COMMITTEE.

HC Deb 03 August 1874 vol 221 cc1177-218

Considered in Committee.

(In the Committee.)

LORD GEORGE HAMILTON,

in moving a Resolution relating to the Revenue Accounts of India for the year ending the 31st day of March, 1873, said, that the Annual Statement which was made in reference to Indian finance differed from that which was made by the Chancellor of the Exchequer, inasmuch as the Indian Statement dealt with the figures of three years instead of two years. In accordance with that practice, the figures which he had to place before the Committee, connected with the Revenue and Expenditure of India, were the Actual Accounts for 1872–3, the Regular Estimate for 1873–4, and the Budget Estimate for 1874–5. Complaints had sometimes been made by hon. Members that they were not able to ascertain the total expenditure for a year, in consequence of the system of accounts, which excluded from the ordinary accounts the expenditure upon extraordinary public works; he would endeavour to get rid of that objection, and in order to deal frankly and fairly with the Committee, he would first state the Revenue for the three years he had mentioned, and he would place against it the total Expenditure of those three years, including all the money which had been expended upon Public Works, Extrordinary as well as Ordinary, as well as the amount expended in averting the Famine.

The Expenditure for 1872–3 amounted to £50,638,386, as against a Revenue of £50,219,489, showing an excess of expenditure of £418,897. For 1873–4, the first Famine year, the Expenditure amounted to £55,122,738, as against a Revenue of £49,478,795, showing an excess of expenditure of £5,643,943. For 1874–5—the Budget Estimate—the total Expenditure was estimated at £54,935,050, as against an estimated Revenue of £48,984,000, showing an excess of Expenditure over income of £5,951,050 making a total excess of Expenditure in those three years of £12,013,890. He would take these figures in another way excluding from the ordinary Expenditure of the year the Famine expenditure and the sums expended upon Public Works extraordinary. The Expenditure of 1872–3——was £48,453,817, as against a Revenue of £50,219,489, showing a surplus of £1,765,672. For 1873–4 the Expenditure amounted to £47,611,158 and the Revenue to £49,478,795, showing a surplus of £1,867,637; and for the Budget Estimate' of 1874–5 the ordinary Expenditure amounted to £47,792,000, against a Revenue of £48,984,000, showing a surplus of £1,192,000, making a surplus for the three years of £4,825,309. If the Committee would add to the deficit of the first table the surplus of the second table they would arrive at the exact amount of money spent during the three years in the construction of Public Works Extraordinary, and in averting the Famine—namely, £16,839,199 or £6,500,250 towards averting famine in Bengal, and £10,338,949 on Public Works Extraordinary, which latter were supposed to pay the interest of the money borrowed for their construction.

The income and expenditure of every year of Indian finance were subjected to a treble ordeal and came before Parliament in three different stages. First in the shape of a Budget Estimate, the whole of the figures of which were those of estimate. Next year the figures came before them as a Regular Estimate, composed of eight months actual accounts and four months estimate, and finally they arrived at the actual year, the whole of the figures of which were those of actual account.

He would take the Actual Accounts for 1872–3, and compare them with the Regular Estimate of last year. In the Regular Estimate of last year his hon. Friend and Predecessor (Mr. Grant Duff) calculated on a surplus, exclusive of Public Works Extraordinary, of £1,492,038; it now amounted to £1,765,672. There had been an increase under almost every head of receipt, except Irrigation Works, and the Land Revenue stood higher in that year than it had ever been before. The expenditure was £30,000 in excess of the Regular Estimate. Comparing the income and expenditure of 1872–3 with that of the former year, 1871–2, they arrived at this result—that the expenditure was about £1,500,000 in excess of the preceding year, and the receipts were about £100,000 in excess of the income of the same year.

He now came to the Regular Estimate of 1873–4, and would for a moment exclude that moiety of the Famine expenditure, which was incurred during this financial year. On the Budget Estimate of 1873–4 there had been an estimated surplus of £140,000, and so carefully were the Estimates framed that Lord Northbrook considered himself justified in abolishing the Income Tax. The surplus this year had grown to £1,867,637. There had been an increase of Revenue under 17 heads—only five showing a decrease, two of them being Land Revenue and Customs, due no doubt to the Famine in Bengal. Opium showed an increase of £822,000, and both Stamps and Excise had considerably increased. On the other hand, there had been a decrease of expenditure of £535,000, and this year was also memorable from the fact that the Army expenditure was lower than it had been since 1863–4. Last year the Government determined to construct Public Works Extraordinary to the amount of £3,878,000 out of the Cash Balances; and they actually expended £3,591,330; yet the Cash Balances in consequence of the surpluses of preceding years stood £3,000,000 higher than was estimated last year. It was necessary during this year to spend nearly £4,000,000 in averting the consequences of famine, yet the whole of this expenditure had been defrayed out of these balances, and they only stood £910,000 lower than was estimated last year. The total Famine expenditure, as he had said, was £6,500,000, and it would be spread over two financial years in two unequal moieties—£3,900,000 over 1873–4, and £2,600,000 over 1874–5.

He now came to the Budget Estimate of 1874–5, comparing it with the Regular Estimate of 1873–4. The Revenue showed a falling-off of about £500,000; "but, on the other hand, it was £700,000 in excess of the Budget Estimate of last year. The difference was entirely due to the careful estimate made in reference to the revenue which might be derived from opium. The Land Revenue showed an increase in the receipts of £364,500 over the preceding year, and stood higher than was ever known before. He would not enter into the disputed questions of permanent versus periodical settlement, but would simply state that the Secretary of State was in favour of moderate assessments. The Opium receipts for the year were £7,615,000, or less by £707,000 than the Regular Estimate of the preceding year. Excise and Forests were nearly stationary. There had been a decrease of £72,000 upon Salt. This was not owing to a falling-off on the Salt Revenue, but the result of a very important Customs improvement effected by Lord Northbrook. The Committee were aware that salt was taxed at different rates and in a different manner in different Provinces of India. There was a Customs line of 2,400 miles in length; which line might be divided into two parts, one of 1,600 miles, running from the upper Indus to Burhanpur, and separating our territories from those of the native princes of Rajpootana and the Indore Agency. The other part consisted of 800 miles running from Burhanpur to the Bay of Bengal. Both sides of this line belonged to us, and the greatest inconvenience had been experienced by the levy of duties along this inland line. There was great unanimity of opinion on this subject. Sir George Campbell who had been Governor of Bengal as well as Commissioner of the Central Provinces said— Throughout the Chief Commissioner's tour it has seemed to him that the Customs line has been felt by the people as a greater grievance than all other grievances put together; no one can travel along the valleys of the Nerbudda and the Wurdha without being liable to constant search by endless Customs officers of low degree, posted at very short intervals, armed with iron search-forks of the nature of cheese-tasters. The Indian Government had, therefore, determined to abolish this line; but, as the Salt Duty was considerably higher on one side of it than on the other, they were obliged to take certain steps to protect the Revenue. A Bill had been introduced into the Legislative Council to accomplish this important reform; and to prevent the Salt Duties from being evaded. That was done by a mileage duty on all the salt brought up from Bombay, so graduated that by the time it arrived in the Central Provinces the amount payable upon it would be as much as the present tax; and on the other side the scale was graduated in a different manner, but it was hoped with a similar result. He attached the greatest importance to that alteration of Customs duties. There were two different schools of thought in regard to the Salt Duties. Men of great experience and knowledge of India maintained that they could not diminish the high duties now levied on salt without great risk to the Revenue. On the other hand, others contended that the duty might be reduced and that the great increase of consumption would be a compensation for that reduction. There was a remarkable fact in support of the latter view—that although the tax was lower in Madras and Bombay than in Bengal, the amount of consumption per head was so much greater than in Bengal, that the actual tax paid per head in the more lightly taxed Presidencies was greater than in Bengal. He therefore thought that the abolition of the Customs line was valuable as an experiment to show whether reduction led to increased consumption. If it could be proved that the Salt Duties could be lowered without loss to the revenue, during time of emergency, it would be possible to re-impose the higher duty, not merely upon the present consumption but upon the increased consumption created by the reduction of the duty. The Customs Duties showed an increase of £113,000. The increase and decrease of other heads of Revenue were unimportant. The Forest revenues remained about the same. The Forest revenues had been very much neglected, but the Department was now placed under the able supervision of Dr. Brandis and Colonel Pearson; and with the attention these gentlemen had given to the subject, the Forests would, it was hoped, form in future a not unimportant item of national revenue.

He now came to the Expenditure of 1873–4, which, including that of the Famine, was £1,150,408 below that of the preceding year. That was accounted for by the reduced Famine expenditure, which was less by £1,340,000 than that of the preceding year. There was a slight decrease in the charges for administration, notwithstanding the fact that a Commission had been appointed for Assam which entailed an additional charge, and there was also an increase of £42,000 for stationery. There was likewise an increase under the head of interest of £100,500, the effect of the contemplated loan operations. Summarizing the Revenue of 1874–5, he might state that the Revenue was estimated at £1,250,000 below the actual receipts of 1872–3; but that was nearly accounted for by the difference in the estimated receipt for Opium. The Expenditure, comparing it with 1872–3, was £660,000 less, and that although the Opium charges exceeded those of that year by £300,000.

He had stated that the Famine expenditure amounted to £6,500,000, and was divided between the two years. The Famine operations might be divided into five distinct heads—the purchase of grain and transport; the encouragement given by the Government to private traders by reduction of freights and suspension of tolls on roads and ferries; the employment of the ablebodied; loans to corporations and private persons; and the provision of charitable relief. The first and chief item was the purchase of grain, £4,000,000; payment to railways for transport of Government grain, £450,000; payment also for the transport of private grain, £450,000; contracts for transport in Tirhoot, £435,000; Durbungah Railway, £200,000; transport, including steam-vessels from England, £499,250; charitable grants, £250,000; supervision, £135,000; making a total of £6,419,250.

He next passed to Public Works Extraordinary, with regard to which, as he had already stated on a former occasion, the Government of India determined in July 1873 to expend, during the four years ending 1877–8, the sum of £17,000,000, of which sum they proposed to expend £4,500,000 during the present year. The Committee would see that in consequence of the heavy Famine expenditure and the Public Works expenditure, it would be necessary to raise money on loan, and he (Lord George Hamilton), had introduced a Bill at the beginning of the Session to empower the Indian Government to raise £10,000,000. The Secretary of State had availed himself of that power to raise £5,000,000, and the Governor General had borrowed £2,500,000 in India. They had also received on loan a sum of £860,000 from the Maharajahs Holkar and Scindia for railways constructed through their dominions, making the total amount raised by loan £8,360,000. The total amount expended during two years in Famine expenditure and Public Works Extraordinary was £14,654,000. The difference between that amount and the amount borrowed "was defrayed out of the Cash Balances, which stood excessively high in consequence of the surpluses of preceding years. There would thus be an increase in the charges of interest in future years; but, on the other hand, there would be a reduction arising through the redemption of the capital Stock of the East India Company, and the reduction on that redemption would amount to an annual saving of £446,793. Having now done with figures, he would consider the main sources of expenditure. The first item was the military expenditure, which the Indian Government, since the year 1868–9, had succeeded in reducing by about £1,000,000 sterling. Not only so, but they had maintained the European Force in as great numbers, and in a state of as high efficiency as before. That result had been entirely due to economical administration, and it was more than probable that a still further reduction would be effected. The Secretary of State had given his sanction this year to a scheme for accelerating the retirement of officers, and Lord Northbrook attached great importance to it as the keystone for the future reforms of the Native Army of India. A Committee of that House had sat to consider the subject of Home charges. They directed their attention to some of the military charges in this country, and he trusted that the results of their deliberations would tend to the reduction of the sums paid by India to this country, without imposing upon England any burden which she could not fairly be called upon to pay.

The provincial allotments were about the same as last year. The decentralization system of Lord Mayo had been greatly attacked both in and out of the House, upon the ground that it would cause increased cesses, and lead to the imposition of fresh cesses in different Provinces. If any such increase had taken place, it was due, not to decentralization, but to the great improvements in judicial machinery. Lord Northbrook had collected information from the Governors of the various Provinces, and they were unanimously of opinion that Lord Mayo's decentralization scheme had reduced the friction between the Supreme Government and Local Governments; and as Lord Northbrook was aware of the importance of checking any undue local expenditure, the good to be derived in the future would be still greater than that experienced in the past.

He would now advert to the guaranteed railway system. There had been 6,201 miles sanctioned, of which 5,490 miles had been completed, and the remainder were in course of construction. The total outlay was estimated at £96,000,000 sterling, of which £92,000,000 had been spent, and the cost, including Government contributions, and one eighth being double track, was £16,480 per mile. The loss upon the guaranteed interest was £2,110,000 in 1872–3, £1,567,000 in 1873–4, and in 1874–5, £1,394,000, showing a considerable decrease, which was due probably, to some extent, to the excessive traffic in grain for the transport of which the Government had paid. There could be no doubt that there had been a great increase in railway traffic in India; but the increase had not been such as the Government had a right to expect, and the great difficulty as to railway success in India lay in the non-expansiveness of the passenger traffic. The Government of India had determined to construct railways in future themselves, and the want of expansiveness which had manifested itself in that traffic must be carefully taken into consideration in the sanction which might be given to the construction of railways by the State. The year, however, had not been an uninteresting one as regarded experiments in railway making. At the commencement of the Famine, a line very much of the character of a tramway had been laid down between the Ganges and Durbungah, and it had been very creditably constructed at the rate of a mile a day. It had also been shown that light railways, partaking more of the character of tramways, were what were required, rather than the costly lines we were accustomed to in England.

He passed on to the most important subject in connection with this Financial Statement, and that was the proposed expenditure on Public Works. In 1868, a stricter line was drawn between Public Works which were to be constructed out of ordinary revenue, and those which were to be constructed with borrowed money. It was then laid down that only those works which showed a fair prospect of repaying interest on the money borrowed for their construction, should be classed under Public Works Extraordinary, that was works constructed with borrowed money. The Government of India did not intend to avail themselves any further of the system of guarantee for the construction of railways. In consequence, £12,000,000 would be expended on Government railways during the next four years. The Secretary of State was most anxious that only works of a reproductive nature should in future be constructed out of borrowed money, and he had therefore intimated that only those works which would pay the interest upon the amount borrowed for their construction should be termed Public Works Extraordinary, the cost of all other works to be included in the ordinary expenditure of the year.

He (Lord George Hamilton) passed on from Public Works expenditure to expenditure which was very closely connected with the Public Works Department, and which he would call the Famine expenditure. The Government of India had had imposed upon them during the past year the duty of saving from famine and starvation a very large number of their subjects, and Lord Northbrook and his advisers were quite prepared to submit to the result of the policy which had thus been imposed upon them. In the Financial Resolutions which were published on the 25th of April this year, the Government of India pointed out that famines in India were not like the Irish Famine, which was an exceptional occurrence, but that famines in India occurred with regularity during certain periods. During the last 10 years there had been no less than three famines—one in Orissa in 1866, another in the North-Western Provinces in 1868, and another in Bengal in 1873. Therefore, the Government of India deemed it necessary that certain provisions should be made in order to carry out this famine policy. Successive Secretaries of State had laid down, as a principle, that the ordinary Revenue should exceed the ordinary Expenditure by £500,000, and Lord Northbrook, in addition, proposed that there should be a margin besides this surplus, and that the margin should make provisions for checking the consequences of famine in the future. Now, famine might be averted, or, rather, the consequences of it, in two ways—first by pouring food by sheer expenditure of money into the distressed districts. But no return was got for that money beyond the satisfaction of saving life. On the other hand, famines could be rendered less likely to occur by famine preventive works, and a certain return might be reasonably expected from such works. He (Lord George Hamilton) had, during the short time he had held the post he then occupied, had the pleasure of talking with many men of eminence who were connected with India, and there seemed to be an almost unanimous opinion among them that there had never been a year in India in which there was not sufficient food on the Continent of India for the whole of the people in India, and that the very causes which produced famine in one part of India produced an unusually abundant harvest in another; and certainly this year, while there had been a famine on an enormous scale in Bengal, there had been an unusually abundant harvest in the Punjab; therefore, it seemed that a primary object should be to open out the resources of the country by the construction of railways, and other means of communication. Irrigation works were no doubt useful in preventing drought, at the same time there was a certain difficulty in making them pay which must not be overlooked. Let them take Tirhoot for instance, the scone of the present famine; nine years out of ten it had plenty of rain, the tenth year the want of rain would probably affect the amount of water in the canal; and even if there was sufficient water for irrigation they would have difficulty during a time of distress in enforcing payment for the use of the water. It had not escaped the attention of the Secretary of State, that if a general sanction were given to famine preventive works, a certain number of schemes which would not come under the head of reproductive works might be constructed out of borrowed money; and, to guard against that, he had pointed out to the Indian Government that although he would not obstruct or forbid the construction of such works out of borrowed money, the expenditure must be included in the ordinary expenditure of the year. Therefore, the second point to which the Secretary of State had called the attention of the Indian Government, was that they should meet the expenditure necessary for the construction of all works, except those of a reproductive character, out of the ordinary income of the year.

A large expenditure on Public Works had boon sanctioned—although, as he (Lord George Hamilton) pointed out, that expenditure was sanctioned before Lord Salisbury came into office—to meet that expenditure it would be necessary to raise loans. At present the disbursements in England exceeded £15,000,000 per annum, of which upwards of £'6,500,000 went in payment of interest, including guaranteed interest on railway capital. It was a well known axiom of political economy that if any one nation had to pay a large annual sum to another nation in the shape of tribute, or in any other form, the country making the payment lost in two ways; it not only lost the actual sum thus paid, but the equation of international exchange being upset by this payment, it paid more for its imports, and obtained less for its exports. The Secretary of State was therefore most anxious to reduce the Home Charges in England, and he had intimated to the Indian Government that if it should be necessary to borrow for reproductive works, the money must be borrowed in India.

The three points, therefore, of the financial Despatch which the Secretary of State had addressed to India were as follow:—1. No works in future except those which would yield a revenue at least equal to the interest on the cost of construction were to be made with borrowed money. 2. That all wants of the year, with the exception of reproductive works, were to met out of the income of the year. 3. If any money be borrowed, it must be borrowed in India. It was said in the debate on the India Councils Bill by the hon. Member for Hackney (Mr. Pawcett), that if a Minister of Works were added to the Council of India, the Secretary of State would encourage excessive expenditure; but, as he (Lord George Hamilton) had pointed out, the object of that Bill was to prevent excessive expenditure, and to require a full account of the money expended, so that we should know whether we had got value for the money that was expended. If his noble Friend the Secretary of State for India had intended an increase of expenditure he would not have laid down those three conditions.

Speaking generally, he (Lord George Hamilton) thought he was entitled to say that if they could only control the Public Works and get the money's worth out of the Public Works Department, the condition of Indian finance was satisfactory. Exceptional expenditure amounting to upwards of £14,000,000 had been incurred during the past two years, and only £8,000,000 had been borrowed, the difference having been met out of the surpluses of the preceding years and Cash Balances.

Many people would, undoubtedly, maintain that the present financial condition of India was open to certain objections; that it displayed little elasticity; that the revenue derived from opium was very precarious; and that in cases of emergency it would be difficult to increase taxation. Now, he for one did not desire to shirk the difficulties of Indian finance. On the contrary, he desired to face them, and to deal with them frankly and dispassionately. First of all, then, with regard to the want of elasticity. There were two sources of revenue which indicated pretty clearly the condition of the lower orders in India—the Salt and the Excise Duties—because they were almost the only two which were derived from articles of consumption. Well, he found the Excise Duty had during the last 10 years increased 35 per cent. and the Salt Duty. 39, though scarcely any alteration had been made in the rate levied on the Salt Duty. He was perfectly aware that the Indian revenue had not increased with the same elasticity as English revenue; but that was not the fault of the system, but was a consequence of the entirely different condition of the two countries. Recent Returns in reference to local taxation at home had shown the very much larger ratio in which personal property had increased as compared with real property. It was that increase which had made English revenue so elastic. In India, an old and settled country, there was a dearth of that personal wealth, and that was the cause why the Revenue of India had not shown the same elasticity as the English Revenue. Then as to the charge that a certain proportion of the Indian Revenue was precarious. No doubt, that was true to some extent of the Opium Revenue; but there was no country in the world which had not certain items of Revenue which were precarious—for instance, the Revenue of this country for 1873–4 amounted to £65,000,000, and of that we raised £37,000,000 on tobacco, spirits, and beer, clearly analogous sources of Revenue to that of opium. Although the gross receipts from opium amounted to over £8,000,000, yet there were large disbursements, amounting to some £2,000,000, to be set against those receipts. He also freely admitted, however, that the incidence of taxation in India was not quite in accordance with European ideas, and also that the tariff might require revision. But what he would say was—"Give us a little time." The income tax had been abolished in India, but that was the instrument by which almost all the beneficial reforms in English finance had been carried out. Such reforms might be easy in theory, but in practice they were difficult, for the inconvenience of sacrificing a certain amount of revenue might more than counterbalance the advantages which might otherwise be derived. At the same time, the Secretary of State was of opinion that there were three cardinal points to be attended to. The first was, to render the Indian Government as independent as possible of the Opium Revenue; the second, to equalize as far as possible the incidence of taxation; and, thirdly, so to alter the tariff of Export and Customs duties as to encourage trade and commerce, thus creating fresh Sources of wealth which would be available as fresh sources of taxation in time of emergency.

Having thus, not unfairly, he hoped, placed before the Committee the conditions of Indian Finance, he might take credit for two things which would prominently characterize the year 1874–5. If one wanted to ascertain whether a nation was taxed in excess of her resources, the money market was the most accurate and delicate gauge for that purpose. It was a curious coincidence that the nearer nations lay to the Equator, and the warmer their climate, the worse was the state of their credit, and the greater the amount of their indebtedness. A warm latitude begot high interest, and high interest meant bad security. But there was one exception to the rule, and that was India. India stood next to England in the money market. He did not deny she owed that advantage to her connection with England, because it was due to English financial capacity and English administrative skill, which had secured to India the inestimable benefit of peace and order. We had never borrowed, either in England or India, upon easier terms than during the present year. That was the first fact. The second fact was the object for which the money had been borrowed. It was borrowed simply to save millions of the poorest and the humblest of Her Majesty's subjects from the fate which otherwise inevitably awaited them—death by starvation. Political Economy or Political Philosophy might say that was a task which no Government ought to, or could successfully undertake. In reply, he would simply say that the duty was imposed on the. Indian Government by the unanimous wish of the English people. And that duty had been fulfilled to the very letter. So adequate had been Lord Northbrook's preparations, so perfect his schemes, that those who wished to find fault—and there were always plenty of such persons—complained now that there never had been any famine at all. He would not waste time by answering such an assertion. It was only due to Lord Northbrook that he should express his opinion, that all the praise bestowed upon him was only an inadequate expression of the value of Lord Northbrook's services. That noble Lord had not only given unremitting attention to the operations against the famine, but had absolutely denied himself during the hot months that recreation and change of air which were almost essential to a hard worked European in a hot climate. He had preferred to stop in Calcutta, so that he might be at hand in case of any emergency. And, well had Lord Northbrook been supported by the late and present Lieutenant Governors of Bengal. Sir George Campbell, though in failing health, had declined to leave the country until he had himself so far matured his part of the scheme of relief that he could safely entrust it to another. Sir Richard Temple, with indefatigable energy, had visited every portion of the famine district, and cheered by his voice and example those officers who so nobly performed their duty. He would not attempt to describe to the Committee the horrors which had been averted, or the miseries from which the people of a part of Bengal had been saved. Edmund Burke had well described "the plague of hunger "— Of all the calamities which beset and waylay the life of man, this comes nearest to our heart, and is that wherein the proudest of us all feels himself to be nothing more than he is. It was against a plague such as that, upon a scale almost unknown, that the Indian Government for the past year had been successfully conducting a campaign, and was he too sanguine in hoping that the result would be lasting? He could not believe that the mere fact of English officers of every grade, from the highest to the lowest, toiling day and night to save the poor suffering ryot from the fate which inevitably awaited him, could fail to produce a just impression on the susceptible and quick-witted race over whom we ruled. And though previous years might have shown a nicer adjustment between income and expenditure than 1874–5, yet he honestly believed there never was a financial year the results of which would more tend to create and increase between England and India that reciprocal sympathy, that interlacing of mutual interests and regard, which every statesman must regard as the foundation upon which our great Asiatic Empire could securely rest. He begged to thank the Committee for the attention with which they had heard him, and would conclude by moving the Resolution.

Motion made, and Question proposed, That it appears by the Accounts laid before this House that the total Revenue of India for the year ending the 31st day of March 1873 was £50,219,489; the charges in India, including the collection of the Revenue, Interest on Debt, and Public Works ordinary, were £38,205,212; the charges in England (including £1,146,116, the value of Stores supplied to India) were £8,138,104; the Guaranteed Interest on the Capital of Railway and other Companies in India and in England, deducting net Traffic Receipts, was £2,110,501, making a total charge for the same year of £48,453,817; and there was an excess of Income over Expenditure in that year amounting to £1,765,672; that the charge for Public Works extraordinary was £2,184,569, and that including that charge the excess of Expenditure over Income was £418,897."—(Lord George Hamilton.)

MR. FAWCETT

said, no one more regretted than he did that there was not a fuller House to hear the clear and able statement of his noble Friend. It was also much to be regretted that the Indian Budget had been brought forward at the very fag-end of the Session, for no one acquainted with the feelings of the people of India could doubt that this would produce the worst possible impression—a worse impression than a more serious practical grievance. In previous years the people of India had, at least, the satisfaction, whatever it might be worth, of being told that the Budget could not have been brought forward, because there was other important Business before the House; but that year they were only comforted by the reflection that the Indian Budget was introduced on the 3rd of August, because a fortnight had been occupied by the Government in struggling over a Bill of which, according to their own confession, they did not understand a single clause. Sometimes he had been accused of taking a gloomy and pessimist view of Indian finance, but he never thought it was in a hopeless condition. All he had contended for was, that it was in an extremely critical condition—a condition so critical, indeed, that if certain great fundamental principles were not observed, Indian finance might soon become almost irretrievable. On the other hand, he was free to admit that Indian finance might be recovered, and placed in a perfectly satisfactory and sound position; and he felt bound to confess that, in spite of the Famine expenditure, he was far more hopeful of the future of Indian finance than he ever had been since he had troubled the Committee with remarks on the subject. He was bound to express the most complete confidence in the present Governor General, Lord Northbrook, as an administrator. His Lordship clearly recognized the fact that India was a poor country. What had done more than anything else to contribute to the financial embarrassments in India was the conclusion that India was inexhaustibly rich; but Lord Northbrook clearly recognized the fact that not only was she poor, but that her resources for taxation were small. Lord Northbrook had, undoubtedly, conducted his financial administration with extraordinary assiduity, and with an unswerving resolution to be economical. The result was, that many items of expenditure, which formerly presented a serious increase, had now been most materially reduced. Hitherto, the whole strength of English public opinion had been in favour of spending Indian public money; but he believed the House of Commons might render invaluable assistance to Lord Northbrook by reversing the current of public opinion in this respect. Having spoken those words in favour of Lord Northbrook, he was bound to say that, after the speech of the noble Lord opposite, he felt great confidence in the financial administration of Lord Salisbury, the Secretary of State for India. He, therefore, regretted that in connection with the noble Lord he had used strong language when speaking upon his policy, for when he last spoke on the subject he described Lord Salisbury as being determined to launch out into a great scheme of public works expenditure, and he was quite sure the Under Secretary would admit he was justified' in his apprehensions by the speeches delivered by Lord Salisbury in "another place," in introducing the India Councils Bill. He now understood, however, from the speech of the noble Lord who had just sat down, that Lord Salisbury had determined to stand firm to the following great principles—First, that no works should be carried out in India, save under exceptional circumstances, by means of borrowed money, unless it could be proved that the work was likely to repay the interest on outlay; secondly, that all public works which would not pay interest on outlay must be carried out by the ordinary surplus revenue of the country; and, thirdly, that borrowed money should be obtained from India, and not from England. More important principles it would be impossible to lay down; but their whole utility and efficiency would consist in the extent to which care was taken before a reproductive work was commenced, to ascertain what was the evidence of its being likely to be reproductive in the future. There had been works promising to be reproductive constructed in India—some of which had produced loss than 1 per cent. some had produced nothing, and. some had had to be abandoned altogether. That, however, was a matter which depended on the vicissitudes of trade. If they wished to see the real state of India financially, they should not take any particular year; and he would draw no unnecessarily gloomy conclusions from the years 1873–4 and 1874–5, which had been rendered worse than they otherwise would have been by the exceptional expenditure caused by the Famine. A fairer and juster view of the subject might be obtained by taking several years together. Now, what had been the financial condition of India during the last seven years, and during the previous 10 years? He took the last seven years because, in an able statement issued on the Motion of his hon. Friend the late Under Secretary for India, it was stated that in 1868–9 the unfavourable years ceased, and an era of greater prosperity commenced. In a comparison of revenue and expenditure it was absolutely necessary to include extraordinary public works. Most of these works which had been constructed during the last few years did not pay interest on the outlay. Many of them, indeed, had not returned any revenue at all. There had been barracks, for example, classed as extraordinary public works. During the last seven years, which had been described as a period of great financial prosperity, the aggregate deficit had been £16,500,000; therefore, if they excluded the famine expenditure, which was stated to be. £6,500,000, the deficit during that period would be no less than £10,000,000. These were not exceptional years. In the nine previous years, when what was known as the Budget system commenced, the aggregate deficit was £10,000,000, and during that time there were only two years of nominal surplus. In the three years previously to 1868–9, India borrowed £6,500,000 to make up deficiencies, and in addition to that her cash balances were reduced by£3,500,000, and therefore an addition of £9,500,000 ought to be made to the large deficit he had mentioned. He might further observe that many of the charges transferred from the Imperial to the local funds were increasing charges, and that consequently each year the amount which the local authorities had to make up had been steadily increasing. Therefore, although there might not be any increase in Imperial taxation during the last few years, yet the amount raised by local taxation during the last seven years had increased by no less than 50 per cent. The great principle to be borne in mind in regard to India was, that, from the nature of the case, her revenue only grew slowly, and unless great care was taken her expenditure must increase. In that state of things the most rigid economy ought to be practised. The slowness in the increase of the revenue could be proved by figures and also by considerations as to the condition of the population. The great bulk of the people lived by agriculture, and on extremely small wages, their circumstances resembling in some respects that of the agricultural population of Ireland immediately before the famine. With regard to the actual revenue during the last seven years—the period of exceptional financial prosperity—it showed very little increase at all, if the amount of the income tax, now repealed, was deducted. He would ask the Committee to contrast the trifling increase of revenue with the great increase in the expense of administration. Sir John Strachey said, and he entirely concurred with him, that the increase of expenditure was duo to two causes for which no one was particularly responsible. He stated that after the Indian Mutiny in 1857, the administration of India had become far more expensive, and added that in consequence of the enormous balance of trade, which necessitated a large importation of bullion into that country, a great rise in prices had been brought about. He showed conclusively also that that rise affected far more the expenditure than the revenue, thus throwing the balance on the wrong side. In 1856–7, the cost of law, justice, and police in India was £2,500,000, while in 1868–9 it was no less than £4,100,000, or an increase of 70 per cent. Taking the year 1869, and comparing it with the year 1870, he found that, while the expenditure in the former year for stationery and printing was only £170,000, it had in the latter increased to £250,000; while this year it appeared there was an increase of £40,000. Again, for the Bombay Establishment in 1856–7 the charge was £201,000, and in 1870 no less than £360,000, or an increase of 70 per cent; the household expenses of the Governor of Bombay having risen from £7,000 in 1856–7—probably owing to the increase of prices—to £21,000, or 300 per cent. The medical charges, which in 1856–7 were £160,000, were in 1870 no less than £520,000, or an increase of 320 percent. There was another way in which he thought he might make the point which he was endeavouring to impress on the Committee perfectly clear. A better illustration of the increasing costliness of the administration of India could not be given than the increased cost of collecting the revenue, and he found that the cost of collecting the land and opium revenue—he believed the same remark would apply to other branches of revenue—was just 100 per cent more than the increase in the revenue itself. But the increase in the expenditure became still more striking when the Home charges were taken into consideration. These charges were something 'like £15,000,000, and although he was aware that a portion of that amount was simply a matter of account, yet it must be borne in mind that in the course of comparatively a few years these charges had no loss than doubled. Taking the Homo charges for the present year, he found that for absentee allowances and Civil Service furlough they had increased in a single year from £160,000 to £250,000. There was observable, too, the same constant tendency to accumulate charges on the revenues of India. For instance, when the Engineers' College at Cooper's Hill was established, he and others had objected to the proposal, because, among other reasons, it would impose a serious burden on those revenues, but they were told it would be self-supporting. Now, however, it appeared that it would entail a charge on India of £24,000 a-year, which did not include the interest on the sum which had been expended in purchasing the estate. What was the practical evidence to be drawn under those circumstances? It was that if there was a slowly increasing revenue and a rapidly increasing expenditure, there must inevitably be an increase of taxation, unless the expenditure could be kept down by practising the most rigid economy. Now, the increase of taxation was a serious thing in any country. If they wanted to raise £4,000,000 or £5,000,000 in this country to make up a deficit, there were 20 ways in which it might be done, and no one would pretend to say that it would necessarily impede the progress of the nation, although it might be regarded as an evil and a misfortune oven in a rich country like England; but it would be a far greater evil and misfortune in the case of India, and in dealing with taxation in that country it was absolutely necessary that a financier should study the genius and character of the people. The Indian people loved rest and repose, and nothing annoyed them more than the threat of increased taxation. Nothing had done so much harm to our rule within the last few years as the constant proposals with which the Indian people had been worried with respect to new taxes. Not a year went by without some new cess or some petty new impost being proposed or suggested. One year it was a tax on marriage feasts, another year it was a local income tax, almost reaching the pauper with 2s. a-week, and another year it was a tax on household furniture, and so on. He understood it was insisted upon by Indian officials—for instance, by the Governor of Madras—that the time had come when the practice of worrying the people ought to be stopped, and a pledge should be given them that except in case of war, no new tax would be imposed for the next 30 years. That would be laying down a valuable principle for the future guidance of Indian statesmen. Supposing that by embarking in some rash scheme of public works for India they were landed in a deficit of £5,000,000, what would they have to do? In England £5,000,000 could be raised by a 3d. income tax; but India was so poor that that sum could not be raised without an income tax of 2s. 6d. in the pound—an impost which it would be impossible to levy and hold the country in peace and tranquillity. What was the practical conclusion? That they should do all in their power to strengthen the Governor General and the Secretary of State in pursuing a policy of economy. They should do more—they should when the Indian Budget was before the House for Home charges, exercise the same close supervision over the items as was done with respect to our own Budget. If that had been done under former Governments and in past years, the present financial position and future prospects of India would have been much more satisfactory. The guarantee for Indian railways might now be a diminishing charge, but still it was a most serious one. That charge on the revenues of India would not be nearly as large as it was now but for the disgraceful carelessness and extravagance with which the contracts between the guaranteed railways and the Indian Government had been drawn up. Even admitting the principle of those guarantees, there was no reason why the contracts should be so onesided against India as they now were. But in future a great savingmight be effected in regard to guaranteed railways. One of the clauses in those railway contracts was called the Annuity or Commutation Clause. At the end of 25 years from the period of the first contract it was possible for the Government to buy up the railways from the existing proprietors by giving them an annuity for 75 years, estimated at the then price of the stock, and calculated according to the current rate of interest, estimated by the amount at which the Indian Government could borrow money. Unhappily that right of purchasing had been surrendered in the case of three important railways—namely, the Madras, the Bombay and Baroda, and the Great Indian Peninsula. That right could be surrendered by the Secretary of State at any moment without concert with the authorities in India or the consent of that House. He did not suppose the Secretary of State would surrender it; but if the Under Secretary, in the name of his Chief, would give a promise that that right of purchasing those railways, by bringing into operation that Annuity or Commutation Clause, would not be abandoned in the case of any other guaranteed Indian railways, without previously consulting Parliament, it would effect a most important saving. That opinion was expressed in a Despatch from Lord Mayo and signed by all his Council, who objected to that clause being surrendered in the three cases he had named. He had calculated that by paying an annuity of something like £4 14s. a-year instead of £5, on each £100, for 7.5 years, the Indian Government, through the operation of that clause, would at the end of that period have acquired the property in those railways, and the payment would cease altogether. He did not ask for a pledge that the railways would be purchased, but for a promise that the right of purchasing them would not be given up until Parliament had had an opportunity of expressing an opinion on the subject. That money could be borrowed on the security of India at a little over 4 per cent might be a proof that the credit of the Indian Government was only second to that of England itself. The low rate of interest was, without doubt, due to a great extent to the confidence which was felt in the stability of British rule in India, but that was not the only reason. There was a vague impression existing in the public mind in India that England would in the last resource be responsible for the Indian debt. That impression was strengthened by the unfortunate passing of an Act which allowed trust moneys to be invested in Indian securities, and therefore he thought it could not be too explicitly stated that England was no more responsible for the Indian debt, than she was for the debt of any other of her Colonies. The holders of Indian securities were now receiving a great deal more of interest than they would be entitled to, if England were responsible for the debt, and therefore he urged the importance of making it clear, if such was the case, that there was no English guarantee at the back of the Indian debt. He regarded the English policy with regard to public works as by far the most important question connected with Indian finance at the present time; and in connection with this question, he wished to endorse what had been said by the Under Secretary for India in reference to Lord Northbrook, who had shown some of the highest qualities of a statesman. Instead of giving way to the excitement which was created, the noble Lord had stood firm, and. displayed energy, zeal, and devotion, which, though they had procured for him some unpopularity, had been of great and unspeakable service to the country over which he ruled as Viceroy. The exhibition of these qualities had not been confined to Lord Northbrook, but had also distinguished Sir Richard Temple and the other officials who had been engaged in carrying out Lord Northbrook's policy. With regard to the public works, there were two entirely opposed schools. One party contended that the works ought to be constructed, even though they did not pay directly, on account of the indirect advantages which they conferred upon the country. Judging from recent speeches of the Secretary of State for India, he had concluded that the noble Marquess held this view, and it was, therefore, with great satisfaction that he had heard the noble Lord the Under Secretary state the view of his Chief to be that no public works were to be constructed in India with borrowed money, unless it could be proved that they would pay the interest on the outlay. The impression he had received upon the point had been shared in by Sir Arthur Cotton, one of the most enthusiastic and skilful engineer officers who had ever served in India. The other view maintained in reference to this question was, that no public works should be constructed in India unless they paid for themselves, and that the Government ought not to seek to prevent famines by these means, but by attempting to deal not merely with the physical but with the moral causes which led to them; for nothing seemed so unsatisfactory connected with the population of the country, as that when famine came upon them they had no accumulated stock of food to fall back upon. His own view was that great care and caution ought to be exercised, for it had been shown, both with regard to irrigation and railway works, that there was in the Native mind a strong indisposition to use them when constructed. He would be the last to say a single word against the construction of public works in India. If such works were constructed out of the revenue and savings of the year, they would be productive of great benefit. If, however, they were constructed through the medium of borrowed money, all experience showed that the question whether they would pay or not was so grave a problem that, in the present state of Indian finance, the utmost and most scrupulous care should be taken and caution adopted before such a course was entered upon. He was happy to think that the House of Commons and the people of this country were beginning to take greater interest than they heretofore did in the affairs of India. Some people were apprehensive that the fact might lead to undue and unnecessary interference in Indian affairs. Such, he believed, would not be the case. There were many services which England could render to India, not only with regard to good government, but in the interests of economy. They could advocate that the policy of justice, wisdom, and economy should be more fully carried out, and that the Natives should be more generally employed than they now were in the various branches of the public service. As he had already said, he did not take a desponding view of Indian finance, and he had carefully avoided censuring any person for what had already occurred. He had, he thought, proved that Indian finance was in a critical position, and that if great care were not taken with respect to expenditure, that position might become extremely serious. But he thought that if the policy of economy which had been commenced were continued, Indian finance would soon become as satisfactory as could be desired, that all the charges that could be so dealt with should be reduced, and that then great public works might be constructed out of savings. It should be remarked that the more economical they were, the more prosperous the country would become, the more contented the people, and therefore the less expensive would be the task of governing them. In a word, each economy might be regarded as a saving of seed from which a future and bountiful harvest of economy would be gathered.

MR. FORSYTH

, as one who for years had taken great interest in Indian affairs, desired to address a few words to the House with respect to the policy pursued by England towards that great dependency. Without attempting in any way to blame the Government, he regretted that the Indian Budget was not brought forward in the House of Commons until the last week of the Session, and he hoped that the sparseness of the attendance would not be considered by their Indian fellow-subjects as evidence of caring little for the welfare of the millions who inhabited that country. He feared they might suppose that the feeling of the House of Commons was that expressed by the Poet Laureate in the line— Better fifty years of Europe than a cycle of Cathay. He thought that hon. Members might congratulate themselves upon the vast improvement which had been made in the government of India during the last few years. It had been said in former times that if our Empire in India were to come to a sudden end, the sole relics of our rule would be broken champagne bottles strewn about the country; but such a statement would be a calumny at the present time, seeing that we had covered the land with a network of railways and with irrigation works, which were converting arid plains into fertile fields. The population of India were contented with our government, preferring the homogeneousness of Imperial rule to being split up into independent principalities which would be always at war with each other. He entirely approved the India Councils Bill, which would secure both responsibility and efficiency in the management of the public works in that country; but he wished to point out to the noble Lord, that in expending public money on public works in India, the greatest caution was necessary, not so much because they might be unproductive, as because of future eventualities which it behoved us to provide against. It was impossible to look at the state of things that existed in Cabul and Afghanistan, and at the advance of Russia in Central Asia, without seeing that we ought to hold ourselves in readiness to meet possible contingencies. The ruler of Cabul was an elderly man, who had selected one son over another, and his eldest son had reared the standard of revolt. When the ruler of Afghanistan died, no doubt there would be a civil war in the country, and he maintained that India was nowhere more open to attack than through Cabul and Afghanistan, lie did not accuse Russia of an aggressive or a hostile policy towards this country; but it was impossible to overlook Russia's progress in Central Asia, whore she was overlapping us from west to east, and we could not shut our eyes to the probability that she might come into collision with us on the North-western frontier of India. Under these circumstances, we ought not to be too lavish of our Indian resources in time of peace. It was impossible suddenly to raise the taxation of the country—not because India was a heavily-taxed country, the taxation amounting to only about 8s. 6d. per head of a population of 184,500,000—but because the Revenue of the country was derived from some seven or eight sources, the receipts from which could not be increased at pleasure. The normal Revenue of India amounted to about £34,000,000, which was derived as followed—The Land Tax yielded £21,000,000, and it was impossible to increase that tax, owing to the Settlement of 1795. The tax upon Opium yielded £8,000,000, and no one would wish to see the revenue derived from that pernicious drug increased. The tax upon Salt yielded £6,000,000, and any attempt to further tax that necessary of life would be attended with disastrous consequences. The assessed taxes yielded the munificent sum of £19,600, while the Customs yielded £2,624,600. The revenue derived from Stamps amounted to £2,697,800, and it was to this item that he wished particularly to draw the attention of the noble Lord. Of the total of £2,697,800, as much as £1,729,148 was derived from the taxation of legal proceedings by means of stamps. For stating your own case in Court, in order to lay the foundation for obtaining justice, there was necessary the payment of £5 on every £100 at issue, up to a maximum stamp duty of £300; so that it not unfrequently happened that a party had to pay what in his (Mr. Forsyth's) opinion, amounted to a most unjust and unfair tax upon justice. The argument by which it was defended appeared to be that such an impost prevented litigation; but that should be done in an open, aboveboard manner. He regretted the great falling off exhibited by a recent Return in the number of Natives employed by the Government, for nothing was more calculated to attach the Natives to our rule than giving them employment in the public service. A Return of Natives who were receiving salaries of 150 rupees a month and upwards, showed that in 1867 there were 700 Hindoos and 193 Mahomedans; while in 1871, there were only 351 Hindoos and 85 Mahomedans. No policy could be better than that of employing Natives, as far as we could do it safely, in offices of trust; and that they were fitted for such offices by their intelligence, could not be doubted by any one who had been brought in contact with them. Nothing could be more plausible than choosing members of the Civil Service of India by competitive examination, but he very much doubted whether it secured the best men for India; and he feared that it was likely to prove a failure if it were adhered to too closely. A member of the Indian Civil Service went out to India to be a ruler of men—of men who were intelligent, kindly, affectionate,-but very susceptible, and we required in such an official a man who understood men, and who could manage them. Of this capacity the present system afforded no guarantee, for it simply ascertained whether a young man could acquire a certain number of marks by proficiency in algebra, or a readiness in the use of certain languages. He did not advocate a return to patronage, but a union, to a certain extent, of the two systems; and what he suggested was, the establishment, at Oxford or Cambridge, of a college for the candidates for the Indian Civil Service, so that they might, by contact with each other, rub off their rusticity, expand their knowledge of men, and cultivate some esprit de corps, in addition to passing the examinations which tested their knowledge.

MR. GRANT DUFF

offered congratulations on the manner in which the noble Lord had told the financial story of India for the year, and upon the fact that, notwithstanding the dark shadow which had overspread India, the financial result was, on the whole, very satisfactory. When the present Government came into office, he believed they found a reasonable policy in reference to the Famine already in action, and they found that the Home Government and the Government of India were absolutely at one on the matter; so the present Government had followed the policy of their Predecessors, as the late Government must have done had they come into office under similar circumstances. In the month of January, when violent and unfounded things were being said in the public Press, be expressed his absolute trust in the Government of-India; and that confidence had been vindicated by what had since transpired. The most satisfactory features of the financial review were the statements with respect to the increase of the land revenue, which we must always rely upon as our main resource, the change in the salt line, the rise in forest revenue, and the reduction in military expenditure. He could not pretend to be so much of a party man that he should not be delighted to see the present Government carry off the honour of effecting a very serious reduction in the Indian tariff. The noble Lord had in the India Office one of the most cautious and wisest financiers who was employed in the public service, and in addition to that he bad the assistance of the first commercial statesman in the British Islands, Sir Louis Mallet; and he trusted that in a few years, by the aid of those gentlemen, we should see a great change in the Indian tariff. He was bitterly disappointed when he saw that the Government to which he had belonged was likely to be precluded from doing anything in this direction when Lord Northbrook found it necessary to do away with the Indian income tax. He had no doubt that on the whole the competitive system had benefited the Civil Service, though it might not have been quite so successful as could have been wished; and it would be possible to combine the advantages of the old system and the new one by some new college at Oxford, or if a new college were not thought convenient, then by such arrangements with the authorities of a University that competitors could secure the benefits of such a training as used to be obtained at Haileybury. The right hon. Member for Horsham (Sir Seymour Fitzgerald) the other day very unnecessarily attacked a Despatch of the Duke of Argyll, and he must say a word about it. The right hon. Gentleman must be aware that not one word was said in it against him personally. The Despatch was cautiously and carefully impersonal. It blamed, and he was afraid it justly blamed, the Government of Bombay; but there was not one word in the Despatch to point the moral specially against the right hon. Gentleman. The case seemed now to stand in this position—Sir Bartle Frere, through the hon. Member for Northampton, denied in the most explicit manner that he was responsible for the enormous expenditure referred to, and the right hon. Gentleman the Member for Horsham, his successor, said he was equally guiltless in the matter. The House had no means of discovering who was the guilty, or the more guilty; and the best thing for all parties would be that the matter should be amicably referred by them to the present Secretary of State, whose verdict, he was sure, would be taken as absolutely binding.

SIR SEYMOUR FITZGERALD

said, be had no intention of taking part in this debate, but after the reference which had just been made to him, he hoped the Committee would allow him to make a very few observations. On the former occasion, having been distinctly referred to by the hon. Member for Hackney (Mr. Pawcett), he bad felt it necessary to make a personal explanation, and, having done so, he expressly said he would not make any charge or throw any responsibility on his distinguished predecessor. While he was himself perfectly free from any responsibility as regarded that expenditure, his predecessor had given very good reasons why he was equally not responsible. It was a totally different thing when he had to refer to the conduct of the Secretary of State and the India Office, of which the hon. Gentleman who had just sat down was himself a Member, because he felt it to be his duty to say this—that in the Despatch referred to they were grossly inaccurate, and, being inaccurate, they were also unjust. He repeated it. He said they referred to a particular expenditure as being a new expenditure, which they had the most complete means in their own power of knowing, so far from being a new expenditure, had occurred at least three and a half years before. "With regard to the general question, the hon. Member for Hackney applauded the conduct of the Indian Government, because the noble Lord the Under Secretary had announced for the first time, as the cardinal principle of their policy, that no public works chargeable as extraordinary works should be undertaken unless they were shown to be reproductive. Giving every credit to the present Viceroy, he must say that was by no means a new principle now for the first time introduced. It was a principle first announced and distinctly acted upon by Lord Mayo at least three years ago. It seemed to be assumed that because a work was represented as reproductive, it would be so; but his own experience taught him differently. Works were undertaken as being extraordinary public works on the ground that they were reproductive, but, without variation, the estimate of the Return was found to be utterly fallacious. He himself, when in Bombay, saw public works estimated to produce 25 and 30 per cent. as to which it subsequently turned out that they were unable to pay their expenses. The moral he drew from that was this—not only that there was a great temptation on the part of those engaged in the Public Works Department to overestimate the revenue, but that the House should be very cautious how they lent their impulse to the constant tendency in India to engage in these large public works. No one who was interested in that country could look to the future without more than grave apprehension. The financial difficulty was the great difficulty, and those who wished India well would not indiscriminately encourage the idea that the thing of all others which was to promote her interests was the extension of public works. He had himself, while in India, sanctioned irrigation works—he would not say to what amount, or he might, perhaps, be charged with profligate expenditure; but, believing that irrigation works were the panacea for all the ills of India, he had sanctioned large works of that kind. When he left India, however, he had formed a very different conclusion, and he believed that of those works which he had sanctioned not one would pay 2 per cent. The hon. Member for Hackney said a great deal about securing economy in administering the finance of India. He believed the place to exercise supervision was not in that House, but in India itself. The only way of securing economy in India was to follow strictly in Lord Mayo's foot-steps, when he introduced a system of decentralization, which had conferred the greatest benefits in India. His principle was this—that instead of the local government being enabled to spend almost as much as they liked, knowing they had a bank to draw upon, they should have only a fixed sum, for the right administration of which they should be held responsible. The result of the initiation of that system was like magic; every charge was taken into consideration by the Council; the expenditure of every shilling was weighed; and 30 per cent more work was done for the same amount than was done under the old system. The observations of the hon. Member for Hackney—he spoke with the greatest respect—showed the difficulty even the most able men must have who acquired their knowledge of a particular subject by reading, without practical experience. The hon. Member spoke of the charges in the various Presidencies for law and police. The hon. Member said that the police were largely increased in numbers; but he had compared two years when the circumstances were essentially different, for during the time the police had, in fact, taken the place of the irregular force, which now was not employed in any part of the Presidency with which he had been connected. He also referred to a large increase in what he called the Governor's establishment. This showed the evil of contrasts made upon very imperfect information. The fact, however, was that the expenses of the private secretary, the military secretary, all the clerks, personal allowances and expenses, had been added to the establishment charge, and therefore, said the hon. Member, they had been largely increased. In conclusion, he might be permitted to say that he did not think there had ever been a statement more lucidly or more moderately made, and there was every reason to think that the finances of India, notwithstanding the great strain to which they had been put, were placed upon a satisfactory footing.

MR. GRANT DUFF

I thought, Sir, I had built a bridge over which the right hon. Gentleman might retreat; but, as he has taken up the matter in a totally different spirit, I will read a paragraph of the Despatch to which I referred— From this summary it appears that a work, for which an allotment of 3½ lacs—that is, £35,000, was originally granted, on the express instructions of the Government of India that that amount should not he exceeded, was constructed on such a scale that the Government became committed to an expenditure exceeding 9½ lacs, before any design or estimate had been approved; and that notwithstanding the censure conveyed in the remarks of the Government of India and the Secretary of State on the breach of rules involved in the action of the Government of Bombay, a similar course was subsequently pursued, until the expenditure actually amounted to six lacs (£60,000) in excess of that for which authority was so unwillingly conveyed on the former occasion; while it has only been kept within its ultimate limit by carrying out the subsidiary works under a separate account, in opposition to your Excellency's instructions. Now, these were the subsidiary works put forward in the flimsy argument of the right hon. Gentleman, which was pooh-poohed by the Governor General in India and by the Secretary of State at home. I speak now as a private Member, and I say, either Sir Bartle Frere and his Council are guilty, or the right hon. Gentleman and his Council have very grievously misapplied public money; and if he does not accept my challenge—if he and Sir Bartle Frere do not submit this matter to the Secretary of State, who is on the same side of politics with the right hon. Gentleman—I will only say, in conclusion, that I hope the right hon. Gentleman will not be put in any position in which he will have to deal with public money until this matter is thoroughly cleared up.

SIR SEYMOUR FITZGERALD

I think the Committee will agree with me that a few words are necessary after the extraordinary speech of the hon. Gentleman, on the good taste of which I will not comment. He has read a Despatch, but in doing so he has put into it certain words of his own. He says that the Government of India complained that the Government of Bombay had so acted that they were committed to an expenditure of nine lacs, and then the hon. Gentleman introduced the words—"During that time you (meaning myself) were Governor of Bombay." I beg to say I was not.

MR. GRANT DUFF

It went on for six months after you arrived,

SIR SEYMOUR FITZGERALD

I beg to repeat the statement I made on a former occasion, that on the very first opportunity, finding that a large expenditure was going on, and a large expenditure having taken place——

MR. GRANT DUFF

It was sixmonths after your arrival in India.

SIR SEYMOUR FITZGERALD

It was a much shorter time. About three months after I arrived I went up to Poonah. I found an expenditure going on, and I directed an estimate to be made. I found that the Government were committed to an expenditure of nine lacs, but they were committed to that expenditure not during that throe months, but long before I arrived in India. I feel that this is not the place for this discussion, and I offer my humble apologies for introducing these personal matters to the House. The complaint I made against the India Office—against the noble Duke (the Duke of Argyll), who was at its head, and the hon. Gentleman who was Under Secretary—was this—not that they complained of an expenditure of two-and-a-half or three lacs, but that they treated that as new expenditure which had occurred after the Government of India had complained of the larger expenditure. Instead of that it was an adjustment of accounts, the money having been expended two or three years before I went to India.

MR. KINNAIRD

said, he wished to draw the attention of the Committee back again to the important question before them, and he was sorry that the consideration of it had been interrupted in the manner it had been. If they contrasted the finances of India 30 years ago with their present condition, and found that every item of revenue had increased, the House need be under no alarm, the more especially when, notwithstanding the Famine, they had heard a statement from the noble Lord which his predecessor in office regarded as most encouraging. He could not agree with the hon. and learned Member for Marylebone (Mr. Forsyth) in regretting the imposition of the duties on stamps in India, seeing that they brought in upwards of £2,000,000 to the Exchequer. He was delighted to hear the testimony which his noble Friend the Under Secretary of State had borne to the administration of Lord Northbrook and Sir William Temple in connection with the Famine, and it must be gratifying to the Governor General to know that his policy had been completely successful. One result of it must be to raise this country in the estimation of the people of India.

MR. FORSYTH,

in explanation, said, he wished to say that if the stamp duties had been a tax on lawyers, he would have said nothing against them; but he objected to them because they were a tax upon justice.

MR. MASSEY

said, he rose principally to notice a statement which had frequently been made both in and out of that House on the precarious character of Indian finance. In those remarks he could not concur, seeing that there were £42,000,000 of revenue to which the Indian Government could look with as much certainty as any European Government could look to a similar amount derived from the same sources. There were two great disturbing causes in India; one on the side of income, and the other of expenditure. The disturbing cause on the side of revenue was in respect to opium, the returns from which varied from causes that were inscrutable even to the Indian Government. When he first went to India, the price of opium was 800 rupees a chest, and in the next year, or next year but one, it was selling at 1,400 rupees. That fluctuation in the price of opium showed the great instability of the income of the year in regard to the revenue derived from that article. Over and above the revenue of £42,000,000 to which he had referred, there was a revenue of £8,000,000, which was to a certain extent precarious, and it was on that margin a financier had to operate, and upon which he must carefully and cautiously adjust his income with his expenditure The other disturbing cause referred to expenditure, and it was the outlay upon public works, which was in the hands of a great spending Department. If the two disturbing causes to which he had referred were removed, there would not be a sounder system of finance in any country in Europe than that of India; but so long as these difficulties existed, there must be financial uncertainty, and the greatest possible caution ought to be observed in incurring liabilities which the country might not have resources sufficient to meet. Unlike other countries, India could not avail itself of new sources of income, when there was a temporary deficit to meet, and it was a most dangerous thing there to resort to modes of taxation hitherto unknown to the people. Notwithstanding all that might be said for the prosecution of great public works which were to remove crying evils, and to conduce to the material prosperity of the country, it would be better to defer the prosecution of those works, than to alarm the people of India by devising new taxes which would be regarded by them as a means of extortion. As to the income tax, it was a weapon of great power in this country, but a very weak and dangerous one in India, and in no case would the returns be commensurate with the dangers of imposing a tax of that character upon a people unacquainted with the civilized modes of collecting taxation which existed in Europe. The Natives of India regarded an income tax as inquisitorial, and as an introduction to a system of confiscation, and like every conquered people, they were suspicious, and looked with misgivings upon any new devices of their conquerors for getting money from them. Another great spending Department besides that of the Public Works was the Military Department. He was glad to hear that under that head there had been a considerable saving effected; but seeing that the expenditure in the Department amounted to so large a sum as £14,000,000, he could not help thinking that a closer inspection and more methodical management would result in still greater savings. In its financial administration the Government of India had also to encounter difficulties arising from the existence of nine somiindependont Governments, which were supposed to be under the control of the Government of India, but the arm of the latter was not long enough to control their expenditure. Two of them, in fact, were in direct communication with the Secretary of State, and assumed in consequence airs of independence. When he was in India, one of the great difficulties which the Government of India experienced was in enforcing the rules of economy which it was their duty to enjoin upon the semi independent administrations. He hoped the Secretary of State would support the Governor General and his Council in insisting upon a due observance by the local administrations of those orders with regard to expenditure which were from time to time issued by the Government of India, and which he was sorry to say were almost systematically disregarded. If, on a proper occasion, the Secretary of State were to remove from his post a Governor or administrator who had been guilty of that systematic disobedience, he would do a great deal to support the Government of India in enforcing economy. He would admit that much had been effected by the introduction of what was called a system of decentralization—a clumsy phrase which implied much more than was really meant. Under that system an estimate was formed, not in any arbitrary manner, of the needs of the local government, and a certain sum was given from the general fund of the country, to be administered locally within the limits allowed. He wished to dispel any vague notions which existed of alarming prospects with regard to our Government of India on account of its financial instability, and he was therefore glad to hear the noble Lord toll them that evening that it was the intention of the Government of India to engage in no public works to be derived from loans which should not be of a reproductive character. That was an excellent resolution, and he hoped it would receive a practical application. He had adverted to the difficulty of devising now sources of income in India. That was the only danger they had to encounter; all other dangers had been substantially removed. There was now a strong conviction among the people of India, far greater than it was 20 years ago, of the power and resources of this country, and he believed that no attempt would be made, at least for a long time to come, to resist the authority of England. They could only alienate themselves from the respect and attachment of the people of India by wild and vague devices of finance, and the best security for peace was to maintain, a due balance between the revenue and expenditure of the country.

GENERAL SIR GEORGE BALFOUR

said, after the very able statement of the noble Lord the Under Secretary of State for India that evening, it was not necessary for him to say much on the subject. He was glad to have heard the noble Lord speak of reduction in the public expenditure, believing, as he did, that order and regularity would result from a well-directed economy. The noble Lord adverted to the great saving that had been effected by the reduction of the Native Army; but it should be borne in mind that the European Army had been greatly increased there, and that heavy expenditure was incurred in that way. He congratulated the noble Lord, however, on the reduction which had been made in the Army, and would suggest that it might be still further decreased, without sacrificing efficiency, by reducing the number of European troops employed in the service. Military difficulties, however, had been small matters in India as compared with financial difficulties, and he had, therefore, peculiar pleasure in noticing the fact that the financial machine was working much more smoothly now than it had done in former periods. With regard to the mode in which the accounts were kept, he must express his opinion that greater clearness would be secured by keeping the "ordinary" and "extraordinary" accounts apart in separate budgets. That would so far simplify matters as to render perfectly easy the now difficult task of comparing the receipts and expenditure of different periods. He had heard with great pleasure the remarks made by the noble Lord in reference to improving the commerce in India. Having given much thought to this question, he had come to the conclusion that if the Government would abolish the whole of the Customs duties along the 2,000 miles of Indian seaboard, it would give such a stimulus to the native industries as to recoup in the shape of exchanges all the loss that would be involved in the abolition of Customs duties. It was now a considerable number of years since he had been Commissioner of Public Works in India, but he was enabled from his experience to speak with correctness upon that subject, and he had no hesitation in saying that unless they exercised great precaution in not undertaking public works but such as they were satisfied must prove reproductive, great evil in the expenditure would result. With regard to irrigation, they should take care and secure water for that object when it was available, taking care to see that above all things the work was well and thoroughly done. In that way, in the Madras Presidency extensive irrigation works had been constructed; the Natives manifested a great willingness to use and pay for the water supplied; and the result was a much greater fertility than was to be found in those parts of the country where irrigation works were not maintained in so high a state of efficiency. The provision of ample and cheap means of conveyance was also vastly important. It was not likely to happen that all India would be short of food at one time; and what was wanted, therefore, in order to secure the country against the dire results of famine, was that food might be cheaply and rapidly conveyed from place to place, and with a view to that he would strongly recommend the India Office to consider the advisability of purchasing the railways. With respect to the question of public works, he thought that the mixed system under which they were constructed, partly by the Government and partly by private enterprise, was a great mistake, and injurious to the interests of India. Either the Government ought to undertake the works, or simply encourage private enterprise to carry them out. The mixed system had been found to be a mistake, and it had in it inherent qualities which would cause it to be unsuccessful for any practical good to all time. He would also suggest that the Bengal Presidency should be still further subdivided, so as to bring it reasonably within the power of one man to superintend its Government. Assam had already been separated, and he thought it would be largely to the benefit of all concerned if a similar course was taken with regard to Orissa and the country lying inland from it. With regard to the mode in which the accounts were kept, he very much regretted that the auditing was not more strict. He would also call the noble Lord's attention to the important Minute which had been recorded by the auditor, and must express his regret that the country had lost the services of that able officer. He had to complain of a large amount of charges which were unfairly imposed on India, especially in connection with China, and also on account of our Embassy in Persia; and he trusted the Government would see that they were placed against the proper quarter that was liable for them. In conclusion, he must say he agreed with the hon. and learned Member for Marylebone (Mr. Forsyth) on the subject of native employment, and he hoped the Government would give their attention to the subject with a view to its development in all cases where practicable.

LORD GEORGE HAMILTON

, in rising to reply to the various questions which had been put to him, said, he had consulted the Secretary of the Finance Department of India as to the time at which the figures could be sent to this country, and the Secretary was of opinion that in another year, the figures might be sent home in sufficient time to admit of the statement being made in June. He (Lord George Hamilton) was much afraid, however, that the great pressure of business in Parliament at that period of the Session would always prevent the Indian Budget being submitted earlier than July. With regard to public works, the Despatch which had been referred to, did not say that no public work of any kind should be constructed out of borrowed money, but laid it down that only works the revenue of which would be equal to the interest of the money borrowed for their execution, should come under the class of public works extraordinary. Famine preventing works were to be executed out of the ordinary income of the year; but if it was absolutely necessary to complete them in a certain time, they would be completed out of borrowed money, but included in the ordinary expenditure of the year. The hon. Member for Hackney (Mr. Fawcett) had asked what amount was expended in provincial services in 1874–5. The provincial revenues and allotments were estimated at £6,130,000, and the expenditure at £6,224,000. The expenditure connected with Cooper's Hill College, which had been alluded to, was caused by certain alterations and additions made to the institution, the cost of which must be regarded as a charge on capital. The actual receipts of the College came within £6,000 of the total expenditure incurred for maintaining it. The very able document written by Sir John Strachey, to which reference had been made, was not an official statement of the views of the India Office, but was the result of the writer's own experience. The subjects to which the hon. and learned Member for Marylebone (Mr. Forsyth) had directed attention—namely, stamp duty, the employment of Natives in offices of public trust, and competitive examination—had been, and were, all under the consideration of the Secretary of State. With regard to a school of native forestry in India, his noble Friend had been in favour of its establishment, but it was not found to be possible to carry it out. As to the gauge of the Indian railways, he believed the line from Lahore to Kurrachee would be constructed on the broad gauge, but that the Government of India had not made up their mind as to the gauge of the portion from Lahore to Peshawur. With respect to the annuity and commutation clause in their contracts with the guaranteed railways, if the Government could be sure that their credit would remain at the same point where it now was, and could also be certain that they could work the railways as efficiently and as cheaply as they were now worked by the companies, it would be a great advantage to the Government to make use of that clause. But there were two considerations which must enter into the calculation of an annuity—first, the length of time it would have to run, and next the rate of interest at which it was to be estimated. The rate of interest was not very clearly laid down in the clause; and although several eminent men had endeavoured to agree as to the meaning of the clause, they had been unable to do so. The point, however, was to be decided by the Governor of the Bank of England. The Secretary of State was fully aware of the advantages of the annuity clause under certain circumstances, but it would not be possible for him to make any promise on behalf of the present Secretary of State, for even if his noble Friend undertook to purchase the railways at a favourable time, his promise would not be binding on his successor. Moreover, it would be inconvenient if the Government pledged itself at all hazards and risks to embark in so large an enterprise. In conclusion, he begged to thank the Committee for its kind attention in listening to him.

MR. FAWCETT

wished to state that the noble Lord had slightly misunderstood him on the subject of the annuity clause. All he pressed for was, that the Government should give him an assurance that they would not surrender their right to avail themselves of it until Parliament had an opportunity of expressing its opinion upon the question.

Question put, and agreed to.

Resolution to be reported To-morrow.