The Government of China, finding that their efforts to discourage the growth of opium were defeated by our persistent determination to force it on the people of that country, would sanction the growth of it in China itself. Then as to salt, could they get more revenue out of it? The Lieutenant Governor of Bengal said the other day that he would rather have his right hand cut off than be a party to increase the salt duty. Lord Hobart expressed a similar opinion. An increase of 18 per cent on salt only produced an increase of 12 per cent. The heavy duty on salt was checking consumption, and there was an extraordinary unanimity of opinion in India that owing to the heavy duty on salt there was great disease among the cattle of that country. The next item of revenue was the Customs, which only yielded £2,750,000, which to a great extent was paid by the European, not the native population. Lord Lawrence did not know a single Customs duty that could be increased. He asked Lord Lawrence whether he could suggest an existing tax in India that could be increased, and he could not; could he suggest the imposition of any new tax to raise additional revenue, and the reply was "No." Under those circumstances, he thought that he had proved his position—that if any additional income was required in India the only reserve from which it could be supplied was the Income Tax. Unanswerable arguments had been given against a tobacco tax, and lately the corn tax had been abandoned. He now came to the subject of Local Taxation—one which the Under Secretary had passed over I very glibly. In England, if it were proposed to increase local taxation, it could only be levied on land and houses. A man's income or his furniture could not be rated. That was not so in India. There local taxation was not only levied on land and houses, but upon everything a man possessed—the clothes he wore, his food, his furniture, his income, wore all liable. Would such a state of things be tolerated for a moment in England? But, said the Under Secretary, local taxation in India only produced £3,200,000. He forgot to remind the House of the extraordinary difference between the wealth of India and of England. Here an income tax of 2d. in the pound produced nearly £4,000,000; there it would produce only £500,000. The population of India was therefore eight times poorer than that of England. In other words, in a country seven times as great as England, a source of taxation only produced one-eighth what it would in England. Nothing could be more delusive than to make comparisons between the taxation of two countries unless the relative wealth of the two were taken into account. The highest authority on such a subject, Lord Lawrence, said that the mass of the people were so poor that they could barely obtain the means of a miserable existence. Not only did the Indian system of local taxation press with great cruelty upon the people, but it seemed to have been devised with a view to producing the maximum amount of torment and terror. Was the Under Secretary aware that in Bombay an Act existed—the Act was suspended merely, not repealed; it was held over the people's heads, and might be enforced any day— authorizing the imposition of an income tax on incomes of £5. In the history of the world was so monstrous a tax ever before devised by human perversity? While the extravagance to which he referred was being practised, the people of India, who found the money that was being squandered, were suffering under a taxation as grievous as any that human ingenuity had ever conceived. It might be asked how it was that local taxation had of late years occupied so permanent a position, and his answer was that the decentralization scheme of Lord Mayo was responsible for it all. The scheme involved the local authorities in an expenditure so vast they had been compelled to very considerably increase the local imposts in order to meet it. Decentralization was all very well in England, where to a great extent the prosperity and power of the country depended upon its local institutions; but it was altogether out of place in India, where the circumstances were altogether different. He might be asked to point out remedies for the state of things of which he complained, and he would endeavour to do so, but not until after he had pointed out the objectionable features of the case as they appeared to him. The most striking fact, as it appeared to him, was to be found in the mode in which the country was governed. The Secretary of State in England and his Under Secretary were at the head of affairs, although nominally the supreme control was in the hands of the Governor General; and therefore it would be seen that the destinies of India were in the hands of high officials who had not been nominated or appointed in any way by the population they ruled, but were Members of the Home Government, and might be removed, as they had been elected, by the will of the English people. There was nothing in the present administration of India to supply the place of that protection and watchfulness which India enjoyed under the East India Company. It might be said that no proofs could be adduced to show that the interests of India were sacrificed to those of England. One of the oldest Indian officials had, however, declared that under the present system he scarcely knew an instance in which the interests of India did not go to the wall when they conflicted with those of England. Sir Charles Trevelyan went out to India at the age of 17. When he returned to this country he became Permanent Secretary to the Treasury. He afterwards returned to India, and when he saw the system of government which had replaced that of the East India Company he averred that things were done now that could never have been done in the days of that Company, and that India was made to pay charges that would formerly have been out of the question. Formerly, under the Company, her finances were managed with remarkable frugality; now they were administered with reckless extravagance. Take the payments made by India for the Malta and Alexandria Telegraph, the payment by India of a portion of the expenses of the Abyssinian War, with which she had nothing to do, and other smaller charges of a like character. Why was India made to pay those charges? Because she was unrepresented. The Duke of Edinburgh not long since visited India, and India was made to pay the travelling expenses of his companions from England. It was no defence to say that the sum was small, for sometimes small impositions of this kind produced more discontent than larger grievances. India had suffered to the extent of millions of money because she had not been protected against certain commercial interests in this country. Scheme after scheme had been guaranteed and 5 per cent had been assured upon million after million upon contracts carelessly drawn. The Orissa Company had been bought at £450,000 more than its market value. The Madras Irrigation Company had a guarantee of 5 per cent upon £1,600,000, but had never returned 1s. of interest. About £8,000,000 had been expended upon the Scinde, Punjaub, and Delhi Railway, which returned 12s. 6d. per cent upon the outlay. India bore the loss of these guarantees, and the £100 shares of these companies so disastrous to India figured in our Stock Exchange lists at from £4 to £7 premium. The Under Secretary stated that the Secretary of State for India was solicitous to reduce the military expenditure in India; but whenever he received from India a suggestion for its reduction he had to forward it to the War Office and the Horse Guards, and they invariably considered the question with reference to English and not to Indian interests. As a proof of the waste and extravagance of the military expenditure it was only necessary to state that during the last ten years, although the European forces had been decreased by 12,000 men and the Native troops by 16,000 men, yet the military expenditure was positively £1,500,000 more than before that reduction was made. To one enormity of Indian military expenditure he would call the attention of the House. In the Staff Corps an officer might enter after three years' active service, and he might rise to the rank of Major General and retire on a pension of £1,200 a year, without having ever done a day's work other than civilian. There was another point connected with military expenditure, which showed the unhappy position of India at the present time. India was charged by the War Office an extravagant price for recruits. She was made to pay at least one-third more than if she obtained them for herself. This had been protested against; but for six months no notice had been taken of the protest by the War Office. The Indian Council had disappointed the expectations of many of its friends. How was that to be remedied? Not by abolishing it, but by strengthening its hands. The proceedings of the Council should be published. If that were done it would form an intelligible basis on which to found our interference in Indian affairs. The whole future of our dominion in India simply depended on the extent to which the House in future was prepared to a greater extent to recognize its responsibility to India. There was no excuse, in his opinion, for continuing the Governorship of either Madras or Bombay. They should be governed as the Punjaub was, by Lieutenant Governors, with regard to whom he might observe that they were almost invariably appointed by the Governor General, and consequently were subordinate to the Viceroy; but the Governors of Madras and Bombay were appointed by the Secretary of State, and were therefore House of Commons' appointments, such Governors being appointed to serve party or political considerations. If it had not been for the extravagance of Bombay, many of the financial difficulties of India would have been avoided. He might mention, as an instance, that the Governor of Bombay pulled down his house, which was valued at £35,000, and when reproved by Lord Lawrence, the then Governor General, he said his intention was to build another house of equal value. The matter was then passed over by Lord Lawrence; but the Governor of Bombay incurred enormous expense at the cost of India in erecting another house. He had incurred a cost of £90,000 on the house. [An hon. MEMBER: Name, name!] Sir Bartle Frere. What sum did the House think was drawn from the people of India for the house? Not less than £160,000; and while that enormous sum was drawn from the finances of India to build a country house for the Governor, yet the Government of India could not or did not furnish the means to found 16 scholarships for deserving youths of the Presidency. Lord Lawrence again remonstrated with Sir Bartle Frere on the enormously extravagant sum drawn for the house, and Sir Bartle Frere thereupon wrote to the Home Government, and what did the House think was the result of his representation? Why, the Home Government actually gave him £20,000 to furnish his country House. Another reform which was absolutely required was to give the people of India a greater voice in the Government of the country. No native could even obtain employment in the Civil Service except he came to England to compete; neither could he become an engineer in his own country unless he appeared at the College at Cooper's Hill. India required what The Times recently called good State housewifery, because hitherto her affairs had been muddled, not managed. With those remarks of the leading journal, which well summarized his views on India, he would draw his remarks to a close. What was required for India was wise frugality, watchfulness of small details, and that careful attention, in short, which distinguished a well-managed household. They required above all to create greater bonds of sympathy between the rulers and the ruled. Scientific systems of jurisprudence, reforms in the law would do nothing unless the people were made to feel that they were to become greater sharers in the Government of their country. Unless England did that, she could not discharge the responsibility she had assumed in obtaining dominion unasked over 200,000,000 of people. The hon. Gentleman concluded by moving the Amendment of which he had given Notice.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "in the opinion of this House, the present constitution of the Government of India fails to secure an efficient or economical management of its finances, and that this House views with apprehension the state of local taxation in that Country, and is of opinion that its financial condition must be regarded as unsatisfactory so long as the Income Tax forms its only financial reserve,"—(Mr. Fawcett,) —instead thereof.

Question proposed, "That the words proposed to be left out stand part of the Question."

Debate adjourned till To-morrow, at Two of the clock.