§ Order for Committee read.
§ LORD GEORGE HAMILTONrose, pursuant to Notice, to make the Indian Financial Statement. He said, that within the last four years there had been two famines in India, which had operated 93 with great severity, and the Indian Government in dealing with them had acted upon principles which only three years ago had obtained the unanimous approval of that House. In carrying out that policy, however, it had been obliged to incur an expenditure which the Indian money market was unable to meet. He felt himself, therefore, most reluctantly called upon to ask the House to grant them certain borrowing powers by which to raise a portion of the sum, the expenditure of which could alone avert a frightful mortality. Now, he felt that in asking for those powers it was only right the House should be placed in full possession of the present position of Indian finance, for nothing could be more unfair than that under cover of an appeal to humanity an intolerable burden should be placed on the revenues of India. He was glad the opportunity presented itself for making some such statement, because during the last few months a great deal of attention had been directed to Indian finance and many alarming opinions on the subject expressed. There seemed to be in some quarters a strong impression that the ordinary revenue had been insufficient to meet the ordinary expenditure; that the Indian Government had to borrow to meet every contingency; that it was annually spending large sums in the construction of works which could never be remunerative; and that therefore its insolvency was a mere question of time. Those views, though quite erroneous, were, he must admit, to a certain extent fostered by the necessary complication of Indian accounts, and he might, perhaps, mention, by way of answer to those hon. Members who were disposed to find fault with those accounts, some few of the difficulties with which the Indian Government had to contend and from which the English Treasury was wholly free. The Indian Government, it should be borne in mind, was one which not merely carried on the administration of a Continent, but which performed many of the duties which in England devolved on local authorities, and other functions which here were discharged by private bodies and by companies. Not only had they to meet the whole cost of the administration of the country, but also to find the funds for the relief of destitution caused by scarcity or famine, and to supply the means by 94 which remunerative public works were constructed, which in this country were carried out by private enterprize. They were, in addition, bankers to the guaranteed railway companies and to certain Service Funds, which involved them in numerons transactions which were further complicated by there being two Treasuries, one in England and the other in India, the Treasury in England making payments in gold, while that in India made them in silver. The result being that, as the relative value of those two metals was constantly fluctuating, it was impossible by any prudence or foresight to prevent unforeseen losses, and extremely difficult to make an accurate comparison between different years. Famine was another disturbing element, for it not only increased expenditure, but curtailed the revenue. He hoped the House would be kind enough to make some allowance for the undoubted difficulties with which the Indian Government had to contend when they placed, either by accounts or statements, the past and present condition of Indian finance before Parliament for criticism and approval. There were three separate classes of expenditure which ought to be kept distinct—first, the ordinary expenditure connected with the administration of the country; second, the famine expenditure, which was incurred to save life, and both of which were unproductive. The third class was of an entirely different character, and was at present known as the public works extraordinary expenditure, which was a particular description of investment for the purpose of developing the material resources of India. Now, he desired at the outset of his statement to make two propositions. He should, he believed, be able to prove that the ordinary revenue was more than sufficient to meet the ordinary expenditure; and, secondly, that as regarded the public works extraordinary expenditure, a twofold process was going on, the annual loss on those works was annually diminishing, while the mileage on railways and the area of irrigation were annually increasing. He could not at the same time deny that Indian finance was liable to dangers from which we in this country were happily free. That must, however, necessarily be the case. We had established in India an European administration, supported by an Asiatic 95 revenue, and there were two dangers against which we had to contend—the curtailment of revenue and a certain expansion of expenditure from which the European financial system was in a great measure exempt. Now, the three years which came under notice on the present occasion were the years 1875–6, 1876–7, and 1877–8. It was necessary to make the comparison between three years, and the House would perhaps be kind enough to bear in mind that the whole of the figures relating to 1875–6 were those of the actual account, while those relating to 1876–7 embraced only eight months of actual account and four months of estimate, those of 1877–8 being entirely composed of estimates. He would now notice an alteration made this year in the accounts. In 1871 Lord Mayo introduced a decentralization scheme by which certain receipts were handed over to the local Governments, while a certain amount of expenditure was also placed upon them, and those sums had since 1871 been excluded from the annual accounts presented to Parliament. It was now proposed to further extend this system, and as a preliminary to such a development of decentralization, it became necessary to bring back the sums excluded into the accounts. An increase of about £1,000,000 was thus effected on both sides. He would now give the amounts for the three years he had named, not in rupees, but in pounds sterling. For the year 1875–6 the surplus was estimated at £506,000, but the realized surplus was £1,668,945. The famine charge in that year, which was not expected, amounted to £508,554. Excluding this charge, the surplus amounted to £2,177,499. The result was all the more satisfactory because in that year the Tariff Bill was passed, by which a considerable remission of taxation was made. At the commencement of the year 1876–7 a change of Viceroy occurred, and Lord North-brook returned home to his well-earned honours and rest. While his Lordship was Viceroy he gave the greatest and most successful attention to the finances of India, and yet, notwithstanding his undoubted ability as an administrator and economist, he was unable to hand over to his successor a larger estimated surplus than £144,000. This curtailment of the surplus pre- 96 viously available was entirely due to one circumstance — an unexpected fall in the value of silver. This fall affected the Indian Government, because they had to make very large payments in this country in gold. In order to meet these payments they had to sell silver, and the lower the price of silver was the more they had to sell of it, and the extra amount of silver which last year they had to sell to buy the necessary gold was two crores and 33 lacs of rupees. Last year he ventured in his statement to say he did not think the fall in the price of silver would cause any deficit; but, unfortunately, as soon as silver began to resuscitate itself a terrible famine broke out, which occasioned a very large loss of revenue from ryot wari settlements. This year, therefore, had had to encounter a two-fold load of disaster. This famine differed from that in Bengal in 1874, because there the Zemindars occupied the place of middlemen, and thus averted the otherwise certain falling off of the land revenue. It was estimated that in 1876–7 there would be a loss of £1,384,500 in land revenue below the Budget Estimate; of £92,500 in Excise; and of £20,000 in Forest. If there had been no famine the revenue would have been £1,223,000 in excess of the Estimate of last year. The expenditure for the year 1876–7 was £1,727,471 in excess of the Budget Estimate; but this was entirely due to the famine, which caused a direct expenditure of£l,911,504. There had been, in addition, given to the Army as compensation for increased dearness of forage and provisions £80,000, bringing up the total famine expenditure to the sum of £1,991,504. The other heads of expenditure remained tolerably stationary. There was an increase on opium of £601.803, due to advances; but the most important feature in the finance of the year was the extraordinary increase in the traffic receipts of the Guaranteed Railway Companies. The gross traffic receipts were estimated at £8,557,500, whereas the sum realized was no less than £10,317,300. As the working expenses had not increased in proportion, the net loss upon the guaranteed interest was reduced from £1,260,000 to £420,051. The Delhi Assemblage caused an increase of about £90,000, and the famine had increased the corn and grain traffic to the amount of about £290,000; 97 but the rest was due to a bond fide increase in goods traffic generally, and of that increase the most important arose in the export of wheat. The quantity of wheat exported in 1872–3 was 320,000 cwt.; in 1875–6 it was 2,156,000 cwt.; and in 1876–7 it rose to 4,839,000 cwt. It was difficult to over-estimate the importance of the growth of this export trade. He was informed, too, by experts that the quality was excellent, and that it would favourably compare with American and Russian wheat. He had very little doubt the present high price of wheat would largely increase the export trade, and very materially assist us in getting rid of our silver.
§ MR. JOHN BRIGHTwished to know whether the exports came to England entirely, or whether they went to other countries?
§ LORD GEORGE HAMILTONsaid, he was afraid he could not answer the question off-hand, but he could easily obtain the desired information. His impression, however, was that the greater portion came to England. They had the enormous advantage of £95,500,000 of guaranteed railway capital, which greatly stimulated trade, and for which the loss on interest was only £420,051. The expenditure on the famine amounted to £1,911,504, and on the Army to £80,000. This, together with the loss of revenue, and making due allowance for the traffic receipts, gave a net loss of £3,198,000. That loss converted the estimated surplus of £144,000 into a deficit of £1,858,158. If there had been no famine there would have been, in spite of the loss caused by the fall of silver, a surplus of £ 1,340,346; therefore, his statement last year that he did not anticipate a deficit from the fall in silver was very considerably under the mark. The revenue last year was £51,220,713, and the expenditure £53,078,871, showing a deficit of £1,858,158. For the year 1877–8 Sir John Strachey estimated the revenue at £52,192,700, which was £971,987 over the Estimate of the preceding year; but the continuance of famine reduced the revenue by £528,400. The expenditure, including £1,425,000 for the famine, amounted to £53,014,400, showing a deficit of £821,700; but, excluding the net charge for the famine — namely, £2,052,000—there would have been a 98 surplus of £1,230,300. The net cost of the famine for two years was £5,250,504. The increase in Land Revenue, Excise, Customs, Stamps, and Post Office, could not be advantageously compared with that of previous years, as the famine had so disturbed the revenue of that year. The revenue from opium was purposely estimated at £566,800 below the sum received in the preceding year. Tthe State railways gave a gross income of £674,800, and exhibited a net gain of £190,000, as against last year's gain of £104,000. The Army expenditure was increased by £633,878, including a charge postponed from last year of £200,000. The remainder was due to increased pay to Native troops and British non-commissioned officers, and to compensation for dearness of forage and provisions. The direct expenditure caused by the famine was £486,504 less than last year, and the total expenditure showed a decrease of £64,471. The main features of Sir John Strachey's Budget had been the extension of the decentralization scheme, which he had done a great deal towards carrying out in 1871. Sir John Strachey then said that—
For years before Lord Mayo became Viceroy the ordinary financial condition of India had been one of chronic deficit, for the demands of the Local Governments were unbounded, and there was no limit to their legitimate wants. They saw on every side the necessity for improvements, and they had a purse to draw upon of unlimited, because of unknown, depth. Their constant desire was to obtain for their own Provinces as large a share as they could gain from the general resources of the Empire. The Government could check these demands only by imposing on the Local Governments the responsibility of maintaining their finances in a state of equilibrium. The distribution of the public income degenerates into a scramble, in which the most violent has the advantage, and the chief evil is that the growth of local income does not tend to local advantage.That was the state of affairs with which Lord Mayo had to deal, and he transferred to the Local Governments the administration of the gaols, the police, education, registration, medical services, printing, roads, and civil buildings. To meet the expenditure so transferred he handed over the receipts of services and allotments amounting to £5,667,000. This system placed great and increased powers in the hands of the Local Governments. It had been in operation for five years, and was a complete success, both 99 administratively and economically. In the year 1863–4 the Services cost £5,112,000; in 1868–9, £6,030,000; in 1875–6, £5,305,000. The scheme led to no fresh taxation, the powers were given only in the Punjab and in Oude, and the total of local cesses, rates, and taxes in 1877–8 was only £2,233,000. The weak point of the scheme was the tendency on the part of the Services to increase in cost, whereas there was no inducement to develop the revenue. Sir John Strachey, however, now proposed to extend this system by handing over further revenue to the Local Governments to meet the costs of other Services to be transferred to them. For the present year this extension of local responsibility would be limited to the North-West Provinces and Bengal. In the North-West the receipts of Land Revenue, Excise, Stamps, Administration, Law and Justice, the net assignments of which, together with other casual receipts, amounted to £698,000, were given to that Government. The cost of the Services now transferred, together with those taken over by the Local Government in 1871, amounted to £1,352,000; and the allotment therefore made, in addition to the sum of £698,400, would be £653,600, making a total equivalent to the cost of the transferred Services. In Bengal the same principle would be adopted, the revenue surrendered being £1,910,000, and the expenditure to be incurred £2,370,000. This transfer involved no fresh taxation, but a saving of £101,700 was effected, whilst a guarantee was also given by the Local Governments of a normal increment of transferred revenue of £44,000, making a total saving of £145,700. This extension of the principle of decentralization would considerably relieve the Supreme Government of the increasing duties imposed upon it, for the telegraph was a great centralizer, and yearly accumulated the responsibilities and anxieties of the central authority. These powers handed over to the Local Governments were subject to strict rules and regulations, the most important of which were that no fresh taxation could be imposed, no change could be made in the management of the revenue, and no fresh expenditure entered into without the consent of the Central Government. Sir John Strachey also proposed to hand over to the Local Governments the irri- 100 gation works constructed by the Imperial Government. Railways were beneficial to the whole country—it would be difficult to define any territorial limits of advantage — but it was different with regard to irrigation works. They only benefited the locality within which, they were carried on. They proposed, therefore, to hand over to the North-West and to Bengal—and to those two Governments only at first by way of experiment—certain irrigation works; but before doing so, they required guarantees for the payment of the interest of the sums expended. In the North-West that outlay amounted to £5,560,000 up to the end of the financial year 1877–8, of which £2,310,000 was expended on works not yet in operation. The works in operation paid much more than the interest on the outlay, but the Indian Government could not afford to give up any of that surplus revenue. They also required 4½ per cent on the works not yet in operation. The total sum to be paid by the Local Governments would amount to £269,500, towards the payment of which they received £169,500 from the canals put under their management. There remained, then, the sum of £100,000 to be raised by taxation; but that sum would, probably, be reduced to £80,000 in five years. This £100,000 was to be met first by a light licence tax, and, secondly, by a power to assign 10 per cent of the rates now leviable in the North-West Provinces. The total of those rates was £430,000, and the increased taxation would fall very lightly considering the number and area of the population upon whom it was imposed. The amount of capital expended on the canals in Bengal was £8,000,000, and he was sorry to say those canals did not pay. On the contrary, some of them scarcely cleared their working expenses, but they were of great benefit to the localities in which they had been constructed. It was believed, however, that, if handed over to the Local Government, their revenues might be considerably developed. The amount of interest to be paid was £270,000, and this would be raised by local cesses and an irrigation rate; but the latter was for the present postponed. It had been urged on the part of the Zemindars that this proposed taxation would be an infringement of the permanent settlement. Mr. 101 Eden had entered into a correspondence with them on the subject, and had, he thought, shown that they were in error. Sir James Stephen some years back argued the same question in this way—It may be asked what good there was in the permanent settlement, what great benefit it conferred upon the landowners of Bengal if it left their property subject to taxation. The answer is that it reduced to a certainty one particular charge on the land which had previously been of variable amount, and so freed the landowners from uncertainty which had previously hung over them in respect of it. Under the old system of land revenue, worked as it was by the old Governments, it was, at all events, a debatable question whether the Zemindars had any private property in the land after all. Not only was this question debatable, but it was hotly debated, and I think that any one who roads the papers which were written to show that the Zemindars were mere farmers of the revenue will be obliged to own that much may be said in support of that opinion. Since the permanent settlement their proprietary right has been undoubted, and the line between their property and that of the State has been clearly denned, and is no longer subject to increase, in consequence, to use the words of the permanent settlement itself, 'of the improvement of their respective estates.' To affirm that because the line has been drawn between the State's share, the Zemindar's share, and the ryot's share in the land, the shares of the Zemindar and the ryot have been freed from all further liability to taxation is nothing less than to argue that by the act of creating property in land and defining the extent of that property the Government relieved the property which it had so created and defined from that which is the common liability of all property in all countries and under every possible system of government, the liability to taxation. I hardly know how to argue against such confusion of thought.Mr. Eden, who was perhaps better acquainted with the condition of Bengal than any other civilian, had discussed the matter in full, and when he asked the opposite side what other tax would they propose, the only suggestion that was made was that there should be an increase of the salt duty. The fact was that Bengal was more lightly taxed and richer than any of the other Provinces. Under the permanent settlement she paid £8,000,000 less land revenue than she would have to pay if the land revenue were liable to revision. No less than £6,600,000 was recently expended to avert famine from Bengal and charged on the revenues of India, and he did not think it, therefore, at all too much to ask Bengal to contribute to the maintenance of those canals which might prevent a repetition of that calamity. The total gain to the Estimates 102 from this scheme of decentralization would be £520,000; the maximum amount of taxation would be £325,000; and therefore, putting it roughly, while one rupee would represent the gain from additional taxation, two would represent the saving to the Imperial revenue from closer supervision and better administration. But the scheme would require and receive close watching. The further extension of the system would be most useful in future famines. At present there was a system in force which would certainly not work in this country. When a famine broke out the Local Government made a demand on the Supreme Government, the Local Government being the spending authority and the Supreme Government finding the funds. There was, therefore, a sort of natural antagonism between the two. It was due to the sound principles which Lord Northbrook laid down that they were able to meet the famine which had now occurred at much less cost than before. There was no doubt that the famine in Madras and Bombay was much more serious than had been the famine in Bengal; and yet, while the whole direct cost of the Bengal famine had been £6,600,000, the whole direct expenditure on the Bombay and Madras famine would be only £3,300,000. Lord Northbrook's principle was that the Government should not interfere with private trade, but should only step in to supplement it when it failed to save the people from starving; and that was the principle acted upon joy the Government on the present occasion. The experience of Sir Richard Temple, who had lately assumed the Governorship of Bombay, had been most advantageous in reducing the expenditure and introducing order and method into the famine administration. Sir Richard Temple had been severely attacked for what he had done, but he had a very difficult and delicate task to perform, and great credit was due to him for not flinching from the difficulties. The latest news received from both Provinces was encouraging. The south-west monsoon had broken on Bombay, and there had been heavy showers in Madras. But while they expected that the estimate of expenditure in Madras would be exceeded, that in Bombay would be reduced. The net result of three years, including famine expenditure, was—Revenue in 1875–6, 103 £51,310,063; expenditure, £49,641,118 —showing a surplus of £1,668,945; in 1876–7, revenue, £51,220,713; expenditure, £53,078,871 — deficiency, £1,858,158; in 1877–8, revenue, £52,192,700; expenditure, £53,014,400 —deficiency, £821,700. He had dealt with the three financial years which had come under his own immediate observation, and he would now make a few remarks on the general condition of Indian finances. The charge generally made against the Indian Administration was that while their expenditure was unduly increasing, their revenue remained stationary. That, however, was not the case. Taking the year 1869–70, a year selected by Sir John Strachey, and comparing it with 1875–6, he found that the revenue in the former year was £50,901,000, against £52,515,787 in the latter. But the income tax, which had since been abolished, was in force in 1869–70, and increased the revenue of that year by £1,100,000. Excluding that, it would be found that the same taxation, somewhat reduced, which brought in £49,800,000 in 1869–70, brought in £52,500,000 in 1875–6, being an increase of £2,700,000. Turning to the expenditure side of the account, he found that in 1869–70 the expenditure was £50,782,412, and in 1875–6 it was £50,846,842. But in this last year there was an exceptional charge for famine of £500,000, so that the ordinary expenditure was only £50,251,000, or £600,000 less than in 1869–70. That showed the inaccuracy of the assertion that their expenditure was increasing in a greater ratio than their revenue. The next charge brought against the Indian Administration was that if the revenue of the year was sufficient to meet the ordinary expenditure whenever any exceptional occurrence took place, they were obliged to go into the money-market and borrow. He had laid on the Table of the House a statement giving the total revenue and expenditure, including the cost of famines, but excluding public works extraordinary, from Mr. Wilson's time in 1861–2 down to the end of the present year, and it showed that though they had to meet exceptionally heavy famine expenditure and the extra charge owing to the fall in the value of silver, the surplus of revenue over expenditure had 104 been upwards of £2,000,000. But there was at the bottom of that statement a Return showing the increase of debt during that period. That increase amounted to £32,666,828, of which there had been a redemption of East India stock to the amount of £4,579,416, leaving the net increase of debt £28,087,412. That increase was due to public works extraordinary. It might be asked, What were public works extraordinary, and what did they get for that increase of debt? Many years ago—he believed Lord Dalhousie was the first Governor General who initiated the principle—the Indian Government determined to construct railways by borrowing. They felt it impossible to do so out of their ordinary revenue; and as a necessary consequence of determining to construct railways by borrowing, they had to put aside a certain portion of their revenue in order to meet the difference between the interest on the sums borrowed and the net receipts from the works on which those sums were expended. They commenced to put that principle in practice through the agency of the guaranteed companies. They borrowed indirectly through those companies, and they applied the money which the companies raised to the construction of the railways. That system was in force up to 1867, when Lord Lawrence wrote a very elaborate Minute in which he showed that the system of giving a high guarantee on the capital raised by the companies was most expensive, and that although it had secured excellent lines, the advantage of which could not well be over-estimated, yet that they were economical neither in their construction nor in their management and working. Therefore, it was determined to abolish the system of borrowing through the guaranteed companies, and the Indian Government adopted instead the simpler plan of going into the money-market themselves, borrowing money at a lower rate of interest, and expending it themselves. As long as the guaranteed companies were in existence the capital thus annually expended on railways was excluded from the accounts; and all that the accounts showed was the net loss on the annual transaction—that was to say, the difference between the net receipts which were handed over to the Government and the guaranteed interest which it 105 paid to the companies. In 1861–2 the loss on guaranteed interest on a capital of only £35,000,000 was £1,425,000. The loss on capital expended when it had been increased by £60,500,000, as it had been since 1861–2, being now £95,500,000, was only £420,000 last year. Therefore, although they had increased their capital expended on railways by £60,500,000 the net annual result was £1,000,000 better than in 1861–2. It was important to bear that in mind, because hon. Gentlemen sometimes expressed regret that the days of the former system were gone. But during the time when the guaranteed companies were disbursing £6,000,000 and £7,000,000 a-year on the construction of railways, that money was borrowed at high interest. Since then the system of public works extraordinary had been started, under which the Indian Government themselves constructed their railways and canals, and borrowed money for that purpose themselves. But in their honest anxiety to show what the exact result of their expenditure was, they had adopted a form of account which he must admit was somewhat misleading. It was a form of account which, as far as he was aware, was the opposite of that adopted by any commercial company or by the Government at home in analogous cases. Parliament had laid down the rule by which railway companies in this country presented annual accounts of their revenue and capital expenditure. In the case of the Indian Government, the whole capital expenditure on public works extraordinary was charged against the ordinary revenue of the year; and, of course, the result was what was called a deficit. The accounts relating to public works extraordinary ought to be clear, first as regarded the sums expended; secondly, as to how they were obtained.; and thirdly, as to the results. It was very difficult to understand those accounts as at present prepared, receipts from these works and revenue being so mixed up as to be unintelligible. Lord Salisbury, therefore, thought that some alteration should be made, because their present form was in every way disadvantageous. In the first place, it gave the public the impression that they annually spent more than they received, because they could not otherwise carry on the administration of India. In the next place, if in that House he tried to 106 the best of his power to state the actual results of those public works extraordinary and their revenue, some hon. Member got up on the one side and expressed astonishment at his audacity in having put the figures too high, and another got up on the other side and expressed surprise that he had put them several millions too low. Again, it was asked, if they could ascertain what was the revenue from those works, why not place it in their accounts? At present there was a common fund from which they met all the various charges that were made upon them. Soon after he entered upon his present office the House granted powers to raise a certain sum of money in this country for defraying the expenses of the Bengal Famine. They accordingly raised £5,000,000 for that purpose in 1874, and the Indian Government also raised £2,500,000 in the same year. The famine expenditure was included in the ordinary expenditure and charged to ordinary revenue. Now, the ordinary revenue in those two years turned out so much better than was expected that there was actually a surplus of £150,000 on the transactions of those years. But they borrowed £7,500,000 in order to meet that famine; and the question was, where did it go to? Into the cash balances; and the only thing clear was that the famine had cost them so much and that but for the famine they would not have had to borrow what they did. It was impossible to trace, under the present system, the exact application of these loans. Some alteration of the accounts, then, was necessary. Lord Salisbury proposed to effect some alterations in them; and as the alteration was important, copies would be found in the Vote Office, so that Gentlemen interested in finance might be able to trace their principle. They proposed, as they were engaged in what was undoubtedly a commercial transaction, to deal with the matter as a commercial one, and to have an accurate revenue and an accurate capital account. The first step they would take was to ascertain what was the total amount expended on those so-called public works extraordinary, which consisted of irrigation canals and railways. That could be easily ascertained. They would treat the whole of the money thus expended, whether it came from revenue or from loan, as borrowed money, and 107 they would then deduct that sum from, the permanent debt. There would, therefore, in future be two debts — the Permanent Debt and the Productive Works Debt. They next proposed in the revenue account to keep the revenue derived from productive works distinct from the income derived from taxation. The revenue from productive works would include receipts from irrigation, land revenue due to irrigation, and railways. The accounts would show the exact amount annually obtained from each of those works. On the expenditure side they would charge interest on the Debt incurred for those works, also the working expenditure for each work. The accounts would, in fact, show the total expenditure on public works extraordinary, and the receipts from them; so that the actual result of the transaction might be seen at a glance. The result would be that any hon. Gentleman would at once perceive what works were paying and what were not. The only objection to this proposal which he could conceive was that by excluding the capital expenditure they might be led to an unlimited expenditure; but a moments' reflection would dispel any such notion. The amount of expenditure incurred was of secondary importance— what were of primary importance were the returns. They could afford to expend a large sum if they got a good result; but they certainly could not spend a large sum if they got no result from it. The hon. Baronet the Member for Kirkcaldy (Sir George Campbell) had a Notice on the Paper to the effect "that the present rapid increase of the debt of India, notwithstanding the enjoyment of profound peace, is inconsistent with financial prudence." Now, if they increased the debt in order to meet their ordinary expenditure he agreed with him, but it was quite a different thing if they increased the debt to construct remunerative works. They also proposed to adopt the English system of applying the surplus revenue of any year to the reduction of the debt. Suppose there was a surplus this year of £1,000,000, and next year it was necessary to borrow £3,000,000 for the construction of public works, they would reduce the permanent debt by that surplus of £1,000,000, and they would charge to Reproductive Works Debt the whole £3,000,000. There would be two accounts of interest. If 108 they were able to reduce the permanent debt, the interest on it would be reduced; and if they could so carry out their works that year by year there should be a reduction of their annual cost to the State, there would on both accounts be an annually diminishing loss. The only State railway constructed and in working order was the Rajpootana Railway. This was now the third year of its working, and it already paid 5 per cent on the capital expended in its construction. He could not but regard that result as eminently satisfactory. The expenditure on public works extraordinary in 1875–6 was £4,270,629; in 1876–7 it was £3,764,614; and in 1877–8 it was £3,628,000. At the commencement of the Session a Motion was made by the hon. Member for Hackney (Mr. Fawcett) for the appointment of a Select Committee to inquire into Indian finance. The Government did not accede to that proposal; but if, next Session, it was desired to have a Select Committee to inquire into the expediency of increasing debt by constructing public works, the Government would not object. The expenditure upon public works extraordinary had been conducted upon certain principles, and it was shown in 1872–3 that the total loss upon the whole of our public works extraordinary, including guaranteed interest on railways, was £2,357,696—that was to say, that amount constituted the difference between the net receipts and the interest on the sums borrowed for construction, together with the working expenses of the works in operation. It was further estimated that after spending £4,000,000 annually up to 1879–80, the loss would be reduced £1,939,806; yet this estimate calculated the loss on the guaranteed railways at upwards of £1,200,000, whereas he had shown it to be only £420,000. The revenue had been reduced by the abolition of the income tax and other remissions in 1873, and Lord Northbrook, in the same year, sanctioned a proposal by which public works extraordinary were developed, and an annual sum of £4,500,000 was to be spent for five years. The amount spent between 1873–4 and the end of the present financial year ought, therefore, to have been £22,500,000. The actual amount expended was £19,466,121. The surpluses realized were£9,362,207, being 109 annual surpluses of about £2,000,000, leaving only £10,103,914 to be borrowed. If, therefore, there had been no famine, they would have been able to expend £19,466,121 on public works extraordinary, only borrowing the difference between that and the surpluses realized — namely, £10,103,914. But unfortunately the Bengal famine and the Madras and Bombay famine had cost the enormous sum of £11,861,591, to be added to the expenditure on public works extraordinary, making a total expenditure of £31,327,712. They had borrowed £17,174,032, and that, with the surplus £9,362,207, about £2,000,000 a-year, made a total of £26,536,239. They, therefore, required £5,000,000 to meet the difference. But he feared they would want a little more, because the withdrawal of the railway capital was very much in excess of the payment, and there were a great number of debentures due in India which would have to be taken up. The Indian Government had advertized to borrow £2,500,000 in India, and they had received from Native States about £750,000, which would be absorbed by debentures coming due. There would, therefore, still remain £2,500,000, which would be necessary to carry on the famine expenditure and meet the expenditure of the year. He therefore asked from the House the power to borrow £2,500,000 in this country, and to have power to add this sum to the permanent debt. That was considerably less than the Indian Government estimated they should have to borrow—which was £3,750,000; and it was no breach of confidence to say that that sum was, in the opinion of the Indian Government, the minimum which they would require to borrow during the year. Now, notwithstanding the increase of their debt which he had mentioned, he believed the actual net charge to the revenue of India was now less than it was at the commencement of the year 1873–4 —that was to say, including the guaranteed interest, as well as the interest upon the permanent debt. They could have afforded to have regarded with equanimity that increase of debt if the whole of it had been raised in India. But, unfortunately, a very considerable portion of it had been raised in England; and if there was one danger to Indian finance more serious than another, he believed it was consequent on the in- 110 crease of disbursements in this country. This was all the more serious because it was not altogether under our control. So long as our connection with India lasted, so long would those disbursements certainly not diminish. There were certain things which India required from Europe which could only be got from Europe. India wanted European soldiers to protect her. She required European administrators to govern her; she required European capital for her public works, and European energy to apply that capital. As year by year the cost of almost everything increased, so India had to pay for everything she wanted here the market price of this country. The traffic receipts of the guaranteed railway companies were still increasing. There was only a net charge of £420,000, but the actual disbursements they had to make in this country amounted to more than £5,000,000, and the better those railways paid the larger the sums we had to pay here. It was once the fashion to imagine that the India Office was at the bottom of all these large disbursements. Only abolish the India Office, it was said, and these disbursements would cease. But that was a great delusion. There was no part of the business of the India Office more carefully done than that of checking expenditure in this country; but, as he had said, the increase of disbursements in this country was not altogether under their control. For instance, as the cost of the whole British Army increased, the proportion of it contributed by India necessarily increased also, and so long as the present principle of payment remained in force, that result would be inevitable. In the matter of stores, of which India required an enormous quantity, he was happy to say that last year they had done good business. They bought 31,000 tons of iron rails at about £6 per ton; whereas in 1873–4 they paid £13 per ton. This year, again, they had paid about £8 per ton for steel rails; whereas in 1873–4 they paid £18 per ton. So that, great as had been the fall in the price of silver, the fall in the price of iron had been still greater, and it was well worth their while to continue to make purchases in that commodity, even when the rate of exchange was heavily against them. The home disbursements of the Indian Government 111 might be roughly estimated at between £15,000,000 and £16,000,000, which was met by selling bills payable in silver in London. Now those bills were drafts upon the Indian Treasury, and for all practical purposes might be regarded as silver. They to a considerable extent regulated and controlled the price of silver in London. The Indian Government had thus unconsciously drifted into an enormous commercial undertaking, which was nothing more or less than the sale of from £15,000,000 to £16,000,000 worth of silver a-year. But although their wants were constant, the demand for silver was variable. At the present moment the East was the great consumer of silver, Europe making little demand for it; but the appetite of the East for silver was intermittent. The consequences of forcing silver upon the London market, which, he believed, regulated more or less the price of silver throughout the world, were very unfortunate. The low price of silver sold by us was only an infinitesimal portion of the evil inflicted on India. Silver being the standard of value in India, any sudden fluctuation in the value of that metal affected not merely the amount of silver sold, but the whole metallic currency of the country, the price of all stocks measured in silver, and the value of all transactions regulated by this standard of value. A remarkable example of the effect of forcing silver upon an unwilling market was given last year, when, between January and July, on £2,739,000 worth of bills, the price of silver fell 11 per cent. Now, he did not mean to say that the amount of the silver sold was the cause of that fall—there were, no doubt, other causes at work, as the right hon. Gentleman opposite (Mr. Goschen) had very ably shown—and great apprehensions were aroused by a fear of these causes; but the sale of Indian bills in London when there was no demand for silver, was the lever by which those apprehensions exercised a most exaggerated effect upon the market. The Indian Government were, therefore, in this most unfortunate position. If they forced their silver upon the market when there was no demand for it, they reduced the price of silver and gave rise to fluctuations which were most injurious to Eastern trade, and if they borrowed money in this country they only put off the evil day. The 112 question then arose—If, on the one hand, it was unwise to increase future liabilities by borrowing, and if, on the other hand, there were times when it was equally unwise to force their bills upon the silver market, what were they to do? As a means of escape from the difficulty, Mr. Bagehot, whose financial ability had been acknowledged by the Chancellor of the Exchequer in making his Budget Statement, and who had rendered signal service in many questions connected with Indian finance, suggested that they should issue Treasury bills renewable from time to time. He (Lord George Hamilton) had therefore to ask the House to give them additional power to issue Treasury bills to the amount of £2,500,000, on the distinct understanding that that power should only be used when they could not possibly sell their bills. By that means they would be able to attain a two-fold, object. They would, on the one hand, be able to keep silver steady, and, on the other hand, they would not add to their permanent debt in this country. Fluctuations in the value of silver were absolutely ruinous, inasmuch as they disturbed the whole basis upon which merchants and bankers calculated their profits and drove capital into different channels free from such danger. The Secretary of State, he believed, was the first publicly to announce the impolicy of increasing the Indian debt in this country, and the House might rest assured that if they granted the reserve power now asked for, the Indian Government would use it with the view of avoiding any increase of their liabilities in this country, and of selling as much silver as they could without injuriously affecting the market. At the instance of the right hon. Gentleman the Member for Pontefract (Mr. Childers), a Return was in preparation showing the total amount of the Indian Debt, and another of income and expenditure was now in course of preparation. The Secretary of State thought that Returns of that kind would be interesting, and he had accordingly ordered them to be produced annually. There were, no doubt, dangers ahead which required constant watching. On the other hand, the revenue was steadily increasing, and the cost of public works extraordinary was, he believed, annually decreasing. He would not go into figures on this subject, because they 113 had been disputed; but he intended, by adopting a new form of account, to provide a certain method by which statements could annually be tested. If, however, the revenue was satisfactory, it could not be denied that a retrospect of the expenditure was the reverse. They had had to contend with the most extraordinary combination of adverse circumstances, as it appeared to him, that any Government had ever been called upon to face. They had had two successive famines, an incredible fall in the price of silver, and a steady continuous depression in trade. It was perfectly clear that if nature was to visit India every year with the curse of famine, the measures he had enumerated would not be sufficiently stringent to meet the increased strain on the financial resources. But whether there was, in the future, a period of prosperity or scarcity, he believed the proposed reforms would be efficacious in either case. In concluding, he hoped the alteration he had made in the accounts would make clear to every Member of Parliament that which had hitherto been a source of perplexity and misunderstanding, and that by adding to their information it would serve to give new zest and interest to the performance of those responsible functions by which that House controlled and supervised the finances of our Indian Empire.
§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—(Lord George Hamilton).
§ SIR GEORGE CAMPBELLrose to move the following Amendment:—
The present rapid increase of the debt of India, notwithstanding the enjoyment of profound peace, is inconsistent -with financial prudence, and renders necessary such a revision of the system as may provide, during times of peace and prosperity, a large margin of income applicable either to reduction of debt or to works really remunerative; and, in order to carry the above securely into effect, a high and independent authority should decide whether expenditure which it is proposed to exclude from the ordinary account may be properly classed under 'extraordinary,' as being, from a commercial point of view, a prudent investment likely to pay.The hon. Member said, that all in that House must acknowledge the financial ability which the noble Lord displayed more and more every year when he came to lay the Indian Budget before 114 that House. His statements were models of clearness and ability, and the House was indebted to him for the improvement that had taken place in the Indian accounts as they were now presented to the House. He was afraid, however, that the talent for official finance which the noble Lord had developed might militate against him, and induce him to put the best face upon the matter, to take too sanguine a view of Indian finance, a view which he (Sir George Campbell) thought the present condition of affairs did not justify. There was a great difference between finance as applicable to England and India. Chancellors of the Exchequer had taken, and very properly taken, a sanguine view of the finances of this country; but the noble Lord was scarcely justified in doing the same in the case of India. In this country we ruled our own people, and in case of emergency we might rely upon them to furnish resources by additional taxation; but in India it was different, because in times of trouble and adversity it would be quite impossible to appeal to the people for extraordinary means to meet our extraordinary needs. Strong as our position was—and he believed it to be stronger than many people supposed— yet we could not attempt in critical and troubled times to raise more money by fresh taxation. He was of opinion, therefore, that if in England in times of peace and prosperity it was considered necessary, as far as possible, to reduce our Debt—and he was glad that the Chancellor of the Exchequer had recognized the fact—it was of still greater importance in India to put by as much as was possible for a rainy day. He regretted, therefore, the sanguine view which the noble Lord had taken of the finances of India. The rule was that every year was exceptional, and no provision was made for accumulating a surplus, or for the reduction of debt, or to prevent borrowing, and this year the demand for loans was unusually heavy. £3,000,000 had already been asked for in India, and now they were asked to sanction a further£5,000,000, the greater part of which was to be spent during the current year. He (Sir George Campbell) was afraid that the finances of India would be worse in the future than they had been in the past. It was true that now railways, instead of being 115 guaranteed by the Government, were made by the Government, but with an open capital account there was much temptation to shift that which should be revenue expenditure to capital, and he was afraid that this was the tendency when they saw some of these expenses put down as "extraordinary." The view he took of the financial position of India was not his own, but was founded on the best possible authority — namely, an official statement. A Return, to which the noble Lord had referred in the course of his speech, had lately been laid on the Table of the House, giving figures showing the financial position during 17 years, beginning with the time when Mr. Wilson introduced his financial reforms. The comparison there given of income and expenditure showed on the whole period a surplus of £2,900,000, but he ventured to think the statement misleading. The whole of that surplus and a good deal more was gained in the first five years, when the additional taxation introduced by Mr. Wilson was imposed. Indeed, in those five years there was a total surplus of £4,600,000. In the remaining dozen years there was on the whole a considerable deficit, to which was to be added the deficit of the present year—namely, £2,500,000. Moreover, in the first five years the extraordinary public works were included, while in the last dozen years they were not. In fact, many works for which credit was now claimed as capital, as, for example, the Ganges Canal, were made before the system of works extraordinary was established at all. That being the state of the case, he was, he thought, justified in saying that our financial position in India was not improving, but deteriorating. A good many millions had been expended, for which there was nothing to show, and no provision had been made for a rainy day. The noble Lord, indeed, at the end of his speech had very candidly admitted that the retrospect was not very pleasant, and in that view he quite concurred. As to the future, he would rely solely on the remarks which he was about to make on the official statement of Sir John Strachey in the Council of the Governor General of India. Sir John Strachey as a Finance Minister was very much in his place. He was clear-headed, and there was not in the public service a more able 116 or zealous man. The lines of financial reform sketched by him were, he believed, good lines; but although the system of decentralization introduced by Lord Mayo was entirely successful, he was not sanguine that we should be able to recover our financial position by that means. The only fault he had to find with Sir John Strachey was that he was a little too sanguine; but in his statement he showed that an estimated surplus for the year 1877–8 would be converted into a deficit of £278,000 by a fair statement of the account. That was the statement of the responsible Financial Minister as to the revenue of the current year. As regarded the future, Sir John Strachey took also a very unfavourable view, which he derived from a consideration of the very seven years to which the noble Lord had alluded, for after going through certain details he said that during the past seven years the Government of India had just managed to bring their expenditure within their income, famine excluded, but that famines could not be omitted from their calculations, and, he added, that they had now no income tax. Was the noble Lord prepared to admit that the views of the official organ of the Government of India were right that the revenue was barely sufficient to meet our ordinary expenditure, making no provision for famine or the reduction of debt? If so, did he look upon our position as one characterized by prudence? He should imagine not. Our present position in India, considered politically, was most favourable, and he trusted that it might be maintained. He hoped that what was going on in Asia would not— indeed, he thought it would not—involve risk, as he believed that we might for years stand aloof from the affairs of Russia in that direction with impunity. At the same time, he pointed out that circumstances might arise which would make an increase of military expenses in India inevitable; and, considering all the contingencies and risks of the future, it would be imprudent to trust to a revenue which went no further than to meet the ordinary and necessary expenditure of the year. The general result of a long study of the subject had been to convince him that in future the increase of our Indian revenue would be very slow, 117 and that we could not look to it for the relief of our finances to the extent to which they ought to be relieved. If it were the case that we had barely provided for the ordinary wants of every day, without providing for famine and other occasional demands, we ought to do something in the way of righting our finances. If it were found impossible to improve the state of our finances in any other manner, he thought we should boldly face the task of introducing in some shape additional taxation. This was a course which the Government of India had now to a small extent adopted; but he was not favourably impressed with the measures taken in that respect during the present year. As to an irrigation tax, while admitting it was justifiable in principle, he thought there were very great difficulties in regard to it in practice, and therefore the Government had acted prudently in instituting inquiries on the subject. He assumed the Government of Bengal at a time when the Government of India were of opinion that the financial position was not secure, and it became his duty to impose a tax on the land of Bengal for local roads. He was strongly of opinion that a rate of that kind was one to which the land of Bengal was fairly and justly liable. He had, however, pledged himself, as the representative of the Government, that the tax should be local and for the benefit of the people themselves. That was the form taken by the road cess in Bengal, and the people had appreciated it. Its success had been such that he only feared lest they should run into extremes and impose too many taxes of that kind. He quite admitted, of course, that other rates would have to be imposed if Bengal was to have the advantage of the intended improvements; but he hoped that as the present new tax had been imposed for Imperial purposes, the Government of Bengal would not be saddled with the cost of a past failure. He would not put himself in opposition to the views of the Government, but he hoped that his statement of the case would be considered. His own contention was that temporary makeshifts should not be used, and that the Government of India was too much influenced by political cowardice, our position in India being much stronger than was generally supposed. They 118 were strong enough to impose burdens —necessary burdens—in times of peace and prosperity, and not in times of financial disturbance. His opinion was the absolutely necessary funds should be raised by large and comprehensive measures; and his own practical belief was that, as the taxation of the people of India was not at all heavy, it would be much better to do what was necessary now than to throw an increasing burden on the future. What was wanted was a margin of income from which debt might be reduced or money invested. He quite sympathized with the noble Lord's regrets at the continued increase of payments made by this country on account of India; but he would remark that these payments were the natural result of an increased debt, and that, in spite of this, power was now asked for a heavy loan. The money market of India would not admit of a loan being issued there; but in times of peace and tran-quillity this necessity for borrowing ought not to exist, and the money should have been obtained in India. With regard to what had been called "famine finance," he was glad to see that the Government of India freely admitted that at one time the famine charge had been excessive. There had been great oscillations of opinion as to the right course to be taken as to famine; but, on the whole, he believed that the happy mean between parsimony and extravagance had been attained. Something should be done towards localizing the famine charges, for the principle of localization was as necessary in India as in England. Local areas should meet their own local charges, and some system should be followed by which money might be accumulated year by year to cover these expenses. As for the public works, he would only say that however necessary an extraordinary account might be, it would have to be used carefully, and not abused, as had been done in France. While not doubting the good faith of the Government, the House ought to have some check so as to distinguish between the ordinary and the extraordinary expenditure of India. At present the temptation was to throw upon the extraordinary expenditure a number of items in order to make things pleasant. The House was indebted to the noble Lord for the new form in which the 119 accounts were now presented; but he thought he still saw the signs of an over-sanguine spirit. The indirect benefit of unremunerative public works could not be brought into the balance-sheet, and had been too much insisted on. If a railway in this country that did not pay at all or only paid 2 per cent put the actual receipts at £500,000, and the profit supposed to be gained by the landowners and others at another £1,000,000, everyone would condemn this as an arbitrary and unreal mode of account. The indirect benefit of these public works might be considerable, but the Government did not get the money into their coffers. If these public works were to be treated as commercial undertakings, their accounts must be kept like those of a private company, and it would then be fair to say that the loss was only moderate. But accounts of estimates of indirect gains were mere guess work. As regarded the Great Trunk lines and other guaranteed railways he (Sir George Campbell) fully and entirely admitted their success. They had already almost paid interest on the cost of their construction, and their future prosperity was undoubted. The Government, however, were making lines through sparsely - populated districts, political railways and certain unremunerative canals, and if they lumped up the guaranteed companies which paid with the undertakings that did not pay, the result would be fallacious. In future the real amount of the expenditure and income of each ought to be clearly shown. There ought to be a sinking fund to pay off the capital in a certain number of years. In all the Committees upstairs provision of this kind was made in regard to local undertakings; but there was no such sinking fund in India. He could find no mention of the Madras Harbour in the accounts. It was a work which would not be remunerative, and which was being made with borrowed money, and these local works were too often hid out of sight and kept out of the Imperial accounts. There was great danger in the practice which seemed to be springing up of the Native States coming into the London Money Market to raise loans. One considerable State put forward as a pretext its great anxiety to establish public works; but the result would be to bring about too intimate relations 120 between these States and the London Money Market. These States were evidently anxious to follow in the path of the Khedive of Egypt. The Government were, however, the rulers of India, and these States were but tributaries, and it would be much better to let them understand that the Government would undertake all the great and remunerative public works, and that as to the rest, they had better save the money out of their ample revenues and make their public works for themselves. There were, necessarily, great complications and difficulties in these accounts, and it was desirable to have a competent authority in the nature of some tribunal, like a Joint Committee of both Houses, so that the accounts might be well sifted and a high audit established. The noble Lord said the Government would not object to the appointment of a Select Committee next Session, if it should be the wish of the House, to deal with the finances of India—[Lord GEORGE HAMILTON: With the Public Works Extraordinary]—and if the noble Lord followed out that intention which he had expressed, his (Sir George Campbell's) object would be to a great extent obtained; and therefore while moving the Amendment of which he had given Notice he probably should not press it very far if he found the opinion of the House was not strongly in favour of it.
§ MR. SMOLLETTIt is fortunate for India that, from circumstances which officials could not control, the finances of our Eastern Empire have been brought under the cognizance of Parliament in 1877 at a period when some attention can be paid to them. The hon. Member for Hackney (Mr. Fawcett), in February last, proposed that a Select Committee should be appointed to inquire into the condition of Indian Finance, and the proposal was largely sup-ported by hon. Gentlemen opposite. Upon that occasion I entered into a searching examination of the causes of the maladministration of the Indian Revenue. I showed distinctly that the huge and persistent excess of expenditure over income was mainly caused by useless outlays of money upon unremunerative works falsely styled reproductive. I pointed out that the late Lord Mayo, the only capable Viceroy who has in recent years ruled in India, had reduced the expenditure in two years by nearly 121 £5,000,000, and I declared my belief that a like reduction could be made in 1877, if the administration of India was placed in proper hands. No reply was made to these statements; they were met by gross personal abuse, and by official misrepresentation of facts. To-night, on the 21st of June, we have submitted to us the Indian Financial Statement. We are indebted for this fact to the necessity that exists to borrow money in London to meet the deficiencies of the Indian Exchequer. But for that necessity the production of the Indian accounts would, by dexterous management, have been deferred to the 10th or 12th August, as has been the case in the two last Sessions. It is with regret that I am compelled to speak of the financial management of our Indian Empire as discreditable. It would be much more agreeable to me if I could speak favourably of the conduct of Indian finances, under a Conservative Government to which I have always given a loyal and disinterested support. Under a Liberal Administration a bad system was introduced, it is still continued, and matters daily go from bad to worse. Remembering as I do the lavish disposition evinced by Lord Salisbury, in 1866, when for a short period he was Secretary of State, recollecting the intensity of his belief in the random assertions then propagated of enormous profits arising from irrigation projects, I was led in 1874 to fear that the selection of the noble Marquess to fill the office of Indian Secretary a second time would not be a happy one. When, too, a few weeks after his accession to office, Lord Salisbury complimented highly in "another place" the Indian Public Works Establishment; when he expressed his satisfaction that that Department had works estimated to cost £17,000,000 in hand, and when he announced his intention to sanction a further outlay upon one single irrigation work of £15,000,000, I was satisfied that the noble Lord had learned nothing and had forgotten nothing during seven years of exile from official life. My fears were somewhat assuaged in August, 1874, when, upon the 4th of that month the Under Secretary of State launched his Financial Statement in Committee. The fairness and propriety of the noble Lord's statement disarmed me. I have learned since to place no reliance upon Financial Statements coming from the India Office. The 122 principles then propounded were reassuring. The noble Lord apologized for the appearance of an item of expenditure in the Indian Accounts amounting to £4,250,000 as an outlay on Extraordinary Works. This policy formed no part, he said, of the programme of the present Administration. It was a legacy left to the Office by the Duke of Argyll. I had hoped that the amount would have been reduced, but this has not been the case. This expenditure has been persevered in, and with the worst results. The noble Lord said that frugality should be the order of the day—that every endeavour should be made to keep down the Home Charges. The Under Secretary of State in August, 1874, assured the Committee that every ordinary want of the year should be defrayed from the Revenues of the year, that no loans in the future should be incurred to meet ordinary expenditure. The noble Lord stated most positively that if money was wanted for reproductive purposes, the money must be borrowed in India. A stringent scrutiny, it was said, was now applied to all Estimates for Extraordinary Works, and none were sanctioned, unless it was clear that the undertakings would repay the interest and ultimately would recoup the cost price. Lastly, the Under Secretary gave the House the most positive assurances that no loans in support of Indian Finance should hereafter be negotiated in London. Now, in my judgment, no faith has been kept either in England or in India upon those points. Upon the 10th or 12th March last, the Finance Minister, Sir John Strachey, introduced the Budget of 1877 in the Council Chamber in Calcutta. He commenced by stating that the Revenue of the year which had just expired fell short of the Expenditure by £6,000,000. He announced that the Estimates of the present year showed an excess of expenditure of £4,250,000, but dexterously manipulating the accounts he made it clear that the financial position was satisfactory and the future most promising. While making these strange observations, Sir John Strachey was compelled to make some scandalous revelations. Sir John admitted at once that no steps had ever been taken in India to exclude unproductive Works from the Extraordinary Budget. He said that they had been always included 123 to a great extent. He said that ordinary and unproductive Works in this year to the tune of £1,206,000 had been so included in the Extraordinary Budget, and he promised not to do this again. But Sir John Strachey went further, he said that during the last seven years—from 1869 to 1875—there had been carried under the head of Extraordinary to Capital account, sums amounting to £4,770,000, expended upon State Rail-way Works that were never supposed to be reproductive. With £1,206,000 included in the present year, here was a sum of £6,000,000improperly transferred from current to Capital account. That was the Finance Minister's Statement. In addition, I could enumerate Irrigation Works that have cost £5,000,000, made with borrowed money, which have never returned a shilling of profit. Lord Lytton, on the 1st May, admitted the correctness of Sir John Strachey's allegations. Lord Lytton said—
That although orders had been sent from England many years ago to exclude from the Extraordinary accounts unremunerative Public Works, the orders were never acted upon. This should be done in future.Nay more, he said he doubted whether an extraordinary Budget was not altogether a mistake. Well, that is my thunder. Lord Lytton has stolen my policy, and described it as his own. But what, I ask, was the position in which these revelations placed the Secretary of State for India. Lord Salisbury, believing that Extraordinary expenditure applied exclusively to reproductive outlay, has continually expressed his satisfaction and his pride at the large surplus receipts of ordinary Revenue in India. Last year, in March, in "another place," he boasted of having carried into the Indian Exchequer £8,671,000 in four years of real surplus. The Under Secretary, under similar delusions, boasted of magnificent surplus receipts. In February last, I denounced these calculations as simply fudge. I charged the officials in India with manipulating—that is, "cooking the accounts." This expression was met with indignant condemnation. But it was true. The Financial Minister and the Viceroy himself admit that the accounts were delusive and deceptive. Under these circumstances, I think an apology is due to myself for the impertinent language applied to me by the Under Secretary of State. But I have 124 no expectation that any such reparation will now be made. So much for the present position of Indian Finance. Now let us look to the proposals for the future. The Indian Finance Minister has told us that no new taxation was to be imposed in India during the present year for Imperial purposes. He announced, however, that a large extension of what was called the scheme of decentralization was to be made. Very few hon. Gentlemen possibly understand what this means. I shall endeavour to explain it; and I shall use Sir John Strachey's own words. The policy of decentralization applied to a Province means that this Province was to be compelled to meet its own local requirements in the future. And, so far as I can see, this principle is to have retrospective effect. Ostensibly this appears a fair and reasonable proposition; but it really was a most tyrannical policy in its application. It would be very fair to make a Province responsible for its requirements, and to compel a Province to pay the interest of loans incurred for its necessities, provided the Province was autonomous, provided the people had a voice in the outlay, and had approved of the works, and had sanctioned the outlay. But when these undertakings were carried out by an autocratic Government, swayed by a corrupt Public Works Establishment, without consultation, and often against the express desire of the owners and farmers of the Province, then to compel the people to recoup that Government for the expenditure incurred, when the works proved to be total failures, was rank tyranny. Now that was the policy to enforce which a strenuous effort was now being made in the Province of Lower Bengal. That Province had been in the hands of speculative engineers for the last seven years. On irrigation canals alone £4,000,000 had been expended up to 1875, and the plans to complete the undertakings required some millions sterling more. The works did not return a shilling outlay; they were worked, in fact, at a great loss. I can enumerate these works and their present cost. First, there was the Orissa Canal. Capital in 1875, with unpaid interest on the capital, £1,912,000. The interest on that capital is £95,000. The loss on working this canal in 1875 was £16,000, and therefore that canal cost the Government £111,000 a-year. 125 Then there was the Midnapore Canal— capital £750,000, interest £37,500, loss on working £1,500, and total loss on these two works £150,000 a-year. Lastly, there was the great Soane work, estimated to cost £3,000,000; but up to 1875 £1,200,000 only had been spent. This work yielded nothing, and, apparently, it never would yield anything. The three works have cost £4,000,000, and several millions sterling were needed to complete them. Well, what was the proposal to recoup the Government under this decentralization system. It was this—the Lieutenant Governor of Bengal has been ordered to levy what I may term a benevolence of £275,000 a-year to recoup the Government for this most wasteful outlay. From whom was the benevolence to be levied, from the landlords?—the Government would not undertake to levy this black mail from the peasantry, because the tax or cess would lead to agrarian outrage. The landlords are told they may recoup themselves if they can. Any outrages that might follow would be attributed to landlord rapacity. This was the system about to be introduced to bolster up the Public Works Department; I think I am justified as denouncing it as atrocious. It was well for the Government of India that the population of Bengal was un-warlike, and was disarmed. If the country was occupied by a military population, and if the Indian Government had a neighbour like Russia to stir up strife, this Province under such a system of administration would be made too hot for the British authorities. Holding those opinions, I am not disposed to sanction a Bill to raise money in support of an execrable policy. I may be told that the money was needed to meet the P amine Expenditure, and that it was not to be spent on Extraordinary Works; I beg to meet such an assertion with the most positive contradiction. It appeared from the public accounts presented to the House that the amounts expended upon "Public Works Extraordinary," a great portion of which had been wholly unproductive, were in the last six years more than £21,000,000 sterling. The expenditure under this head in 1872–3 was £2,184,500; in 1873–4, £3,553,500; in 1874–5, £4,249,500; in 1875–6, £4,146,000; in 1876–7, £3,800,000; and in 1877–8 the sum entered in Sir John Strachey's Budget was £3,628,000, making in round numbers an expendi- 126 ture of £21,500,000 in six years upon unproductive Works. The excess of Imperial expenditure over income during the same period stood as follows:—In 1872–3, £419,000;in 1873–4, £5,360,000; in 1874–5, £3,930,000; in 1875–6. £2,601,000; in 1876–7, £6,076,000; and in 1867–8 the deficit was estimated at £4,250,000. Thus in six years the deficits amounted to £22,600,000, while £21,500,000 had been expended on extraordinary and unproductive undertakings. But for this expenditure upon worthless Works there would have been nearly an equilibrium of income and expenditure, and no addition to the Public Debt of India would have been required. In the Estimates of 1877–8 there was an item of more than £3,500,000 sterling for unnecessary Works. If this be struck out from the Estimates no loan in London for Indian purposes would have been needed. To raise a loan in Great Britain when money was being squandered in India upon Public Works Extraordinary was a proposal to which I shall not give my assent. In conclusion, I beg to second the Amendment moved by the hon. Member for the Kirkcaldy Burghs.
§
Amendment proposed,
To leave out from the word "That" to the end of the Question, in order to add the words "the present rapid increase of the debt of India, notwithstanding the enjoyment of profound peace, is inconsistent with financial prudence, and renders necessary such a revision of the system as may provide, during times of peace and prosperity, a large margin of income applicable either to reduction of debt or to works really remunerative; and, in order to carry the above securely into effect, a high and independent authority should decide whether expenditure which it is proposed to exclude from the ordinary account may be properly classed under ' extraordinary,' as being, from a commercial point of view, a prudent investment likely to pay,"—(Sir George Campbell,)
—instead thereof.
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. LAINGsaid, that he had abstained from taking part in discussions on Indian finance for some time, because he thought the more they talked about India the more harm they did. There was a constant tendency, as far as he had seen, in this country both to swell expenditure and to diminish receipts. He did not want to go back to old times, 127 when India was involved in wars by Imperial considerations for which she had to pay; but to come to more recent times, he thought the amalgamation of the Indian with the English Army after the Indian Mutiny was effected in a much more expensive way, because the views of England were forced upon India contrary to the opinion of Lord Canning —a statesman then on the spot. He believed that it was owing very much to the manner in which that amalgamation was effected that Indian finance was now embarrassed, and that with a diminished military force we were not able to realize reductions of expenditure which we had a right to expect. With regard to the question of public works, upon which the hon. Member who spoke last had dilated with so much vigour, he could perfectly well recollect the very strong pressure put on the Government of India in this country, in the direction of spending money on public works, especially navigation and irrigation.
§ Notice taken, that 40 Members were not present; House counted, and 40 Members being found present;
§ MR. LAINGcontinued: With regard to famine, which had cost so much, there could be no doubt that opinions expressed in English newspapers that lives might have been saved by increased expenditure had an influence on the officials in India, and tended very largely to increase expenditure. He mentioned that simply as showing how expenditure had been increased. Then, if they looked to the revenues of India, as far as he knew, the influence exerted in this country by a party would go to the destruction of the whole duty from opium, to sap and utterly derange the whole fabric of Indian finance. There were cases in which English opinion brought to bear on Indian finance had done injury; and he thought that it was a credit to the good sense of the House that in the main it left Indian questions of finance to those who were acquainted with the details. The issue at stake appeared to be this— Two great calamities having overtaken Indian finances—that caused by the famine and that caused by the depreciation of silver—the question was, how were they to be met? The Government proposed to meet them by raising a small loan and so tiding over the evil 128 time; whereas the hon. Member for the Kirkcaldy Burghs (Sir George Campbell) thought the best way to grapple with the difficulty was by resorting to heroic measures, and by raising the necessary funds by increased taxation. For his own part he preferred the Government scheme, and he thought the hon. Member for the Kirkcaldy Burghs did not thoroughly appreciate the dangers that might result from increased taxation in India, and that he had exaggerated the financial difficulty of the position in which they now stood. He (Mr. Laing) was satisfied that increased taxation would be attended with a great deal of discontent and must necessarily lead to much oppression in that country; and he felt that the present state of that part of the Empire did not warrant us in resorting to a plan which must lead to such a result. In order to arrive at a just conclusion upon the subject, however, hon. Members should have a clear view of the present position of Indian finances. Taking the last nine years, he found that six of them had been years of surplus and three of deficit. The aggregate surpluses amounting to £8,476,000, and the aggregate deficits to £5,588,000, which left an average annual surplus extending over the whole nine years of £320,000. It was true there had been an additional extraordinary expenditure spread over those nine years of £18,733,000. With regard to that extraordinary expenditure it was impossible to draw any rigid line and say what should be charged to capital and what to revenue. If they had carried out the rigid doctrine that no public works were to be charged to the capital, it would have been impossible to construct any railways in India. The railways which they were now constructing might not be so productive as the Great Trunk lines laid down by Lord Dalhousie; but they were constructed at less cost, and were now yielding 5 per cent. It had been urged that the revenue of India was not sufficient to meet the requirements of the country; but he did not think the statement was accurate. It was true the finances of the country were not in a brilliant or flourishing condition: but he thought it could not be denied that a very sound and steady progress had been made, notwithstanding the fact that the income tax had been repealed. There had been an increase, 129 for instance, under the head of the land tax, the customs, the salt duties, the stamp duties, and the revenue derived from public works, which included the State railways and irrigation works. As regarded opium he compared the yield from it for a number of years to prove that its returns had been uniformly steady, and he did not see why it should not be so for the next 10 or 20 or 30 years also. But for the disturbing elements of the change in the value of silver last year and the famine there would have been a considerable diminution in the expenditure, accompanying a large increase of revenue. With regard to the depreciation in the price of silver, he thought it would not be well to take any steps until sufficient time had elapsed to enable the Government thoroughly to appreciate the difficulties of the situation, the chief of which was owing to the exigencies of trade, the substitution of a gold currency and standard of value for the silver standard which had existed up to the present time. The two disturbing causes in respect of Indian finance to which he had referred— namely, famine and the depreciation in the price of silver—ought to be watched by the Government with care and caution; and above all they ought not to launch into extraordinary expenditure for public works, even such as were likely to prove profitable, as freely as in other circumstances they would be justified in doing. The most stringent economy possible ought to be exercised; but that was a thing which could not be enforced by Resolutions of the House of Commons or by Reports of Select Committees. It involved questions of detail to be dealt with by a prudent Governor General with able men under him, and who would go through the almost innumerable items of expenditure one by one, and see where consistently with efficiency reduction was possible. India, in fact, must be governed in India. They ought to appoint the best men that could be found for the high position of Governor General, and then give them a full and generous confidence. For his part, he believed that the Government of India had been well and wisely carried on for the last 20 years. Mistakes had, no doubt, been committed; but, on the whole, the Government had been prudently conducted, and the finance of India had been wisely administered by 130 a succession of men of precisely the type which the circumstances required. He had been somewhat alarmed by some of the wild utterances on the part of the present Governor General with regard to frontier policy indicative of a departure from that wise policy of masterly inactivity inaugurated by Lord Lytton's predecessors. But he was glad to learn from a speech of the Marquess of Salisbury that such a course as the one suggested by those utterances was really not intended. He, therefore, presumed they might be considered as a little effervescence on the part of a man of genius going out to India with fresh impulses; and he had no doubt Lord Lytton would be sobered down in his policy when he came under the influence and experience of the Indian Council. Such a departure from the wise course as the utterances of the noble Lord pointed to could not be attempted without a serious interference with Indian finance. With wise economy, he believed the present difficulties would be removed, and that India would recover from the temporary causes of depression which now existed and be more prosperous in the future than she had been in the past.
§ MR. ONSLOWexpressed his regret that an attempt should have been made to count out the House in the midst of so important a discussion, and he felt sure the proceeding was one which would be resented by the country. He had read the Financial Statement of Sir John Strachey with much interest. He was glad that Statement had been made openly before the Council instead of being published in The Gazette. He feared that the hopes of Sir John Strachey with reference to his ability to remit or reduce taxation in India were too sanguine. One of the taxes he trusted to be able to remit was that on inland Customs, which brought in £2,500,000; but he (Mr. Onslow) did not think that the finances of India would for many years be in a state to bear that extraction. It would be a long time, too, before they could afford to give up the £850,000 duty on cotton goods, whatever they might individually think of that impost, and the day was distant when the financial position of India would justify them in abolishing the duty on salt. No doubt the duty pressed upon the masses somewhat; but the masses ought surely to 131 pay something towards the expenses of the Government of India. He was afraid the Budget last proposed was rather of a sensational character, but the time had gone by for sensational Budgets in India. The increase of Bengal paper currency from £4,000,000, in 1864, to £12,000,000 at the present time was a proof of the prosperity of the country. He could not see that the circulation of five and 10 rupee notes was necessarily an argument against a gold coinage in India. The real objection to a gold coinage was the impossibility of regulating the ratio between the silver and gold currency. The Government had been called upon for further economies; but successive Governments had honestly tried to reduce the public expenditure as much as possible, and he did not believe that in any one branch of Indian expenditure any material economies could be made. The question of additional taxation was of serious importance. Mr. Wilson had tried the imposition of an income tax; but it had been taken off by one Indian financier, and again imposed and again taken off by his successors. It would never be popular in India, and he could not see how the Government would ever be able to get at proper returns. The difficulties of collection, owing to the frauds practised by the Natives, were insuperable. The salt duties had been enhanced, but the duties on Customs were not capable of any further increase. Tobacco had been specified as a means of raising additional revenue, and no doubt the Government could raise a certain amount by taxing it; but the tax would fall on the very people who now consumed salt, and who could not well bear the two imposts. He thought that by a system of licences, first proposed by Mr. Massey, more might be done to raise additional revenue than by a hard-and-fast income tax, and we might have to resort to a licence tax some day. The objection to succession duty was that you would never be able to ascertain on whom and on what to impose it. It was a most difficult thing to tax the people of India for the purpose of obtaining additional revenue. He could not see the immorality that was said to exist in the imposition of the opium duty, considering that India merely provided as a merchant a certain commodity which people out of India were glad to obtain; and therefore he 132 hoped no Viceroy of India would entertain the idea of taking off £6,500,000 of net revenue, which it would be impossible at the present time to raise by any other tax. No doubt the item of Public Works Extraordinary offered a temptation to include unremunerative works, accompanied by plausible reasons why they might be regarded as highly remunerative in the future. He believed it better to spend money on railways than on irrigation works, because the Natives would rather starve than take the water, while railways would be of great use for the transport of food to avert famine. Scarcely one of the irrigation works could be considered remunerative; only two were paying their working expenses; but he believed we should ultimately derive a revenue from the railways. We had made advances to Bombay on the security of a special land fund, and, although the land had been valued at £3,000,000 or £4,000,000, and afterwards at £8,000,000, the land had not been sold on account of the depression of trade. He should like to hear how much of the money advanced on this security had been repaid; and he hoped the House might now rely upon the assurance that had been given that no more public works would be undertaken unless investigation showed that they were likely to be remunerative.
§ GENERAL SIR GEORGE BALFOURsaid, that during the 22 years that had elapsed since Lord Dalhousie left India the debt of India had, with the exception of a few years, yearly increased. Assuming the year ending 30th April, 1857, to have closed his great administration, the debt in India and in England was about £59,000,000. At present, it might be about £135,000,000 or £136,000,000. It was necessary to speak in this qualified manner as to the exact amount of debt owing to the many changes in the annual accounts, which rendered it impossible for any private Member of the House of Commons to make out, with any exactness, the real state of the indebtedness of India. The increase of debt in 22 years might then be taken to amount to about £76,000,000 or £77,000,000. In that amount was included the adjustments made in respect to the settlement of the Proprietors Stock of East India Shares, and the Security Fund lodged at the Bank of England for that Stock. It might also be accepted 133 as covering the debt due to the service funds, which, having been taken over by the Government, necessarily led to the accumulations of those funds being also taken over, and that debt, formerly included amongst the "obligations" bearing interest, was then cancelled. But the accounts failed to show with clearness the real state of those transactions. Within seven years after Lord Dalhousie's administration the debt increased from £59,000,000 to £104,000,000; in the three years following it was reduced to £98,000,000; but since 1866 not a year had passed without an increase; and since 1868 it had swelled up by borrowings to about £35,000,000 or £36,000,000. Unless a great change was made in the present scale of expenditure, the debt might augment in a higher ratio in the future than in the past. A comparison of the 22 years' total income and gross expenditure showed, that there had been only five years in which there had been a surplus of revenue over expenditure, and in 17 years the expenditure had largely exceeded the income. The surpluses amounted to upwards of £4,500,000, the deficits to about £73,000,000, leaving a net excess of about £69,000,000. The year which closed Lord Dalhousie's great career, left a surplus. The year which might be said to have closed Lord Canning's financial administration also left a surplus, through the aid which his hon. Friend the Member for Orkney (Mr. Laing) so ably gave in restoring the finances of India. In Lord Mayo's administration surpluses were also left; but in all the other years the statement he had tried to compile showed yearly deficits so large in amount that during the last five years ending with the 31st March, 1877, the deficit amounted to £18,000,000. He stated these figures with great diffidence, for it was difficult for anyone outside the India Office to make out, from the often altered forms and entries, the real amount either of income or gross expenditure. The result of all these deficits was a debt of £76,000,000, of which only £34,000,000 was caused by extraordinary expenditure for public works and famine relief, and we were now about to add £10,000,000 more, including the borrowings in India and England. That was a dangerous condition of things, and there was no reason why India 134 should escape the fate of other countries whose expenditure during a series of years exceeded their income. Not only the military, but also the civil expenditure of India had largely increased of late years. The cost of collecting the Land Revenue, the Customs, the Stamp Duties, the Post Office, Telegraphs, and various other items of the same kind—which had been regarded as a permanent charge— had increased from £9,000,000 in 1868 to upwards of £10,000,000 in the present year. Again, the charges for administration, law, justice, police, education, medical services, &c, were estimated for 1876–7 at upwards of £12,000,000; whereas in 1868 the expenditure under the same heads was only £10,000,000. It was most important that they should endeavour to control in this country the vast expenditure now going on in India. With regard to military expenditure, the noble Lord intimated that they might expect it to undergo some further increase By the decision of the War Office in this country, India was obliged to receive from the Homo Army a large European force to garrison India. Even if Imperial policy dictates to the Government of India that a special European Force for India should not be separately maintained, he thought it would be only fair that the Government of India should have some voice in the arrangements connected with that force, which was maintained at an expense far beyond what needed to be incurred, and casting a very heavy burden on India. There could be no doubt that the organization of the 60,000 men supplied by the War Office to India could be greatly changed, and that, without sacrificing any efficiency, or reducing one private, the expenditure for India could be greatly reduced, and the Home Charges, including the cost of recruiting, also largely lowered. The increased charge for that force was indicated by the noble Lord and by the Finance Minister of India, as one of the many causes requiring money to be raised on loan. The Finance Minister had also placed on the Home Administration of India the entire responsibility for that increasing charge, and intimated that some measures must be adopted to provide additional funds for meeting the yearly augmented military charges, and thus evidently referred to the necessity for additional taxation. But it was a 135 very difficult and even a dangerous thing to add to the taxation of that country. He remembered the time when the late Lord Canning impressed upon him the importance of reducing the military charges, thereby obviating the necessity of increasing the taxation of India, urging that it would be better to maintain our power in that country by a small military force than to keep up a large force, thereby adding to the taxation. Of all the difficulties which we might have to encounter in India, financial embarrassment was one of the greatest; and he would, therefore, strongly advise the Government to abstain from imposing fresh taxation. It would be a more wise and statesmanlike policy, if possible, to reduce taxation. The salt tax was one of the most unjust and oppressive taxes, and it was raised from the poorest classes. It was lamentable to think that a people who lived mainly upon rice should be deprived of a condiment so essential to health as salt. Although, financially, the retention of the duty on that article might be beneficial to the Government, yet, politically as well as commercially, it was a great mistake. If any statesman would boldly do away with that impost on salt alone, he would give a very great stimulus to commercial activity in India. So vast was the bulk of salt requiring transport that the 5 per cent now earned by the Rajpootana railway, mentioned by the noble Lord, mainly consisted of traffic earnings from the carriage of salt. An examination of the income of India during the past 10 years, clearly showed that financial progress had been but trifling. Indeed, the revenue might be considered to be stagnant. The land revenue, which formed so large a portion, was actually less in amount in the year ending 31st March, 1877, than it was in the year ending 30th April, 1866. So also with respect to other sources. After deducting the cost of collection, the net results were far from satisfactory; to that there was one exception, that was salt. But the increase in the salt tax was not traceable to increased consumption, but to increased taxation on that, the great necessity of the poor. It was that article which alone almost had been made to bear increased burdens. It was the article which the wealthy needed less than the poor, and it was the one 136 article which was invariably indicated as the article to be taxed. It might, therefore, be truly said that the revenue of that country was almost stagnant. Another change which he advocated was that of making India a free port. The net Customs revenue by land and sea might be said to vary, after allowing for a variety of charges of collection— for pensions, for buildings, and other items not shown in the accounts—to be between £2,250,000 and £2,500,000, and after taking off the duty on cotton goods, there would be about £600,000 on exports, and the same sum levied on a great number of articles forming the imports. If that country could be thrown open to the commerce of the world, he believed its revenues would greatly increase, and that any sacrifice of revenue from customs, incident to that measure would be far more than counter-balanced by its beneficial results in respect to the political and contented feeling which would follow thereon.
§ MR. FAWCETTsaid, there were some considerations of a general character which, he thought, it was important the House and the country should clearly understand before sanction was again given to the piling up of this load of Indian debt. He could not forget that when the present Government came into Office those who took an interest in Indian finance had their hopes raised by being told by the Secretary of State that no public works should be undertaken in India except such as were certain to prove remunerative; that in connection with the construction of such public works as might be entered upon no money should be raised in this country, and that every effort should be made in order that the expenditure might be balanced by the revenue of the year. These were the principles which were to guide the conduct of the Secretary of State; but so far from their being observed, they were cast to the winds by the Bill which was about to be introduced for the purpose of giving authority to the Government to raise £5,000,000. Had this sum been necessitated by the famine he could not, of course, have held the Government responsible. But what was the financial position of India at the present time? It was this—£5,000,000 might be borrowed in England; £2,500,000 had been borrowed in India; and £900,000 more 137 had been borrowed from Native Chiefs, making alto gether close upon £8,500,000. But for how much of this £8,500,000 was the famine responsible? He took the estimate of the Finance Minister himself; and that was that the estimated cost of the famine for the present year was only £2,100,000. How, then, were the remaining £6,500,000 to be accounted for? Simply by the fact that the Secretary of State had not kept, or could not keep, to the principles which he laid down for himself when he took office. The finances of India had been presented with a roseate hue, and he had no motive for depicting them worse than they were. The views of the Under Secretary would be correct if the assumptions on which they were based were well founded. Those assumptions were, first, that all outlay on famine was to be treated as an extraordinary expenditure; and, second, that all money expended on extraordinary public works was certain to prove remunerative. The declarations of the officials showed that both these assumptions were absolutely unfounded. In three places Sir John Strachey gave distinct and emphatic warnings that famines were so certain to recur that they must be anticipated exactly as a farmer looked for occasional bad harvests. Sir John Strachey selected the seven years from 1869–70 to 1876–7 as representing the normal condition of Indian finance, in spite of the occurrence within them of the Bengal famine. During the last 10 years there had been four famines—in the North-West, in Orissa, in Bengal, and now in Madras and Bombay; and Sir John Strachey said these 10 years could not be treated as exceptional years. The most important fallacy was the assumption that extraordinary public works were remunerative. The noble Lord the Under Secretary tossed his figures about and said there were so many millions of surplus, and that the debt was to be regarded as capital outlay; but again and again had he contended that there was not a tittle of evidence to show that the money was laid out on remunerative and productive works. £30,000,000 or £40,000,000 had been expended on extraordinary public works; but during the last 10 years no inconsiderable proportion of the outlay had been upon works which, from the nature of the case, though they would be useful, never could 138 return any direct revenue in proportion to the amount expended upon them. £14,000,000 had been spent upon worthless barracks. There was no point upon which Sir John Strachey was more explicit than this—that only a portion of the outlay classed as extraordinary had been devoted to works that could be considered reproductive. In the present year, of £3,600,000 so classed, one-third had been devoted to the construction of railways which could not give a fair return. They were designed, not for commercial, but for political and military purposes, and the outlay ought no more to be regarded as reproductive than the expenditure on fortifications. There was another extraordinary fallacy running through the comparison made by the Under Secretary of State, and also by the hon. Member for Orkney (Mr. Laing), as to the revenue of India in relation to its expenditure now and some time since. That comparison, as it seemed to him, was worthless, as they were considering not net revenue, but gross revenue, and that gross revenue was swelled by items which could not be considered revenue at all. In 1876–7, for example, the real revenue — the amount which the Government of India had to spend—was not £51,300,000, the amount named by the Under Secretary, but about £40,000,000 only. The land revenue was set down at £21,500,000, but there ought to be deducted from that the cost of collecting it—namely, £2,500,000. Forests yielded £600,000, but this was obtained at a cost of over £400,000. Then, again, the salt revenue, and the opium revenue, cost a considerable sum in collection, and the Post Office revenue, which was put down at £700,000, was obtained at an outlay of £800,000. In the same year not less than £1,500,000 was lost by exchanges. Yet on the revenue side there was an item, "gain by exchange £500,000." It might just as well have been put down at£5,000,000. Making these deductions, the revenue of India at the present time, instead of being £51,300,000, was not a penny more than £40,000,000, and that was all that the Government of India had to spend. In the years 1867, 1868, 1869, and 1870, the net revenue was somewhat higher than the net revenue in 1875–6. This was a significant fact, and threw an instructive light on the misleading comparisons made for the 139 purpose of showing an alleged growth of revenue. Now, the proper way of getting a fair estimate of revenue was to take not the gross, but the net amount, which he again asserted was at the present time not more than £40,000,000. He would compare that fact with one or two others. The Army expenditure could not be estimated at less than £18,000,000. He knew it was put down at £16,000,000, but there were various additional items that ought to be classed with the Army expenditure, which brought up the amount to the figure he had named. It was an increasing expenditure, and would soon absorb one-half of the total net revenue. He regarded the amalgamation of the two Armies as an unfortunate mistake. A poor country like India was unable to bear the strain of an Army managed on the same principles as our own. Sir John Strachey, in his recent speech, stated that the Army expenditure was steadily increasing, and significantly added that the authorities in India had scarcely any control over it. This was the most serious fact connected with the financial position of India at the present time. The Indian Army expenditure was bound up inseparably with our own; and when costly experiments were carried on which England was well able to afford, it was apt to be forgotten that part of the burden had to be borne by a poor country which could not afford them. The Under Secretary had admitted that the Home charges were steadily increasing. This year they found that no less than £16,000,000 were to be remitted home out of a net revenue of £40,000,000, and yet a new loan of £8,500,000 was now to be provided for. Such a policy could not be justified, and would lead to increased financial embarrassment. But it was said by the noble Lord the Secretary for India—"We shall improve our system of accounts, and we are going to set up a great scheme of decentralization." No tossing backward and forward of figures, however, would enable the Government of India to make good a deficit when they were spending more money than they possessed. We were about to lay out a large sum on public works; but, looking on the subject by the light of past experience, could any one say, taking into account the poverty of India, that we were pursuing a wise course in sanctioning the continuance of 140 that policy? The expenditure up to the present time on seven irrigation works was £9,100,000, and the net result was, allowing nothing for interest during the time of their construction, a charge of £320,000 a-year, so that every shilling of this money was spent on un-remunerative undertakings. As to the system of decentralization, he could only say that while he did not mean to argue against it, it had its dangers and ought to be carefully watched. There were irrigation works at Orissa on which about £2,000,000 had been laid out, but they did not pay the working expenses, and it seemed somewhat hard that those unremunerative works should be thrown suddenly as a local burden on the people of Orissa, who had no more responsibility than he had for their construction, in consequence of bungling and mismanagement. The Government conferred upon the local authorities to whom such works were handed over the power to raise new local taxes, in order to make good the money required for undertakings which would not pay. But how was the money to be provided? It must be by taxation; and it was a grave danger associated with the scheme of decentralization that its inevitable result would be to lead to the imposition of manifold local burdens which would be withdrawn from the notice of the House of Commons. The noble Lord, he might add, had referred to the appointment of a Committee, and if he had agreed to that course when he himself had asked for the appointment of a Select Committee to inquire into the financial condition of India he should gladly have accepted his offer. But be that as it might, there was one branch of our Indian expenditure—he alluded to the military expenditure — which ought to be inquired into without delay, for it had grown in a few years after the amalgamation of the European and Indian armies, notwithstanding a reduction of 13,000 in the numbers of the former, and of 5,000 in those of the latter, from £14,800,000 to over £16,000,000. Although he had sometimes spoken strongly on the subject of Indian finance, he was quite ready to recognize the difficulties of the task which the authorities, both in England and India, had to perform, and his only object was to strengthen their hands. He knew very well that the House had 141 seldom interfered in the matter of Indian finance, except for the purpose of throwing new charges on the revenues of India. He thought it was greatly to be regretted that the influence of this House should be used in order to obtain money from the Indian revenue. His chief wish was to see a sufficient surplus in ordinary years to cover such events as famine; but he could not think Indian finance wholly satisfactory when the authorities had to borrow money in this country for public works. Nor could the finance of India be considered satisfactory until there was a true balance, on an average of years, between revenue and expenditure; until the system, of constantly adding to the debt came to an end; until the Government declined to be the sole constructors of public works. If Government would leave something more to private enterprize, what had happened in other countries would happen in India. Sooner or later English capitalists would invest their money in a country enjoying peace and security under British rule, instead of in foreign adventures, which often turned out deceptive.
§ LORD GEORGE HAMILTON,in reply, said, that he fully appreciated both the motives and the criticisms of the hon. Member for Hackney (Mr. Fawcett); but he doubted whether he had entirely apprehended his argument. He did not sanction the principle that "Famine expenditure" should be excluded from the Budget. His own contention had been very different; and he had endeavoured to show that there was a large margin available for exceptional contingencies, among which was famine, which could not be considered as altogether abnormal. Neither could he describe as abnormal the expenditure on public works. The Indian Government had sanctioned a certain amount of expenditure for that purpose in the time of the late Ministry. Those works had been begun, and as they could not very well be abandoned, Lord. Salisbury had permitted them to be continued; but for the future no works would be undertaken that would not pay interest on the money advanced. As for the Army expenses, they were certainly very heavy, but not more so than they had been some time back. The hon. Member for Cambridge (Mr. Smollett) complained of certain public works which 142 did not pay their working expenses. That was true, but it did not follow that all others were worked at a loss. With regard to the Madras Harbour, the hon. Baronet (Sir George Campbell) would find it under the head of "advances." The advances were made with the understanding that the Madras Government would pass a Bill to enable them to tax the shipping that came into the harbour, and thus repay the outlay. [Sir GEORGE CAMPBELL: Was that Bill passed?] No; but their attention had lately been called to the subject, and they had been requested to take the necessary steps. The hon. Member for Hackney (Mr. Fawcett) had raised objections to further "decentralization," in which there might be some force; but, if he recollected aright, he made the same objections against Lord Mayo's decentralization plans, which were now universally admitted to have been successful. With regard to the hon. Baronet's Amendment, he did not know that there was much difference of opinion as regarded the expenditure on public works extraordinary. He hoped, as there would be subsequent opportunities for expressing an opinion in regard to the loan, he would not press his Resolution to a division, but allow the House to go into Committee.
§ Amendment, by leave, withdrawn.
§ Main Question, "That Mr. Speaker do now leave the Chair," put, and agreed to.
§ MATTER considered in Committee.
§ (In the Committee.)
§
Motion made, and Question proposed,
That it is expedient to enable the Secretary of State in Council of India to raise a sum, not exceeding £5,000,000, for the service of the Government of India, on the Credit of the He-venues of India.
§ SIR GEORGE CAMPBELLcould not help saying that the House had been taken somewhat by surprise as to the amount of the loan proposed to be raised in this country. He understood it was only necessary to raise £6,000,000 in all, of which £2,500,000 was to be raised in India; but instead of £3,500,000 the Government now proposed to raise £5,000,000. He did not think a sufficient explanation had been given when it was said that the amount would be 143 raised on short-dated Treasury notes, the object being that the loan should not be a permanent one in this country.
§ LORD GEORGE HAMILTONexplained that the Finance Minister in India requested that £3,750,000 should be raised in this country, a sum which was very much less than what at first the Indian Government wished to raise. But the Secretary of State, always believing that it was most impolitic to increase the Indian debt here, has resolutely refused to borrow more than was absolutely necessary, and at some inconvenience referred the subject back to the Indian Government. He explained in the early part of the evening that they could not safely estimate the loan that it would be necessary to raise at less than £2,500,000, and he hoped the House would give power to increase the Funded Debt in this country to that extent. But then there were great difficulties arising from the disturbed state of the silver market which made it absolutely necessary to have some reserve. Some emergency might arise—there might be some heavy fall in silver—which would make it impossible for them to sell their bills. Fluctuations, such as those which had occurred last year, might occur again, which might make it most impolitic for them to force their bills, at all risks, upon the silver market. The German Government had resolutely refused to state what quantity of silver they had got to sell, or whether they meant to sell it, but that they had a large amount in reserve was well known. He had applied for information to two well-known silver merchants in London to know what amount of silver had been sold by Germany, and one of them estimated it at the value of £7,600,000 from the commencement of June, 1876, to the commencement of June, 1877, and the other at £8,225,000. It was therefore necessary to ask for this reserve. By assenting to the Resolution now proposed the House was not bound to any sum whatever; but it was necessary it should pass before the Bill was brought in, when a full discussion could take place on the whole subject.
§ MR. FAWCETTsaid, that under these circumstances he should not oppose the Resolution, but reserve to himself full power to move the rejection of the Bill on its second reading, or take any other course he thought proper.
§ MR. LAINGbelieved it was necessary for the Government to have a reserve, and as the Resolution was a mere matter of form he hoped it would be allowed to pass.
§ Resolution agreed to; to be reported To-morrow, at Two of the clock.