COMMITTEE. [FIRST NIGHT.]

HC Deb 22 May 1879 vol 246 cc1040-93

Order for Committee read.

MR. E. STANHOPE

, in rising to move "that Mr. Speaker do now leave the Chair," in order that the House should go into Committee upon the East India Revenue accounts, said, that in making the usual Statement with regard to the finances of India he felt, looking to the numerous and intricate subjects with which that Statement must necessarily deal, and to the public interest which the subject of Indian finance had recently evoked, that no one who had ever occupied the post which he had the honour to hold deserved more the consideration and indulgence of the House. But whatever might be about to happen in the course of the debate, he felt it to be his duty, in the interests of India, to make as clear and as impartial a Statement as he could, even if, in so doing, he should have to trespass for some considerable time upon that indulgence. No subject was more commonly discussed in the debates of last year than the difficulty which some hon. Members experienced in consequence of the changes that had taken place in the form of the Revenue accounts. At that time he had pointed out that these changes had been adopted in consequence of representations made in the House at different times as to the desirability of assimilating, as far as possible, the form of the Indian to that of the English accounts. It was, however, quite impossible to deny that there was a great deal of force in the arguments of some hon. Members; and, therefore, he had endeavoured to prepare a Statement in accordance with their views. And before leaving the subject of the forms of accounts, he would remark that the India Revenue accounts were, as usual, converted in accordance with the conventional system of taking 10 rupees to the pound. The main reason for this was convenience. Indeed, it would scarcely be possible in any other way to make the accounts really intelligible. It would, of course, be open to the Government to convert the accounts at the rate of exchange of the year; but that would prevent any possibility of comparison, and would cause great difficulty in the presentation of Estimates for a coming year, as the rate of exchange itself would be a mere guess. It would, also, be productive of inconvenience in other ways—for instance, if the Government should want to convey to the House a clear idea of the salary of a member of the Council, or other official, such salary would necessarily appear in varying amounts, whereas they all knew it was really a fixed payment in gold, quite independent of the rate of exchange.

He now came to the figures which it was his duty to lay before the House for the three years under review. The accounts for 1877–8 showed a gross Revenue of £58,969,300, and a gross Expenditure of £62,512,400, leaving a deficit of £3,543,100. This result, as the House was aware, was mainly due to the famine in Southern India. It approximated so closely to the regular Estimate which was given last year that there was no need for him to trouble the House by dwelling upon the details.

The figures for 1878–9, as set out in the regular Estimates, showed a considerable increase on both sides of the account. As he explained last year, this was mainly due to the incorporation into the general accounts of provincial income and expenditure amounting to about £2,000,000, and on the Revenue side, also, to the proceeds of the new taxation imposed last year. The gross Revenue was accordingly taken at £64,687,000, and the gross Expenditure at £63,236,000, leaving a surplus of £1,451,000. When it was remembered that, in addition to the expenditure which he anticipated last year, they had had an enormously increased loss by exchange, and had paid £670,000 on account of the war in Afghanistan, this result did not compare unfavourably with that which was predicted last year, or with the Estimate which he gave in December last, based upon such information as the Government then had. It was then calculated that, after payment of the war charges of the year, the surplus would not exceed the sum of £600,000. The real surplus had turned out to be £1,451,000.

The finances of India had been terribly affected by the recent famine. The direct loss of Revenue, owing to this cause, was estimated at about £9,400,000, in addition to the loans to Native States and the cost of a railway constructed as a famine relief work. Altogether, the Government of India believed that the disbursements necessitated by the famine amounted to no less than £13,000,000, the loss to the country being still greater. From Mysore and Madras, in which parts of the country the famine had made such terrible havoc among the people, the Government had, he was glad to say, received the most conclusive testimony of the great good effected by the charitable funds so largely subscribed in this country. Houses had been restored, thousands of horses had been given or let on hire, seed had been provided, and looms, ploughs, and other implements furnished in numerous cases. From Mysore the Government learnt with gladness that the crops were in good condition, and that there was a prospect of a speedy return to the former prosperous condition of that country. From Madras, for a time, the accounts had not been so good, but recent rains had caused a great improvement in the prospects of the Province; while it had been found possible to discontinue relief works at the end of last year. The Government of India, therefore, in framing their Estimates for the coming year, were able to lay aside any considerable anxiety with regard to the two districts to which he had referred.

But one or two difficulties had to be surmounted. They had to provide for what he was glad to be able to call the late war in Afghanistan, and they had to meet the enormous loss which would be sustained in the operation of transmitting to this country the full amount of £17,000,000 required to meet all their home payments during the year. The actual payments on account of the war, which had been brought into the accounts of 1878–9, amounted to £670,000, which was considerably less than the sum at which his noble Friend the Secretary of State for India (Viscount Cranbrook) and he (Mr. E. Stanhope) had ventured to estimate it in December last—an estimate which was much criticized at the time. For the present year, the cost of those operations was estimated at £2,000,000. He had heard it said that this was an inadequate estimate, and that various high authorities shared this opinion. With all due respect to those authorities, he submitted that when their opinion was formed it was impossible for them to have correct data before them. The Government of India, who were responsible in the matter, had made that estimate, believing it to be a correct one, after full consideration of the circumstances in which they were placed by the position of affairs in Afghanistan, and the policy which was being pursued there. And, accordingly, it was arranged that a sum of £2,000,000 should, with the consent of Parliament, be advanced out of the Imperial Exchequer, no interest being payable, and re-payment to be made in the course of seven years; so that the Government of India would not only have cash in hand for their immediate necessities, but would be able to reduce their remittances to this country by that amount.

The difficulty due to the Afghan War having been disposed of, there remained one other matter to be considered before the Estimates could be framed. He alluded to the import duties upon cotton goods. The House would recollect a famous Resolution in connection with this subject passed two years ago. In consequence of that Resolution, the Secretary of State, not only in his own name but in that of the Council also, sent a despatch to the Government of India, in which he said that, looking to the condition of their finances, he did not think it probable that they would be able then to achieve the repeal of the whole of the cotton duties, but in which he also pressed upon their immediate attention the necessity of dealing with those portions of the duty which were undoubtedly protective in their effect. Upon those instructions Lord Lytton immediately acted, issuing a Commission to inquire into and investigate the whole subject; and, in the meantime, he exempted from the duty certain coarse descriptions of cotton goods, about which there could be no doubt as to the operation of the duty. That policy was universally approved. Since that time the Report of the Commission had been published; but to judge from certain minutes which had been delivered to the House, it had not been fairly studied by everyone interested in it. What did that Report show? It showed—first, that the extent to which the duty was directly protective had been very much under-estimated, and that it was desirable to extend, at the earliest possible date, relief to the suffering branches of the import trade in those goods; and, secondly, that that part of the duties thus shown to be undoubtedly protective could be removed without any very serious loss of revenue. It then remained for the Government of India to decide whether they would attempt to maintain a limit which was logically indefensible and practically utterly impossible to maintain, and so keep up the sources of irritation that existed between England and India; or whether they would follow the lines of policy laid down by the Secretary of State in Council, commenced last year, and approved by that House, and extend the limits of exemption to all those portions of the duties that were distinctly protective. The Government of India chose the latter course, and what had happened since? A discussion had taken place in that House, and the course determined upon by the Government of India had been entirely approved by a vast majority. Whatever objection might be made, either in reference to the merits of the course pursued or to the mode in which it had been carried out, he was perfectly satisfied that the Governor General of India would not have sanctioned that course except in the belief that it was the best, under all the circumstances, for the interests of India.

He came now to the Budget of the year. Including, then, the whole of the war expenditure which could at present be in any way foreseen, but excluding, as he had throughout done, the capital expenditure upon productive Public Works, the figures for 1879–80 were as follows:—The gross Revenue was taken at £64,562,000, the gross Expenditure at £65,917,000; or, according to the calculation of net income and expenditure which had been placed in the hands of hon. Members, the net Revenue amounted to £43,623,100, and the net charges to £44,978,100, leaving a deficit for the year of £1,355,000. But if the Bill which his right hon. Friend the Chancellor of the Exchequer would introduce for the advance of £2,000,000 from the Imperial Exchequer became law, there would remain in hand a sum of £600,000 to meet any contingencies which might arise. Before he proceeded to attempt any general view of the financial position of India, it was right that he should call attention to the changes in some of the items of Revenue and Expenditure which the tables recently distributed would enable any hon. Member to follow as he traced them during the three years under review. Some of the principal variations which were to be observed were due to the great disturbing element of the famine in Southern India and the scarcity which prevailed elsewhere. The not proceeds of land revenue, for instance, were abnormally depressed in 1877–8, and they were largely swollen in the intermediate year by the arrears which had been collected in Madras to an extent beyond expectation. Although a small amount of arrears had still to come in, the revenue under that head was almost restored to its normal condition. In the same way, the drought in Upper India seriously affected the proceeds from the Forests and from Excise; but under both those heads some improvement was expected this year. The receipts from Customs were more difficult of comparison, because of the changes in taxation and the reforms in the import tariff. Last year, mainly by the abolition of the sugar duties, but also by striking out of the tariff articles which yielded only an insignificant amount, and certain coarse cotton goods, revenue was sacrificed to the extent of £232,000. This year the exemptions from the protective import duty of all cotton goods containing no yarn finer than 30's and the changes in the tariff valuations involved a loss of £192,000, making a total of £424,000. In spite of this, and also of the very great commercial depression which had existed, some recovery had taken place in the Revenue. The net receipts from opium showed an extraordinary fluctuation. In 1878–9, they exceeded the estimate by no less than £1,584,000. In consequence of the abundant crop of 1876–7 the stock in hand in 1877–8 was very large. Owing to a reduction of the payments to the cultivators and a failure of the crop, the charges were considerably less; but the saving appeared in the accounts of 1878–9. It was altogether an exceptional year, and the Estimates this year, though very much lower, showed, when compared with ordinary years, the expectation of more than the average receipts. The new taxation recently imposed, and which could be traced in the accounts, partly under the head of assessed taxes and partly under that of provincial rates, was expected to bring in this year about £1,300,000; and there would still remain for future years a small addition for a portion of the famine cess in the North-Western Provinces, which had not yet been levied.

The salt revenue showed only a very slight increase. The rise which was to be noticed last year, as compared with 1877–8, was due partly to the rectification of an erroneous procedure in the accounts from Madras, and partly to the fact that in the earlier year traders held back in the expectation of the reduction of duty, which did, in fact, take place a few months later. The revenue was now in its normal condition, the recent reforms in the salt duties having produced no particular effect upon the net proceeds. But, even at the risk of keeping the House from subjects of more general interest, he was bound, in justice to the Government of India, to explain what had recently happened with respect to these duties. Last year, he had described at some length the various steps in the process of equalization, and showed how the great and scandalous barrier of the Inland Customs Line—at one time 2,300 miles in length—might very shortly, in consequence of the reforms which had been effected, be altogether dispensed with. This line virtually ceased to exist on the 1st of April last, with the exception of the Trans-Indus section, about 400 miles in length, which it would be necessary to maintain for a short time. The accomplishment of that great reform, accompanied as it had been by the abolition of the sugar duties, which operated as protective duties against our own and in favour of foreign sugar, could not but be regarded as a great step in advance. It had enabled the Government to get rid of the vexatious system of search, of the transit duties upon salt, and, in the case of four of the Native States, of all other local transit duties also. Although the arrangements with the Native States, which had been rendered necessary in consequence, were not yet in perfect order, they were working more smoothly than could possibly have been expected. As the House was aware, it was no part of the original scheme for the equalization of the salt duties throughout India to add anything to the salt revenue. Nor was the increase of duty imposed in Southern India intended to form part of the Famine Insurance Fund. It was intended only to enable the Government to get rid of the Customs Line, while it was expected that the revenue would be the same as formerly. It was now thought that, after deducting the compensation payable to the Native States, and the loss of revenue ncurred by the remission of the sugar duties, the net results of the equalization were to cause a loss to the Exchequer of £48,000 a-year, at first, but that this would speedily be recovered by the increased consumption in many parts of British territory, and in some Native States. It was, of course, too soon to form any confident opinion as to the effect of these measures upon consumption. Among the 130,000,000 of people to whom the duty and the cost of salt had been reduced, it was, naturally enough, expected to increase. And, accordingly, there had been a steady increase in the quantity consumed in Bengal. The amount which paid duty last year was larger than in any previous year. Among the 47,000,000 of people to whom the tax had been increased, it was necessary to watch the effect very carefully. The amount that paid duty in Madras and Bombay in 1877–8 was exceptionally large. Since that time the duty had been raised; but, in spite of the terrible losses of wealth and population which those districts had sustained, the consumption last year was only 3 per cent less than in 1877–8, and, with that exception, greater than in any previous year. As showing the effect of the spread of railways and other causes upon the price of salt, he might say that although in 10 years the duty on salt in Southern India had been increased 66 per cent, the price had only risen 20 per cent; and when hon. Members spoke of the oppressive nature of the tax, he thought they did not pay sufficient attention to the way in which it was collected—namely, by infinitesimal payments reaching over the whole year. It had been stated last year by a very high authority—he meant Lord Northbrook—that the tax which weighed least upon the people and caused least discontent was the salt tax. On the whole, he thought he might say that the great work of equalization had been accomplished without undue strain upon the people, and with remarkable success. It was an achievement of which Lord Lytton and his Government might very justly be proud.

Having detained the House, he was afraid, too long in considering some of the details of the Estimates, he had to ask its attention to a more general review of their financial position, and before coming to the special case of the present year it would tend to a clearer understanding if he dwelt for a moment upon the results of the last few years. He would take the five years ending with the 31st of March last, during which the present Government had been in Office, and the finances in India had been administered partly by Lord North-brook and partly by Lord Lytton, because they served to illustrate very plainly the main causes of the difficulties with which they had had to contend. They had undoubtedly been exceptional years. The Government of India had first of all to deal with terrible famines. They had been forced to undertake public works to an exceptional extent for the relief of the suffering. And so far from the pressure of public opinion in England having always been to restrict that expenditure, it was notorious that it had sometimes been in the direction of a great, almost an unlimited, increase. The right hon. Gentleman opposite—the Member for Birmingham (Mr. John Bright)—for instance, actuated by the highest motives, pressed upon the Government the immediate investment of £30,000,000 in irrigation works. Then, in 1876, came the sudden fall in the exchanges. And all those difficulties had to be met with a revenue diminished by the recent repeal of the Income Tax. The result of those five years, excluding the proceeds of any new taxation, was a deficit of about £3,000,000 only. But what was the extraordinary expenditure of those years? He was not going to mention the public works expenditure, although that was swollen to an unusual degree by the demands of the famine, because it was not a new policy, but one long accepted and pursued, and it was, undoubtedly, to some extent at least, under the control of the Government of the day. Limiting himself, therefore, to extraordinary expenditure, which arose from causes entirely beyond the control of any Government, what did he find? India had had to provide for famine relief no less than £12,000,000. She had found for net loss by exchange no less than £7,250,000. If he included the present year, the sum would be enormously greater; but, comparing it with the corresponding previous period, it would be found that it represented an excess expenditure of £5,500,000. So that those two items alone, both entirely beyond the control of the Government, had caused an extraordinary expenditure during this period of £19,250,000, or nearly £4,000,000 a-year, while the realized deficit had only been £3,000,000, part of which had been met by increased taxation. Not only did this seem to show a most creditable effort on the part of the Government of India to meet its engagements and reflected great credit on the Governments both of Lord Northbrook and Lord Lytton; but he confessed that after these figures it surprised him to be told that a war charge of £2,000,000 for the present year was the sole cause of any difficulty that existed. The Government had had great difficulties to contend with, and it had met them with vigour and very considerable success. But the great object of directing the attention of the House to this period was to show in a clear light to what an extent the two great and paramount difficulties of Indian finance were the uncertainties which were introduced into it—first, by the loss by exchange incurred in obtaining remittances; and, secondly, by the recurrence of famine. He would deal with those in turn.

He came first to the item of "Loss by Exchange," and at the outset it was, perhaps, desirable that the House should understand clearly what was meant by that term. The Government of India received its revenue in silver, and had, of necessity, to make very large payments annually in London in gold. According to the form adopted in the accounts, the rupee was taken at 2s.; but, as its value in London was now only 1s. 7d., a very much larger number of rupees had to be provided in India to make those payments in England. When he spoke of the rupee being worth 1s. 7d., he referred, of course, only to its value in relation to gold. The extent to which prices in India itself had been affected it was almost impossible to determine. Some thought that no appreciable disturbance of internal values had followed the fall in silver. But, however that might be, it was certain that the internal change was very much less than that which had occurred in the foreign exchanges. The gross loss by exchange—which was practically, therefore, the cost of obtaining remittances from India—appeared upon the face of the Estimates this year as £3,952,000. But, on the other side of the account, there was the item of gain by exchange, which mainly represented the gain of the Government of India in its transactions with the guaranteed railway companies under the contracts fixing the rate of remittance at 1s. 10d. per rupee. Deducting this amount, he arrived at a net loss by exchange of about £3,500,000. It had recently been frequently stated that this was an exaggerated statement of the real loss sustained by the Government of India. Well, of course it was. He was careful to explain last year—and his noble Friend and Predecessor (Lord George Hamilton) did the same—that that amount, being calculated according to the conventional system adopted throughout the accounts of reckoning 10 rupees to the pound, did represent more than the actual loss. That had always been obvious to anyone who examined the accounts of the Indian Government. There was no mystery in the way of calculating the loss by exchange, and he would endeavour to explain the matter as simply as he could, taking arbitrary figures for the purpose. To remit £100 at 2s. the rupee, 1,000 rupees were required. To remit £100 at 1s. 7d. the rupee, 1,263 rupees were required. That was to say, the loss was represented by the excess number of rupees required to be sent home at the rate of 2s. the rupee; and, therefore, the sterling loss was 263 multiplied by 2s., or £26 6s. That being the principle upon which the loss was calculated in the accounts, he would now try to state, not what the loss this year was according to the conventional system of taking the rate of exchange at 2s., but what it was compared with the average rate of exchange for some years past, which was certainly not less than 1s. 10½d. Taking the whole amount of the remittances required to meet the Home charges this year, and taking the rupee at the rate of 1s. 7d., as compared not with 2s., but with 1s. 10½d., he arrived at the result that the real loss to India on the total amount of the remittances that ought to have been made this year would have been £3,130,000 sterling. As they only proposed to remit £15,000,000, however, the real loss would be £2,750,000. But the point to which he especially desired to direct the attention of the House was, not so much the actual amount of this loss, as the great and recent increase of expenditure under this head. For the four years before the heavy fall of silver in 1876, the net average annual loss to the Indian Exchequer upon the face of the accounts was £432,000. In the four years since that time, it had been £1,920,000. This year it was in the same way, and, as he had already explained, £3,500,000. Speaking of this evil in 1876, when it was far less serious than at present, the late Mr. Bagehot, whose authority everyone in that House would fully recognize, said— So grave a misfortune has seldom happened to any Government so suddenly and so completely from causes out of its control. … The great peculiarity of the case is the position of the Indian Government, which has so great a burden so rapidly thrown upon it, and is so little able by additional taxation with equal rapidity to find means to bear it. Again, it was said that the Indian Government was to some extent compensated for this by the increased purchasing power of its gold in this country. What the effect of that had been he was not competent to discuss, and the subject was too intricate to enter upon at the present moment; but it was clear that the gain could apply only to a very small proportion of the whole remittances of the Indian Government to this country. After all, however, they were really not concerned in calculating what the exact amount of real loss might be. He had only to guard against the idea that it was necessary to exaggerate it in order to prove its gravity. Taking it at £2,750,000, or what they liked, the worst difficulty of all was the disturbing effect which it had suddenly exercised, and continued to exercise, upon all the calculations of the Government of India. What a discouragement to all careful and prudent estimates on the part of the Government of India, when the rise or fall of 1d. in the exchange from causes wholly beyond their control might put a totally different aspect upon their financial position! It was, in such circumstances, as the Government of India said— Extremely difficult to follow any settled financial policy, for the Government cannot even approximately tell what income will be required to meet the necessary expenditure of the State. Of course, it had not been the only disturbing element in their calculations. Famine had been another; but, even for that, some definite idea of the average annual expenditure over a term of years had been arrived at. Then there was the direct loss sustained by all Europeans in the employment of the State, who, being in receipt of fixed salaries, had to make remittances to this country. And, lastly, there was the injury to trade. No doubt, there was great difference of opinion as to the precise effect of these fluctuations in exchange upon the trade of India. Into that question it was not necessary to enter; but hardly anyone would deny that with these fluctuations in exchange trade transactions must necessarily be of a speculative, not to say a gambling, character. No ordinary amount of margin would make a merchant safe, and the result was that day after day men withdrew themselves from Indian business, and invested their capital in enterprizes where prudence and foresight were of more avail. In such circumstances it was only natural that the Government of India should have had the subject of the disturbing effect of these fluctuations in the exchange under their careful consideration. And very recently they had addressed to the Home Government a proposal which they believed, if carried out, would remedy the evil. As soon as that despatch was received, however, it became apparent that it could not be discussed with reference to the interests of India alone. Accordingly, not only on account of the importance of the subject, or the weight to be attached to the opinions of those who had put it forward under a deep sense of responsibility, but also because of the other great interests involved, which it was equally their duty to watch over, the Government decided to refer it to the careful and detailed examination of a small Committee. At the outset, it appeared that there were certain points on which it was impossible to arrive at anything like a positive conclusion. To what extent the present disturbance was due to the depreciation of silver, or the appreciation of gold; whether the balance of evidence pointed, on the whole, to a long continuance of the present disturbance, or whether they might hope within a reasonable period for the establishment of a more fixed ratio between the precious metals; when and how the German Government would dispose of any surplus of silver it might possess; and what would be the policy of the Latin Union—these were questions which it was only necessary to mention to show the gravity of the considerations involved. The opinion of the Committee having been received, and the Government having had time to examine the proposals of the Government of India, as regarded their suitability to the peculiar circumstances of India, as well as in all their other bearings, they had arrived at the conclusion that it would be impossible to sanction them, and a despatch to that effect would shortly be sent to India. They recognized fully the motives with which those proposals were put forward; they sympathized cordially with the difficulties for which they were suggested as a remedy, and they felt that in spite of that decision, no Government, of whatever Party, could cease to give the subject a watchful and constant attention. The result of that decision was that the loss by exchange, whatever it might be, must be manfully faced.

Then there came also the difficulty of famine. The House was well aware that last year the Government of Lord Lytton first took practical steps for the provision of an adequate surplus revenue to meet the average annual sum required for famine expenditure; and as the nature of their proposals had been somewhat misrepresented, it might be well to state exactly what they were. The conclusion arrived at by Sir John Strachey, after a careful review of the finances, was that, in order to place them in a perfectly sound condition, it was necessary to provide for a clear annual surplus of £2,000,000—to assist in which he imposed certain new taxation, which last year brought in £1,200,000. Of these £2,000,000, £500,000 was the normal surplus of income over expenditure, which every Government, like that of India, ought to provide in order to meet any contingencies that might occur, and £1,500,000 was to be devoted to the relief and prevention of famine. It was at the time urged by some people that the sum so raised should be formed into a separate fund, with a separate account; but Sir John Strachey pointed out the difficulties of such a course on the 9th of February, 1878, when he said— With all my desire to see the pledges maintained that we have given, as to the application of a sum not less than £1,500,000 as an insurance against famine, I think it would be irrational, in many circumstances that I can conceive, to object to the temporary diversion of any necessary part of the revenue from this purpose, with the view of obtaining relief which might be no less urgently required than that which experience has taught us to be requisite in meeting famine. …. Without thinking of a future far removed from us, events might, of course, happen which would make it impossible even for us who have designed these measures to maintain our present resolution. So, at the time this fund was established, ample notice was given that, in extraordinary circumstances, it might be necessary to suspend its operation. It was hardly possible to conceive how it could be otherwise. Suppose an insurrection—which God forbid!—or any other cause of extraordinary expenditure, they must either have new taxation, or they must suspend the operation of this system. In England they could at once impose new taxation to meet the difficulty; but in India they could not adopt any such course, and the only alternative was the temporary suspension of the arrangements for a surplus. The ultimate results of the arrangements for famine insurance were to be as follows:—It was estimated that the expenditure upon every 10 years famine relief was £15,000,000. Apply £1,500,000 annually to its relief and prevention, or the diminution of debt, and at the end of the 10 years you would have met all your estimated expenditure upon famine, without any addition to the debt. The precise mode of applying this sum to these objects was a matter of much difficulty. It had been the subject of much correspondence; but the final conclusion arrived at was that one half of it was to be held available for remittance to this country in discharge of our gold debt, and the other half was to be appropriated to the extinction of debt in India, or to the construction of Public Works designed to ward off, or to afford material assistance, in the event of famine, or which would guard against future outlay in relief. Well, last year the Government of India did pay in famine relief £550,000, and they provided at the end of the year a surplus of £1,450,000. It was perfectly true they were unable to make any remittance to this country in reduction of the gold debt; that under the state of exchange it was perfectly impossible to accomplish, and the result was that the £1,450,000 remained in the cash balances. This year the very contingency contemplated by Sir John Strachey had arisen; adverse circumstances had to be dealt with. The consequence was that no surplus was provided upon the face of the Estimates; and the Government of India frankly told them why. While the subject of the exchanges was under special consideration, they did not feel justified in imposing new taxation, or in adopting other steps which might, after all, prove to be unnecessary; but now that a decision had been come to, an endeavour must be made to balance income with expenditure. They had, therefore, to provide for the full loss by exchange, and also to obtain that surplus of income over expenditure which was admitted to be necessary.

There was an estimated deficit of £1,355,000; but if only the state of exchange had been a little more favourable there would have been a large surplus. But, in addition to that deficit, they had not made provision in the Estimates for the £1,500,000 for famine insurance, nor for the further small surplus required to meet contingencies. The result, therefore, was that, speaking roughly, the total deficiency of the year amounted to £3,250,000. He did not forget the increase of debt to be made, in addition. That he would deal with presently. For the moment they were considering only the deficiency shown upon the Revenue and Expenditure of the year. Of this sum of £3,250,000, £2,000,000 was on account of the war, which was an entirely exceptional expenditure, and it was proposed, not unreasonably, to borrow it from the Imperial Exchequer, and to repay it by instalments. Putting that aside as extraordinary expenditure, he arrived at the conclusion that the excess of ordinary expenditure over ordinary income, after fulfilling all pledges and providing for all liabilities, was £1,250,000. It could not be said that that was a satisfactory state of things. It was caused, undoubtedly, by a combination of adverse circumstances; but it was a state of things which, although it was not satisfactory, need not, in the smallest degree, alarm them, for India had surmounted equal difficulties, and would surmount them again. But the House would not be satisfied with any such general assurance; and it would desire to consider how the equilibrium between Revenue and Expenditure could best be re-established. That was the view taken by the Government of India also, and the state of affairs had formed the subject of anxious consideration at home and in India. The conclusion arrived; at was that the first step to be taken to overcome the difficulty was a large reduction of expenditure. That reduction of expenditure was to be not only a theory, but also an established fact. The task was a difficult one, and Lord Northbrook, in speaking of it last year in "another place" said— Although he thought something might he done in the way of reduction of expenditure—and he was satisfied that the Government of India were not neglectful of any opportunity that might occur for effecting reductions—he did not think it likely that the cost of the Government of India could he very considerably diminished. Whatever savings might he made in one direction would be met by the increasing demands for improvements of different kinds throughout India."—[3 Hansard, ccxlii. 1150.] In spite of that somewhat discouraging opinion, the Government was determined to make the attempt; and they considered that the reduction should be applied to more than one branch of expenditure. And if the House would allow Mm to trespass upon its attention, he would take in turn each principal head of expenditure.

First came the Civil charges, in which—looking to the increased demands which would be necessarily made upon them, as improved government extended itself in India, and by the growing intelligence and civilization of the people—there was a natural tendency to increase; and if they were to attain that most desirable object of reducing their military expenditure, it could only be by renewed efforts to promote the contentment and happiness of the people. And if any attempt were made to raise that great question whether it would be possible, after giving full consideration to all vested interests, to revise the future scale of civil salaries and pensions—which he admitted to be well worthy of attention—they should not forget the grave dangers which they might incur if they failed to attract to their service in India the same class of zealous and intelligent public servants as were supplied under the existing system. But there was one means of reducing the Civil charges which had constantly occupied successive Governors General of India—he meant the increased employment of the Natives. Parliament had on more than one occasion deliberately held out such a prospect; it had been embodied in more than one Act of Par- liament; and it had been the declared policy of the country for more than 40 years. But the efforts to put it into practice had been spasmodic, unsystematic, and altogether incomprehensible to the mass of the Native population, while the great increase which had taken place in the number of Europeans in some branches of the Public Service, and various other acts, might have seemed to them to be in partial violation of this policy. It could not be denied that, whatever might have been the intentions of successive Secretaries of State, very little progress had been made in giving effect to it. But ever since his arrival in India, Lord Lytton had applied himself with characteristic vigour to its development; and, accordingly, it had now been decided not only that higher offices should be thrown open than those for which Natives had hitherto been eligible, but also that by diminishing the number of covenanted civilians sent out from this country, larger openings might be given to the employment of Native Civil servants. The process could only be a very gradual one. They must not forget that it was not a quarter of a century since our first systematic efforts had been made for the improvement of the education of the Natives; and so far as experience had hitherto gone, the higher class of administrative offices could only in exceptional cases be intrusted to Native officials; but he was quite sure that in the hands of one who had taken so much interest in the question as Lord Lytton, and who felt so strongly the political importance of associating the subject-race with ourselves in the government of the country, this great reform would be pushed on as quickly as was consistent with prudence. A long time must, however, elapse before any great diminution of expenditure could be looked for from this source. But, quite recently, another practical step had been taken in this direction under the head of Civil charges. The central establishments were to be overhauled and curtailed. The arrangements with the Provincial Governments were to be revised, care being taken, on the one hand, not to interfere with the policy, so successfully inaugurated by Lord Mayo, of extending the power and responsibility of local governments, and, on the other, not to cause the necessity for any further local taxation. There could be little doubt that the general effect of these measures would be to effect a considerable saving, which was estimated by the Government of India at about £250,000 a-year.

The second great head of Expenditure to which he would call attention was that of Public Works, which was necessarily a little confusing, because it included the expenditure upon productive Public Works, which was treated as capital; secondly, the results of that outlay; and, lastly, the ordinary expenditure upon Public Works paid out of Revenue. He would deal first with the capital expenditure upon productive Public Works. Now, it was very constantly alleged by those who had not looked closely into the matter, that this class of expenditure had largely increased of late years. It would not be difficult to show that this was not the case. Again, its nature was not always fairly described. The hon. Member for Hackney (Mr. Fawcett) often tried to insist upon its being treated as part of the ordinary expenditure of the year. Its real nature was that of an investment of capital, which was hereafter to bring in a return, and whether that investment was made by guaranteed companies or by the State itself was very much the same thing. In order, therefore, to form a correct estimate of the sums spent upon the construction of railways, they must add the expenditure of capital by the guaranteed companies to that of the State. Calculating in this way, he found that in the 20 years following the Mutiny the capital invested in railways alone averaged about £5,000,000, besides what was spent upon works of irrigation. But the House was aware that, for some years past, the system of constructing railways under the guarantee system had been superseded; and now all railways, as well as irrigation works, were constructed under the direct agency of the State. Those of them which were expected to be remunerative were classed as extraordinary or productive, as distinguished from ordinary works to be paid for out of revenue—a classification which, so far from having originated with the present Finance Minister, dated as far back as the time of the right hon. Member for Tiverton (Mr. Massey), though it had since undergone considerable modification. The capital expen- diture upon productive Public Works amounted in 1877–8 to £4,791,000, and in 1878–9 to £4,599,000. But in these years the expenditure was abnormally swollen by the necessity of finding labour for the famine-stricken population of Southern India, and of pressing on such works as would immediately contribute to their relief. The Budget Statement of the Government of India showed that this year the capital expenditure upon railways and irrigation works was reduced to £3,500,000, being £1,100,000 less than last year, the chief reduction being under the head of railways. And now, before attempting to lay down any general principles as to the prosecution of these public works, it would have been highly desirable to have been able to place before the House some idea of the results derived from those which had been already constructed. But he was in this difficulty. This very point was under the special consideration of a Committee up-stairs, which was engaged in considering a comprehensive Report, laid before them by his noble Friend the Vice President of the Council. He would not for a moment venture to steal any of the facts, or to forestall the Report, which had not yet received the sanction of the Committee. Upon that point the House must be content to wait for further information. But there was one way in which, he thought, he could give to the House some idea of the results obtained for all the works hitherto constructed, including those made by the guaranteed railway companies. Large sums of money had been borrowed for this purpose. And, therefore, he thought it would not be uninteresting to the House if he endeavoured to explain, first of all, the precise position of the Debt of India, and, secondly, the effect produced upon that Debt by the system of constructing Public Works. The Debt of India amounted, on the 31st of March last, to very nearly £139,000,000 sterling. Of this amount £52,250,000 was borrowed before the Mutiny, £37,750,000 was added at that time, or, it might be said generally, in consequence of it, and the remaining £49,000,000 had been incurred since, or at the rate of rather more than £2,500,000 a-year. Now, he desired to analyze that sum of £49,000,000, and see to what it was due. Some im- portance might be attached to this investigation, because, although it was quite true that the Debt of India was increasing, the causes of that increase were very often misunderstood. Well, of that amount £4,500,000 were raised to redeem the capital stock of the East India Company, which had been an exceedingly profitable operation to the Government, and had saved £450,000 a-year; £14,500,000 had been borrowed for famine relief, and was, undoubtedly, a dead weight charge upon the finances; and £24,000,000 had been raised for other purposes, and which certainly could not be so described. He found, as a set off against that sum, that during the same period they had advanced as loans to municipalities and Native States for the relief or the prosecution of useful works, upon all of which they received interest at an average rate of 4½ per cent, the sum of £8,250,000; and £33,500,000 had been invested in productive Public Works, which, if not remunerative in what he admitted to be the proper sense of the term, did, at any rate, pay some interest upon the capital invested in them. The result was that, of the whole amount of Debt raised since the Mutiny, only £14,500,000 was entirely unproductive. But, in addition to this sum of £139,000,000, they had borrowed through the agency of the guaranteed companies about another £100,000,000, upon which they had guaranteed interest at the rate of 5 per cent. They had, therefore, to pay interest upon a capital sum of £239,000,000; and the point to which he desired to direct the attention of the House was, that while the amount of this Debt had steadily increased, the charge for interest upon it had steadily diminished. And, in order to make a comparison fair to the results of these works, he did not for the moment take into account the recent fall in the exchanges. But 10 years ago the charge for interest upon the general Debt, upon the debt incurred by the guaranteed companies, and by the State for Public Works, amounted to £8,094,000. This year it was £5,750,000, showing a reduction of £2,340,000. That was a very remarkable diminution. Of this £500,000 was due to reduction in the rate of interest, and the remainder was due to the increased productiveness of the railways. Although he could not suppose that equally good results were to be antici- pated from the development of the railways and irrigation works constructed by the State, this he would say, that the total abandonment of Public Works would be about one of the greatest evils which could befall India. That was not the time to enter fully into the discussion of all the beneficial result which had accrued to India from the construction of those works; but he thought that the financial results alone justified the position which the Government of India had taken upon this question—namely, that it was right to proceed with these works, but in a cautious and prudent manner. He thought, upon the whole, that the expenditure under this head might have been somewhat in excess; but they should never forget that the smallest access of famine might, indeed would, create an enormous demand for Public Works. The pendulum swung now in one direction, it might swing in the opposite directions in a few months. The one essential point, therefore, as he submitted to the House—a point far more important than the precise amount of this expenditure—was to take a prudent and far-seeing estimate of the future, and to fix upon a limit which, looking to the demands likely to be made upon them, it was desirable to establish and to maintain over a series of years. Of all things, the most desirable was a settled policy—fix the limit where they would, but endeavour to maintain it when fixed. In the opinion of the Secretary of State in Council, the principle upon which that limit ought to be fixed was this. Ever since Lord Salisbury had laid down the rule, the principle had been maintained—though in practice it had been somewhat departed from—that money required for Public Works should be borrowed in India, and not in England. To that principle they still gave a most unhesitating adherence. That being so, the limit for Public Works, they thought, should be fixed according to the amount which the Government of India could fairly be expected to borrow in India in an ordinary year without undue disturbance of the money market. That amount had been ascertained to average £2,500,000, and, therefore, they had decided that the limit of expenditure on Public Works ought to be £2,500,000. It was not without great regret that they would abandon a great many Public Works which it had been their desire to push on; but they felt, under all the circumstances, that it was necessary to make a considerable sacrifice, and they were therefore prepared to make it. As compared with last year, it was a reduction of more than £2,000,000. Of course, the whole of the reduction to be effected could not be made for a short time, looking to the contracts they had already entered into. He had now a word to say on the Public Works ordinary. These works were not only roads and civil and military buildings, but also such railways and irrigation works as were not directly remunerative, but were, nevertheless, considered to be necessary; and it included, also, the cost of working and of maintenance. Upon these works the Government of India were of opinion that a great reduction could be made. No new works were to be undertaken, even if already sanctioned, without the special consent of the Supreme Government; a rigid investigation was to be made into the necessity for them. Establishments which were excessive were to be cut down. In the result, it was anticipated by the Government of India that an annual saving of £750,000 would be effected.

He now came to the head of Army Expenditure. The net charge for the Army was about £14,500,000; but that did not include the whole of the cost, because the expenditure on military buildings, about another £1,000,000, was taken under the head of Public Works. Last year that amount was, unfortunately, exceeded, partly owing to the increase of prices, and partly owing to other circumstances over which neither the Government of India nor the Home Government had any control. The House was hardly aware of the extent to which the increased cost of the Army was owing to recent legislation or to circumstances over which the Government had not any control at all. Whenever a reduction of expenditure was spoken of, the economical eye fixed at once on the Army accounts. The hon. Member for Orkney (Mr. Laing) said, the other day, that retrenchment in India meant reduction in the Military Expenditure. Therefore, he need scarcely say, they had not overlooked the matter. It might be said that during the war, which he hoped was now brought to a happy and successful termination, it was difficult for the Government of India to attempt any reduction, and that, even on its conclusion, some additional expenditure would be necessary. That was a controversial matter, into which he was desirous not to enter. But, at the outset, he wished to say that the Government did not look forward to being able in any way to reduce the British garrison in India. That was a question which must be considered and decided upon grounds of which the financial constituted only one of the elements. But the Government of India did believe that reduction of Military Expenditure was possible, and they had considered how it was to be done. And accordingly, with the consent of Her Majesty's Government, a Commission of civil and military officers was about to be appointed to inquire in India into the organization and expenditure of the Army, placing before that Commission certain special points of inquiry which had been the subject of recent correspondence, and directing their attention particularly to the reduction of expenditure, where it could be accomplished without loss of efficiency. One member of the Commission would represent the English Army, and would be nominated by the Secretary of State. Of course, it was impossible for him to give to the House any indication of what the results of that inquiry might be. But the Government of India believed that they would be substantial, and they were satisfied that it was the only way in which a successful reduction of Army Expenditure could possibly be accomplished.

Having dwelt on the three great heads of Expenditure, the House would now allow him to turn to the Home charges generally, which formed, probably, the greatest difficulty with which the Government had to deal. In any circumstances, the remittance to this country of £16,000,000 or £17,000,000 in a year must be attended with risk. These charges had very considerably increased; but their real rise dated from the Mutiny. The right hon. Gentleman the Member for the City of London (Mr. Goschen), in his admirable Report upon the depreciation of silver, pointed out that the full effect of those charges, though they had previously increased, was only recently felt. While railways were being constructed on a large scale in India under the guarantee system, the money raised in England was paid into the hands of the Government here, and was applied in reduction of the remittances. But after 1871, when that mode of construction practically ceased, they suddenly jumped up to £10,000,000, and were now £15,000,000. The practice of denouncing those charges as extravagant had led many to suppose that the Home Government had drawn enormous sums from India and recklessly squandered them in this country. An examination of the real state of the case would dispel that idea. The total amount of Home Expenditure, exclusive of mere banking operations, was about £15,000,000 a-year. Of that sum, the interest on Debt, guaranteed interest, superannuation, and furlough allowances—all practically fixed charges—absorbed £11,250,000; the effective charges for the Army, £1,000,000; stores supplied on demand of the Government of India, about £2,000,000. This last would undoubtedly, now that the Public Works Expenditure had been cut down, be diminished. But the whole cost of administration in England, which was practically the only amount under the direct control of the Secretary of State in Council, was £275,000. He was not going to argue that that amount could not be reduced—possibly it could be; he was only now endeavouring to point out the smallness of the sum. But the hon. Member for Hackney did not hesitate to charge the Home Government with the most reckless extravagance. In a recent article, the hon. Gentleman said—"The examination of the Home charges will at once show that a year never elapses without various acts of extravagance being committed." That was a serious charge. The hon. Gentleman went on to say—"I might quote innumerable instances," and, accordingly, he gave two instances. But, unfortunately for the argument of the hon. Gentleman, it happened that in both instances the charges were fixed by Act of Parliament. Now, upon these facts it was quite obvious that, without gross injustice to individuals, which he was sure no one would desire to perpetrate, it was impossible to hold out any great hope of a large and immediate reduction of those charges. But they had received many suggestions on the subject. Quite recently, he had seen it proposed that they ought to pay their pen- sions in silver. Independently, however, of the fact that any such change could have no immediate effect, it was perfectly obvious they might, by so doing, run the risk of discouraging a great many excellent persons from entering the Public Service at all. All he could say as to the Home charges—and he knew he could speak not only for the Secretary of State, but for his Council, who felt deeply their responsibility in this matter—was that they would lose no opportunity of reducing thorn as much as possible. The House was already aware that the effective charges of the Army had recently been settled for all past years on a basis which involved a considerable concession to India, and, as regarded future years, the subject was now being considered by an able Committee, of which Lord North brook was the Chairman.

Summing up these figures, he arrived at the conclusion that, independently of the results which might be produced by the Army Commission about to be appointed, and independently of a reduction of the expenditure on productive Public Works to the extent of £2,000,000, they would have improved their position by the reductions of which he had spoken by £1,000,000 a-year. The House would not expect him to say, then, what proportion of that reduction they might expect to realize in the present year; but, under favourable circumstances, he fully believed that they would be able, at the end of the year, to establish an equilibrium between their income and expenditure, and to provide for every possible claim upon them.

But then they were told that the position must be eminently unsatisfactory, because of the large amounts which they were about to borrow in India and in England. In the article he had already quoted, the hon. Member for Hackney left, no doubt quite unintentionally, the impression on the mind that they proposed to borrow at once £15,500,000, and to increase the Home charges by £400,000 a-year, and that, therefore, a crisis was at hand. Nothing could be further from the truth than that. He would tell the House very shortly what they were forced to borrow. In the first place, India had to provide for the cost of the war. For that purpose they proposed to borrow £2,000,000 from England. That was a temporary loan, and not in any sense an addition to their permanent Debt. Secondly, for the productive Public Works in India they proposed to borrow £3,500,000 this year. The policy of these loans might be good or bad; but the borrowing of a sum of money for the purpose of investing it in productive Public Works was no more a sign of insolvency than loans were which were raised in this country for improvements by the Metropolitan Board of Works or by the great town of Birmingham. Lastly, there remained the sum of £1,500,030, which was required to pay off the untransferred portion of the 5J per cent loan which was just being paid off. That loan would now be entirely got rid of, and a saving to the finances of India of about £100,000 a-year would be effected. Still, no doubt, that £1,50),000 a-year was an addition to the Debt, and it was the only real unremunerative addition made this year. The cash balances had been reduced to an exceptional extent, first of all, by the great expenditure upon Public Works during the Famine, and then by the abnormal demands made upon them for advances in connection with the war. They in England could hardly realize the difficulty of transporting treasure in India. It became necessary, therefore, before the hot weather set in, to place an enormous sum of money in the Frontier Treasuries. That made an undue Call on the cash balances, and reduced them to an amount lower than the Government of India considered safe. Accordingly, the amount to be borrowed in India was £5,000,000, and a loan was issued to that amount; £4,000,000 of that loan was accepted at 94¾. Considering the present position of the silver market, the large amount of the loan, and the somewhat depressing articles and speeches to which the public mind had recently been subjected, he thought that was a very satisfactory result. Whether the remaining £1,000,000 would be obtained, he was not yet in a position to state; but if it were possible, they would undoubtedly endeavour to raise that sum also in India.

Then it was said that they were likewise proposing to borrow sums of money in England. He was afraid that when he brought forward his proposals a few weeks ago, the objects which he stated they desired to attain had been a great deal misunderstood. It was alleged, in the first place, that they desired to raise at once a large loan. Nothing, in fact, was further from their intentions, and he distinctly explained to the House on that occasion that they hoped they might have to raise nothing at all in England, at any rate not in the form of addition to their permanent Debt. Then it was said that they desired to control the exchanges, and that the fact of their wanting a loan having somehow leaked out, a favourable effect had, in fact, been produced upon the exchanges. It did not at all surprise him that it had leaked out, considering that notice of his intention to apply for a loan was for six days upon the Notice Paper, and everybody might have known perfectly well that a loan was to be applied for. Undoubtedly, the main ground upon which his proposals had always been based was the difficulty in obtaining their remittances. But, certainly, they had also anticipated that some part of the loan, which was being advertised in India, might not be obtained, and that, therefore, they would have to borrow it in England. Then there was the sum which it would be necessary to borrow in order to offer stock to the shareholders in the East Indian Railway Company, who desired to commute the annuity to which they were entitled by the terms of the recent purchase. It would be out of Order for him to discuss this subject then, and upon careful consideration they thought that this might be best dealt with in a separate Bill.

Therefore, it was not necessary for them to borrow anything at all at the present moment; but the borrowing powers for which they asked had been so much misunderstood that he was bound to explain, as shortly as he could, the difficulty in which they were placed with regard to their remittances from India. In the time of the old East India Company not only was the amount to be remitted very small, but the Company always reserved to itself the right of bringing over the necessary funds in the manner it deemed best for its own interests, and did in fact do so, to a very great extent, by buying produce bills in India. Since the transfer of the Government to the Crown that plan had been given up, as being an operation hardly suited to the Government. Other modes, indeed, had been adopted. They had bought some gold in India, and transmitted it to this country. They had sometimes bought bills upon England—last year, indeed, they attempted rather a large operation in this direction, but with limited success, because the effect of it was to disorganize for a time the market for their bills at home. Practically, therefore, they were reduced to the mode of drawing bills upon India and selling them to the highest bidder; and although the amount offered varied, of course, from time to time, practically, the rule was to go on selling some of them weekly throughout the year. And this they did, partly because they were obliged to regulate their drawings so as to suit the convenience of the Government of India which had to meet them as they were due, and partly in order to accommodate their customers by letting them make their calculations with greater certainty. There were some who attacked this mode of proceeding altogether, and said that the Council of India were the most unbusiness-like people in the world, because, whether there was a demand for the commodity which they had to sell, or not, they went on pressing their bills upon the market, sometimes in increasing amounts when that demand was at its minimum, and forced down artificially the price by their own action. The answer was that they were obliged to do it, because they must have the money at any sacrifice. But it happened sometimes that they could not sell their bills at all, and what were they to do? The only remedy for such a state of things appeared to them to consist in having a certain reserve of borrowing power which enabled them to withhold their bills when there was no demand for them; and, considering the magnitude of their remittances, that reserve ought to be a large one. The House would bear in mind that after Parliament was prorogued there was an interval of six months, during which they were obliged to bring money home at the rate of £1,000,000 to £1,500,000 a-month—and if the demand for remittances were suddenly to cease, and they were unable to sell their bills even at any sacrifice, they would be left entirely without any means of paying their way. Therefore, after a very careful consideration of the whole case, and after consultation with those most competent to form an opinion upon its diffi- culties, they had come to the conclusion that such a reserve of borrowing power was absolutely necessary. Looking, however, to all the altered circumstances of the case, to the recent slight improvement in the exchanges, and to the fact that the success of the Indian loan rendered any addition to the permanent Debt in this country, as they hoped, unnecessary, they thought that the borrowing power for which they asked need not be so large as they had previously anticipated. They had considered what was the smallest amount to which they could limit their demands consistently with safety. And here he might quote the opinion of Sir Thomas Seccombe, who after 50 years of service in the India Office still gave them the advantage of his ripe experience. Now, no man in England was more averse to borrowing in England, under ordinary circumstances, than Sir Thomas Seccombe. But, upon the whole, he now entirely concurred in the opinion which the Government had formed, that they could not, without danger, ask for any less sum than £5,000,000. Accordingly, when the proper time came, he would propose to substitute that amount in the Resolution now before the House. As to half of that sum, power would be asked to borrow it upon debentures.

And now, his case was complete. It remained only for him to thank the House for the kind attention which it had given. Whatever judgment might be formed upon the facts now put forward, they would not, as he thought, justify in any way the opinions of those who went about so loudly proclaiming the impending bankruptcy of India. Many facts pointed to a very different conclusion. Her external trade had doubled in 20 years. The gross receipts of her railways testified to the growing activity of her internal commerce. And though, like other countries, she was at present passing through a period of severe commercial depression, and struggling with the difficulties created by the fall in the exchanges, her credit was still high. Sometimes they might have been tempted to make too much of the riches of India. Let them not, under the influence of an unfounded panic, exaggerate her poverty. The future of India, God willing, might be a great one. It should be the grand mission, of the English people to insure it.

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

MR. FAWCETT

said, he had intended moving a Resolution, declaring— That this House regards with apprehension the present state of the Finances of India, and is of opinion that measures should at once be taken to reduce expenditure; but after the speech of the Under Secretary of State for India, he considered that his Resolution had virtually been accepted by the Government; and as on Indian questions he was always desirous that, if possible, there should be no entanglement between the two sides of the House, he should move a somewhat different Resolution from that of which he had given Notice. Accepting the assurance of the Under Secretary of State that expenditure would be reduced, and accepting also the declaration of the hon. Gentleman as one for which the Government would be held responsible, that that reduction would be carried out thoroughly and sincerely—in other words, that the declaration would not prove a mere empty promise—he should, at the close of his observations, submit a Resolution which, so far as he could see, it would be impossible for the Government to reject if they were sincere in their desire for economy. He should ask hon. Members to express their opinion— That this House, regarding with apprehension the present state of Indian Finance, approves the decision to reduce Expenditure. It might be asked why he did not rest satisfied with the assurances which had been given by the Government, and why he proposed a formal Resolution? His answer was, that the Records of that House showed that there had been Vote after Vote in favour of an increase, instead of the reduction, of expenditure in India; and the reason was that the interests of India had been regarded as an abstract thing, and that the House of Commons represented the popular feeling which erred from the belief that India was an extremely wealthy country. It seemed to him, therefore, that a great deal might be gained by passing a Resolution which was intended, not to cen- sure the Government, but to encourage them in the path which they had declared it to be their intention to pursue. While there was much in the speech of the Under Secretary of State with which he agreed, and though he was perfectly free to acknowledge the ingenuity and ability with which he explained his figures, there were, he thought, one or two remarks which he might just as well not have made. At the conclusion of his speech he referred to the loan in India, and he said that £4,000,000 of this loan, at 4½ per cent, had been taken up at 94¾. This, he added, was not altogether satisfactory; but he thought it was so—and here was the sneer at himself—considering the alarmist speeches which had been made. But could the hon. Gentleman, he would ask, point to anything which he (Mr. Fawcett) had said in that House, or which he had written, which took an alarmist view as to the state of Indian finance at all to be compared with the opinions on the subject which were held by men of the highest position in that country, and even by members of the Council of the Viceroy? Mr. Whitley Stokes, a very good authority on the subject, had said that the finances of India were intolerably bad; and that it would be found, when we desired to increase taxation, that we had exhausted all sources of indirect taxation, and could only fall back upon the direct taxes, at the expense of producing much just discontent. There were still stronger expressions of opinion in the Minutes lately laid before Parliament, and which bore the names of men in high official position. He (Mr. Fawcett) had never spoken about the certain insolvency of India, nor had he ever believed in the insolvency of India. What, however, he had said was, that if the Indian Government was not checked in the course it was pursuing there was nothing else before it but financial insolvency. The truth of this remark had been abundantly proved by the Under Secretary of State himself—indeed, every single thing he (Mr. Fawcett) had ever contended for had now been more than conceded. When he spoke about the excessive expenditure on public works, he had never suggested, as the Government had done in a perfect panic of alarm, that they should suddenly cut down expenditure under that account from £4,000,000 or £5,000,000, to £2,500,000. He had never proposed any such step. The proposals of the Under Secretary of State showed, notwithstanding the phraseology in which they were wrapped up, that the truth had at length dawned on the Government, and that every opinion that he (Mr. Fawcett) had expressed about the financial condition of India had been expressed in too moderate language, and that the Government knew now that their straits were desperate. Had they awakened four or five years before, and had they then admitted some facts that they were now obliged to admit, so considerable a reduction of the expenditure on public works would not now have been necessary, and they would not have had to make proposals that were at once humiliating and unavoidable. It was all very well to say that but for this or that contingency all would be well; all Indian Budgets were dependent on "ifs." There was not a country in the world whose finances would not be in a satisfactory condition if it were not for certain circumstances. If Turkey had not been mismanaged, if her revenues had not been farmed, if her officials had not been corrupt, her financial position would, no doubt, be satisfactory; and so in India; if the Government had not forced the country into an unnecessary war, if her Home charges had not been permitted to increase year by year, if there had been no Famine—if, in short, everything had gone on well, then, obviously, her finances would leave nothing to be desired. In speaking of what might have been, he would not touch upon controversial topics unnecessarily; but he could not regard war as an inevitable act of Providence. Nor, in speaking of the exchange, could he ignore the fact that the policy of the present Government had tended to render it more and more unfavourable. He knew full well, from letters confidentially written to him by persons holding high official positions in India, that the financial condition of India at the present moment was such, and the feeling of discontent there was so deeply-seated, that he was fully sensible of the responsibility with which he spoke. The Government were going to raise £5,000,000 in India, and to take power to raise the same sum in this country, while £2,000,000 was to be lent free of interest.

Notice taken, that 40 Members were not present; House counted, and 40 Members being found present,

MR. FAWCETT

, resuming, said, that when the Bill for raising the loan came before the House, it would be possible to insert provisions defining the purpose for which the loan was granted; but still it was clear that India was about to borrow in one single year no less a sum than £12,000,000. It was said with regard to one of the £5,000,000 loans that £1,500,000 was to be devoted to paying off the balance of another loan; but it was to be remembered, at the same time, that, in order to enable the Indian Government to do with a loan of £5,000,000, it was necessary to reduce the public balances by £1,350,000. It might, therefore, be said approximately that India in a single year would borrow about £7.000,000, take authority to borrow £5,000,000 more. In order to obtain a real view of the financial condition of India, it must be remembered that this sum of £7,000,000 was required at a time when additional taxation had been imposed, for the purpose of providing India with a surplus of £2,000,000, of which sum £1,500,000 was to constitute a Famine Fund, and the other £500,000 was to form a surplus without which no Government in the position of that of India could consider itself solvent. Notwithstanding this, India at the present moment was not only without a surplus, but had to obtain advances to the extent of £7,000,000 in one year. It was, therefore, fair to say that at the present moment the amount of the Indian deficit could not be less than £9,000,000. But, in order to appreciate the grave issues which were associated with these proposals of borrowing, it was of the first importance to remember that this borrowing had not been accompanied by any attempt to raise a single shilling of additional revenue by taxation; but the Indian Government was surrounded with such sinister influences that in the midst of this exceptional borrowing they could not maintain the revenue already in their possession, and had been obliged to sacrifice a revenue of no less than £200,000. The Under Secretary of State said that if England had a great exceptional expenditure and had to borrow largely, such were the resources of the English people that it was easy to meet part of the exceptional expenditure by additional taxation. It might be easy; but, unfortunately, it was just the very thing the Government, of which the Under Secretary of State was a Member, did not do during the present year. They were afraid to meet exceptional expenditure by putting on a shilling of additional taxation, and there was no financial authority of repute out of the House who had not described the policy of the Government in that respect as a policy which was alike unsound and improvident. But unsound and improvident as was the English financial policy this year, what was the language which would accurately characterize the financial policy of the Indian Government, when, in the face of such large indebtedness, they not only made no attempt to raise additional revenue by additional taxation, but actually had not the courage to maintain the revenue already in their possession, and sacrificed a portion of the revenue raised from the import duties upon cotton goods, to meet a cry which had come from Lancashire? Even if it could be shown that these duties might be ten times more objectionable than they were said to be, yet, although it might be wise to remit them if there was a surplus revenue, it became the height of folly and imprudence to remit them under present circumstances; for what had really been done in India had been to borrow money in order to reduce duties which were probably paid with more satisfaction than any other duty in the whole fiscal system of India. The most extreme caution was necessary in reference to borrowing money in India. The Under Secretary of State had himself stated that it was not prudent to borrow more than £2,500,000 in India in any one year; but it was now proposed to borrow double that sum in the present year. The advance of £2,000,000, free of interest, by England to India, raised a question of greater financial importance than any proposal that for some years had been submitted to the House. It could be looked upon only in two ways—either as a gift or charitable offering, or a contribution which England was legally and equitably bound to make to India. If it were a gift or charitable offering, he believed it would be most mischievous. If, however, the advance was to be looked upon as a contribution which England was legally bound to make, it was most inadequate in amount. Regarded in the light of the first proposition, he thought that if India was to come to England to relieve her from present necessities, both countries were starting on a path fraught with financial peril. They were told that the Afghan War did not concern India only, but that it was an Imperial question, and had been undertaken to maintain the influence of England both in the East and in Europe. The charge of the war, therefore, should be borne fully as much by England as by India. In advancing £2,000,000, free of interest, to be repaid in seven equal annual instalments, the amount of pecuniary sacrifice made by England in the loss of interest would be about £320,000; and if the Afghan War cost £2,600,000, as estimated by the Under Secretary of State, India would have to contribute £2,280,000 for an expenditure which was to maintain the influence and character of England in Europe. In other words, for every £1 contributed by wealthy England, £7 would have to be contributed by impoverished and embarrassed India. Whenever any spirited act of foreign policy was to be performed, in which the interests of England were involved, if England was only to pay £1 for every £7 paid by India, what an encouragement would be given to throw additional burdens on the finances of India! In consequence of this war, the Native Army had been increased by no less than 12 per cent. That additional expense must be borne by India; but, after all their boasting about what they were going to do for India, the result of their proposal would be that India should pay £7 where England paid only £1. He did not believe that the House of Commons would ever sanction such a proposal. Then, with regard to the loan of £5,000,000, to be raised in this country, the speech of the Under Secretary of State was halting and hesitating. He told them a Committee had been appointed to investigate the subject of the exchanges; but he did not tell them what the Government were going to do. He would, therefore, endeavour to explain what the Government intended to do with the £5,000,000 loan. They meant to become speculators in silver. What would be the effect of their affecting the price of silver? Their proposal was simply a temporary expedient in which they might succeed for a few days; but, in the end, their position would be worse than before. Every additional £1,000,000 borrowed in England would increase the Home charges, and they would thus be bringing into operation an influence which, would make the exchanges still more unfavourable. Silver had become depreciated, and they had been heavy losers in consequence. Why? Simply because for years the Indian Government had been pursuing the perilous course of having the Revenue received entirely in silver, and perpetually increasing the payments to be made in gold. The proposal of the Government, instead of diminishing the payments to be made in gold, would still further increase them, and thus their position would be aggravated. It was said they should limit the coinage of silver in India, and introduce a gold currency. But that would still more unfavourably affect the value of silver, and would be looked upon, from one end of India to another, as a breach of faith with the people. It would be regarded as a roundabout way of trying to screw something more out of them in the form of taxation. The course to be pursued was simply one of common sense; but it was exactly the opposite of that now proposed. Every effort should be made to reduce the Home charges and to diminish the amount of remittances India had to make to England. Last year a Famine Insurance Fund was established, and various new taxes were imposed to create it. Among them was the licence tax, which was virtually an income tax of 5d. in the pound on incomes of not more than 4s. a-week. Every artificer, and even many labourers, had to pay that impost; but not a professional man, with his thousands a year, nor an officer of the Army, nor a civilian, not even the Governor General, with his £20,000 a-year, had to contribute a farthing to it. The only justification put forward for those extraordidary exemptions was that the proceeds of that tax should be solely devoted to the relief of Famine, and that it was only just that those who were to be thus relieved should provide the Famine Insurance Fund, and, consequently, the professional and civilian classes should not be called on to contribute. That was a very sorry excuse for what was done. What would have been thought if this country were threatened with Famine and a Famine Insurance Fund were created, to which the poor should be made to contribute and the wealthy should be exempted, because the former class would be affected by the calamity and the latter would not? But even that plea had been entirely swept away, because not one sixpence of that Fund had been devoted to the purposes for which it was established. How could they, then, with common justice or decency, continue one hour longer those exemptions which made that tax the cause of so much discontent in India? It had gone forth throughout India, on the authority of some of the highest officials in that country, that revenue had been sacrificed, and that the solemn promises of the Viceroy had been disregarded, in order to meet the exigencies of English politics. He did not say whether that charge was true or not; but it had been made, and it ought to be answered. Lord Lytton declared, when the taxes for creating the Famine Fund were imposed, that not a single rupee which they yielded should be devoted to any other purpose than that to which they were pledged; and Sir John Strachey also said that no administrative reform, however necessary, no fiscal change, however wise, could justify the application of the proceeds of those taxes to any other object than that of relief from Famine. Notwithstanding those assurances, that money had been spent in paying the cost of the Afghan War, and in enabling the Government to remit £200,000 of the cotton import duties. That being so, he thought the first part of his Resolution was amply justified. It was not the question whether this or that individual was highly paid; but whether India had got the money to make the payments she now had to make. She must put up with inferior or different service; anything was better than growing financial embarrassment. The Under Secretary of State had fully admitted that there was only one remedy for the existing state of things—namely, the immediate reduction of expenditure. Economy was, undoubtedly, quite practicable. Let them look to the Army. Unless they were prepared greatly to reduce their expenditure on the Army, he believed that they would make no sensible impression in improving the financial position of India. The present Finance Minister for India said some three years ago, in a time of peace, that the military expenditure of that country was not less than £17,000,000 a-year. Since then it had increased by, at least, £1,000,000; and if something was not done, it would very soon reach £20,000,000, or more than one-half of the entire net revenues of India. The Under Secretary of State had told them that the Government were going to appoint a Commission. But what was the Commission going to do? For a great part of the increased military expenditure the present Government was not responsible. It was the result of changes carried out in the English Army. The short-service system was for India one of the most costly arrangements that human ingenuity could devise. It enormously increased the charge for transport and other expenses, while it diminished the efficiency of the Army. If we returned to the old system, India could also obtain recruits at much less cost. India was bound hand-and-foot to our costly military system, and charge after charge was thrown upon her. The increased military expenditure was the more disappointing, because a great portion of the unremunerative public works were intended to have a military value and ought to lead to a reduction of the military expenditure. He would now turn to the Department of Public Works. Here, like the Under Secretary of State, he could not speak with perfect freedom, because he, also, was a Member of the Committee that had been referred to. The Under Secretary of State had quoted elaborate figures to show that these works were productive. But these Returns must be accepted with extreme caution. It would be easy to quote figures on the other side. During the last three years there was no point in the Indian Budget on which the Under Secretary of State had dwelt with more satisfaction than the increasing railway returns. But in the Budget Statement of the present year it was calculated that the returns from the guaranteed railways would show a falling off of £1,800,000, and that they would yield a smaller net return than in any year since 1873–4. He hoped the proposed reduction of expenditure in the public works would be carried out, not too precipitately, but with fairness and consistency. He had heard of thousands of poor labourers being dismissed, but not of a single person with a salary of £1,000 a-year being affected. He hoped the economy, of which the Under Secretary of State had given pledges this evening, would not be of that miserable and contemptible kind which touched the poor, and left untouched everyone who had sufficient influence to make himself heard in that House. The Under Secretary of State had made them promises which, if carried out, would give India cause to congratulate herself upon to-night's debate. He had truly said that for the last 40 years the most magnificent promises had been made with regard to the larger admission of Natives into the Public Service, and yet their number might be almost counted on the fingers. The number of covenanted servants must be reduced, because India could not afford her present staff. This would also greatly reduce the charge for pensions, which was too great to be borne. Out of a Revenue of £37,000,000, a sum of £2,800,000 was paid away in this country in the form of pensions, superannuations, and compassionate allowances. The Under Secretary of State seemed to think he had been unjust when, in a recent speech, he characterized these Home charges as extravagant. But he thought the charge could not be denied. Even with regard to the two items the Under Secretary of State had referred to—namely, £1,200 for the outfit and passage money of a member of the Council of the Governor General, and £2,500 for the outfit and passage money of two Bishops and certain chaplains, he thought the charge sufficiently made out. Why should India pay a single sixpence for a Bishop? The Under Secretary of State said he was compelled to allow these items by an Act of Parliament; but, if that was so, why did he not get the Act of Parliament repealed? It was a mistake to suppose that the Home charges could not be reduced. Let them but compare the salaries received by certain officials in the India Office with the salaries of officials who did the same work in some of the English Government Offices, and they would see that a reduction was not impossible. Instead of diminishing the Home charges, the Government were pursuing a policy which would tend still further to increase them. While advising the Government to carry out in India a policy of rigorous retrenchment, he by no means underrated the difficulties which they had to encounter. He knew perfectly well that the very moment some private interest was attacked it summoned around it a host of friends, who became the keen assailants of the Government who were desirous of practising economy. Nothing would be more unfair or unjust than an attempt to add to the difficulties which the Government would have to encounter if they should carry out the promises of economy which they had made that evening. It was not his intention to make any direct attack upon the Government, for no fair person could hold them solely responsible for the present state of the finances of India. Strongly as he objected to some things which the Government had done—the Afghan War, for instance, and the reduction of the cotton duties—he still admitted that many of the causes that had brought financial trouble upon India were in operation long before the present Administration came into Office. He held that no single circumstance had done so much to bring financial trouble upon India as the amalgamation of the two Armies—a step for which a Conservative Government were not responsible. Nothing, he thought, would be more mischievous than to waste time in recriminations about the past, and in attempting to apportion blame between this Government and that. The House of Commons itself was by no means free from blame. In a country like ours, the policy of the Government became, sooner or later, the reflex of the feelings of the House of Commons, whose Members represented the feelings of the nation. Until recently, public opinion, with regard to the financial administration of India, had always been on the side of expenditure. The English people thought that India was an extremely wealthy country, and could not be too expensively governed. But, within the last year or two, there had been a change in their ideas, and language entirely different from that which was heard a few years ago was now on men's lips. On all sides, now, we heard the financial embarrassments of India spoken of. Although he did not believe in the insol- vency of India, he did believe that if that which had occurred during the last five years were to continue unchecked in the future, India would one day find herself unable to pay her way, and Ministers would have to seek a grant in aid of our Eastern Dependency. If this should ever happen, a burden would be imposed upon England which would be felt in every English home. If anyone should ask him why he brought forward the Resolution which stood upon the Paper in his name, he would reply that he wished to do the little that could be done by a single individual to keep the influence of the House of Commons on the side of economy with regard to Indian administration, and not on the side of extravagance. He accepted, in no grudging spirit, the promise of the Government, that they would pursue a policy of strict economy. He hoped that they would not refuse to accept the Resolution which, he was about to move. It placed no censure upon them; it only acknowledged a principle to which the Government themselves had subscribed. He would probably be asked to withdraw his Resolution; but he hoped the Government would refrain from making such an appeal to him, for they would have to encounter many obstacles in their efforts in the direction of economy, and he believed that by accepting his Resolution they would be strengthening, and not weakening, their hands. The hon. Gentleman concluded by moving his Resolution.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "this House, regarding with apprehension the present state of Indian Finance, approves the decision to reduce Expenditure,"—(Mr. Fawcett,) —instead thereof.

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

MR. BIRLEY

observed, that the concluding remarks of the hon. Member for Hackney very much mitigated the force of his preceding criticism. Nothing could be more easy than to draw, at the present moment, a gloomy picture of the finances of India. He regretted that the speech of the hon. Member had not partaken of the character of a reply to the admirable speech of the Under Secretary of State for India, He entirely agreed with that part of the hon. Member's Resolution which spoke of the necessity for economy in the administration of the Indian Revenue; but he could not say that he regarded the condition of the finances of India with apprehension. There was certainly great reason for caution in connection with the administration of the finances of that country; but this necessary caution was being faithfully exercised by those who were responsible, both in this country and in India itself. When they considered the enormous losses the Indian Government had sustained on account of Famines, and on account of loss by exchange, the answer to the charges of the hon. Member was obvious; and he thought it was a matter for some degree of congratulation that in the last year referred to in the Accounts, if they excluded the expenditure on account of Famine, the loss by exchange, and unproductive public works, there would be a favourable balance of very nearly £3,000,000. There was a point to which attention had been called by the Under Secretary of State for India, and that was as regarded the salt revenue. It had been frequently said that, salt being an article of universal necessity, it was hard that a revenue of something like £6,000,000 should be derived from it. But when they considered that that was equal to only about 1d. per month per head of the population, and that it was the one means by which some slight contribution could be brought to the Revenue from all classes, much of the objection disappeared, and a still larger portion of the objection disappeared when they considered the measures taken by the Government of India for the supply and distribution of salt. It was more important even than the question of the tax that the Natives should be able to receive regular supplies of salt, of which there had sometimes been a famine. The hon. Member for Hackney referred to the cotton duties. At an early period of the Session the House had devoted an evening to this question, on the Motion of the hon. Member for Blackburn (Mr. Briggs), and it was impossible to get up even a semblance of opposition to the resolution which had been come to by the Government of India to remove all those duties which had anything of a protective character; and he confessed he listened with great surprise to the remarks of the hon. Member for Hackney, who professed to be a Free Trader, and who yet advocated this tax. The hon. Member said, however, that it was a tax which was paid by the Natives of India with the greatest satisfaction. The hon. Member must have forgotten that that was one of the arguments used by those who were favourable to the adoption of the principle of Reciprocity. Indirect taxes were always preferred to direct taxes, and that was the argument which was used everywhere in favour of indirect taxes. That the duty in question was a protective duty there could be no question whatever. It had been said that the duty had been removed at the instance of the English Government, and at the behest of the Lancashire Members. That was an unworthy observation; but the hon. Member said it was not his observation, but one which had been made by members of the India Council. Why, almost as soon as Lord Salisbury came into Office—in 1874 or 1875—he declared to the Indian Government his strong objection to this tax, and said it must be got rid of as soon as possible; and the noble Marquess had spoken to him about it in terms almost as strong as those he used in his despatch, and explained how much he objected on financial, political, and commercial grounds, to this unjust and impolitic tax. The clear and admirable statement of the Under Secretary of State had, he thought, completely cut the ground from under the feet of the hon. Member for Hackney, and also from under the feet of the hon. Member for Kirkcaldy (Sir George Campbell), and their supporters, and he was confident that the House would agree with the Under Secretary of State as to the future administration of Indian finance. The hon. Member for Hackney had claimed Sir John Strachey as an authority in favour of the statement that the Famine Fund had been unjustly absorbed in the expenditure of the year. What Sir John Strachey said was that "the propriety of the course taken by the Government had been justified by the event." That "any other decision would have resulted in the necessity of imposing new taxation;" and he added that if serious circumstances arose they would have had to choose between fresh taxation and an abrogation of the Fund. The charge, therefore, made against Sir John Strachey was not borne out by the facts. Then, again, the hon. Member said that the licence tax was one in favour of the rich as against the poor. [Sir GEORGE CAMPBELL: Hear, hear!] He was not going to argue the question generally, and he did not know that the tax was founded on an equitable basis; but it was a tax on trade such as was known in many European countries, and it was, in some degree, a substitute for the Income Tax, which failed in India because the Natives would not submit to it. With regard to the question of exchange, the hon. Member for Hackney said there was a tendency on the part of the Government to become speculators in silver; but the Under Secretary of State had carefully guarded himself from suspicion on that point, and every merchant knew that there were times when it would be exceedingly imprudent to sell exchanges. The question of allowances and pensions to European officials had been alluded to, and he was glad to hear the assurance given to the House by his hon. Friend that it was intended in future to employ Natives in a larger degree than heretofore in the Indian Civil Service. He had only, in conclusion, to congratulate his hon. Friend the Under Secretary of State on the valuable and remarkable address he had delivered—an address which he believed would have an effect, not only upon the House, but upon the country.

MR. LAING

warned the House against the optimist view of the situation put forward by the Under Secretary of State in his able speech, in which he had stated many pleasant things in a very pleasant manner. The accounts presented to the House by the India Office at home were characterized by a greater degree of fairness than those which emanated from the Government of India. The latter were singular illustrations of the maxim that complicated accounts went along with embarrassed finance. The alleged increase of £5,000,000 in the Revenue of India during the past two years was really only nominal. When examined it was found to be due to a mere stroke of the pen, and the ordinary items of Revenue, instead of being buoyant, were stationary, or rather on the decline. Of course, the Government of India were not responsible for the great calamities of Famine and the depreciation of silver; but it seemed to him they were to blame for not having realized the situation soon enough, and prepared for it by a rigid economy. It was as apparent three years ago as now; yet, instead of practising economy, the Government of India plunged into the Afghan War, of which he would say no more than that it might either have been averted or postponed. The accumulated deficit of the last few years exceeded the interest of the Debt. India had thus, in fact, been paying the interest of its Debt out of borrowed money, which was just what Egypt and Turkey had been doing. No doubt, he would be met by the argument of productive public works. The Statistical Abstract contained some figures showing what had been the expenditure upon, and the revenue from, public works during the last 10 years. The expenditure on works of irrigation had been £9,620,000, and on State railways £14,622,000, making a total of £24,302,000. The revenue from irrigation works in 1876–7 was £520,000, and the working expenses were £587,000, showing a loss of £60,000. The receipts from railways were £371,000, and the working expenses £263,000. The result was, the gross revenue was £871,000, and the working expenses were £850,000. Practically, there was no return at all for the expenditure. Returns which showed surpluses were, therefore, delusive, as were the Budgets of Napoleon III., which showed a surplus from year to year, while £100,000,000 was added to the Debt of France. Any Financial Statement was illusory and delusive which did not include the expenditure on public works in India. We had increased the public Debt of India by upwards of £50,000,000 in the last few years, of which more than £40,000,000 had been increased in the last six years. The actual deficit of cash expenditure over cash revenue was at the rate of not less than £7,000,000 a-year. He should be surprised if the Afghan War involved a capital charge of less than £4,000,000 or £5,000,000, which must be followed by an increased permanent charge for occupying Forces of 14,000 or 15,000 men, with camp followers, & c. Everyone would rejoice that the war had been brought near to its close, and they had now to look to the future. In occupying the new Frontier, there would be three Passes which would require protecting, and they were so distant from one another that each would have to rely upon its own strength. The estimated yearly expense of the Forces to be set apart for the defence of the new territory had been put down by Sir Henry Norman, who was the very highest authority, at £1,000,000. The good resolution of the Government as regarded economy, so essential to the salvation of the Indian finances, was badly answered by an extension of the Frontier, which, beyond the first outlay, would add £1,000,000 a-year to the permanent Expenditure. As to increasing taxation, the possibilities of doing so were pretty well exhausted. Indirect taxation was admitted to have nearly reached its limit; and as to direct taxation, the political danger arising from any attempt in that direction was so great, and the amount that could be obtained was so small, that all the wisest statesmen had abandoned the idea. In justification of that view he would proceed to examine the several sources of Indian Revenue, in order to show that little or no additional income could be derived from them. Two sources had been suggested from which additional revenue might be obtained—tobacco, and an income tax. As to tobacco, the first fatal objection to deriving revenue from it was, that a great part of the population of India was so poor that they could get no more out of them. Another fatal objection was, that being of almost universal growth, if they attempted to raise a revenue from it they must have an army of Native Excisemen going through the country and prosecuting every unfortunate man who grew it. The objections to an income tax he had often stated. They were based chiefly on the Oriental habit of mind, which was so jealous on the subject as to make any such imposition odious to the people. When he was in India, there was a well authenticated instance of a well-to-do man having hung himself, his mind being so much disturbed by having an income tax paper served upon him. After all, if they put on an income tax they would collect very little. The fact that last year the Government had fallen back upon the licensing tax was a proof how hardly they had been driven to find a fresh source of taxation, it being a tax amounting to 5 per cent upon incomes of 4s. a-week. The Government appeared to underrate the gravity of the situation with regard to Indian finance, and to over-estimate the amount of the reductions that could be made in the expenditure. There was a fixed annual expenditure of £17,000,000, in which no reduction could be effected; and under several other heads, such as that of "Famine," it was scarcely to be hoped that the expenditure this year would be less than that of last. There was also a loss to be expected with regard to silver; although he thought the conduct of the Government was wise in refusing to listen to any of the empirical schemes which had been put forward for changing the standard. As long as the credit of England stood, it would be easy to raise a succession of loans which they would meet until they approached the gulf of bankruptcy; and he concluded by warning the House that these Indian loans would ultimately fall back upon England.

MR. SAMPSON LLOYD

said, he was certain the House had listened with much satisfaction to the peculiarly clear and lucid statement of the Under Secretary of State for India. He believed every Member of that House was a sincere friend of judicious economy; and he had equally little doubt that that economy would be practised by Her Majesty's Government, when it could be safely carried out, by following the uniform policy indicated in the speech of the Under Secretary of State. He had no doubt that the employment of Natives in the subordinate posts would lead to this, and also have a very beneficial effect on the loyalty of the people. He need not follow the hon. Gentleman in his suggestions as to economy. No doubt, anyone who had paid attention to Indian finance would find that considerable economy might be made in public buildings in India, and what was called ordinary public works. With regard to the Army, he remembered in a former Session the hon. Baronet the Member for Kirkcaldy (Sir George Campbell), whose experience gave his words great weight on questions of this sort, said that as regarded men very little reduction was consistent with the safety of India, and with regard to the officers no reduction need go very far. He submitted that in order to realize any great scheme of economy of the Indian Army, the House must deal with the standing Armies of the great feudatory Princes. So long as those Armies were maintained, numbering many tens of thousands of men, and large numbers of artillery, it was very difficult, indeed, to effect any measure of economy in the Army of India which would bridge over, to any extent, the deficit. As regarded public works, he quite agreed, from what little attention he had paid to the subject in the present circumstances of India, that they had no choice but to take the expenditure on public works. In dealing with these financial difficulties, there were two ways of meeting them—one was, by economy, to lessen the burdens on the ratepayer; and the other was by benefiting the condition of the ratepayer and enabling him to bear greater burdens. He could not help thinking that something might be clone by the Government in that way. With regard to the question of manufactures, be thought that the people of India, might, to a considerable extent, manufacture for themselves. If India were governed by Native Princes, or by any other Power than England, he could not help thinking that means would be taken to foster, to some extent, at all events, the system of Native manufactures; and for that reason he thought the true interest of India were not consulted by the recent reduction of the duties on the import of manufactures into that country. Referring to the depreciation of silver, he thought, it was not due to any natural law, but to the demonetization of silver by Germany, and the reduction of mintage facilities by the States of the Latin Union. The loss to the Government last year from this cause amounted to £3,500,000, or more than the cost of the Famine and the Afghan War, and it was far from certain that the worst had passed. He believed that the grave character of this matter could scarcely be exaggerated, and should have been glad, had the very able statement of the Under Secretary of State for India comprised some indication that the Government were devoting their serious attention to it. He believed that it would be sometime before there would be an equilibrium in India.

MR. GLADSTONE

Sir, although the hour has arrived at which, when a debate is expected to be prolonged, we usually adjourn, I do not rise for the purpose of moving the adjournment, but with the object of disentangling the different elements of this discussion, which it appears to me have no natural or proper connection with one another, and the conjunction of which, on the present occasion, may rather tend to perplex the public mind. The discussion upon the India Budget, although it is generally limited to a certain number of hon. Members in this House, yet necessarily, and upon all occasions, involves many topics of great interest and importance. On the present occasion it is obvious that those topics are unusually numerous and unusually weighty; and I do not think, nor do I expect or desire, that this discussion should be terminated at the point which it has now reached. But a very great change has taken place in the position of the House in relation to the question now before it since the debate began. We have had upon the Books for some days a Notice of Motion given by my hon. Friend the Member for Hackney (Mr. Fawcett), which appeared to raise a contentious issue; and I, for my own part, came down to the House at 5 o'clock to-day prepared to give strong support, to the best of my ability, to the Motion of my hon. Friend. I was entirely ignorant of what might be the intentions of the Government; all that I knew was that the many grave and even, in my view, alarming circumstances which surround the subject of Indian finance, called for the expression of a very decisive opinion on the part of this House, on behalf of strong, energetic, and effectual measures for the reduction of expenditure. There was the common expectation that we were to have, not merely the usual amicable discussion of incidental points connected with Indian finance, but that we were to have a great issue regularly raised, and that all arrangements had been made for clearing the Paper early in order that the debate might go forward, and the decision of the House taken by division upon the question raised by my hon. Friend. But, Sir, I listened with the utmost interest to the speech of my hon. Friend the Under Secretary of State for India, to which the hon. Member who has just sat down (Mr. Sampson Lloyd) has done, I think, no more than justice in expressing the feeling of the House that it was a most lucid and able exposition of the complicated facts which he had to lay before us; and it was certainly with an amount of pleasurable surprise to me that, after my hon. Friend had, in the discharge of his duty, represented fairly and equitably the very grave state of affairs which exists, he proceeded to announce that Her Majesty's Government, having considered the state of Indian affairs, had arrived at the decision that it was their duty to take in hand effectual means for equalizing expenditure and charge. That was a most important announcement; but it did not appear to me to put an end to the occasion for discussion, because there still remained a great deal to be said upon a large number of incidental questions materially affecting the conditions of Indian finance. If you were to speak, for example, of import duties on foreign goods imported into India—that, of itself, was a topic which could not go by without discussion. I think there are Gentlemen in this House who feel a desire to discuss such matters; but it does appear to me that it would be most unfortunate that they should be discussed under the notion that we have now any contentious issue before us. The declaration of my hon. Friend is one of the utmost importance. He has made an announcement, and he has given encouragement to the House, for the fulfilment of which Her Majesty's Government are responsible. It may be that when they come to the development of their plans they may be such as to give entire satisfaction; and it is possible, on the other hand, that after those plans have developed questions may still remain on which there is a difference of opinion, and which, accordingly, must be debated between us. But what I feel strongly is that for the present moment the declaration made on the part of the Government has removed all reasonable grounds for anything in the nature of a contentious issue; and, therefore, speaking in the character of one thoroughly disposed to support the original proposition of the hon. Member for Hackney (Mr. Fawcett), I venture to say to him that I think it would be a great pity that the House, which is substantially unanimous in accepting the pledge of Her Majesty's Government, should be engaged in a debate with the prospect of its terminating with a Division. What I have to suggest to the hon. Member is that the Motion which, under the rather sudden pressure of the moment, he substituted for the original Resolution still leaves the subject clouded with a certain degree of ambiguity; and that, not having understood the amended Motion of the hon. Member to be acceptable to Her Majesty's Government, I do not, under the circumstances, think we can fairly expect that it should be accepted. The more natural and usual course, when the Government have evinced an intention on their part, which is substantially agreeable to the views which have been expressed by the House, is not to call upon the House in a formal shape, but to accept the assurance which has been received, trusting implicitly to its fulfilment, or, at all events, to postpone its consideration to a later date, when, if there is found to exist any difference of opinion, the matter can be referred to a Division between the two sides of the House. Sir, I do not know whether I express the views generally entertained upon this subject; but I think I express an opinion in conformity with the general experience of the House, when I say that it would be better, for the unprejudiced and dispassionate consideration of the subjects of great importance and difficulty connected with the present state of Indian finance, if we were to allow the hon. Member to get quit of anything in the nature of a Motion that "you do now leave the Chair." I hope, therefore, that my hon. Friend will ask the House for the leave, which I have no doubt will be accorded, to withdraw his Motion, in order that the discussion may be allowed to proceed without there remaining in the public mind the misapprehension that we are divided in intention, while our views in the matter are really united.

MR. ONSLOW

rose to a point of Order. He wished to know the position in which the House was placed with regard to the Amendment?

MR. SPEAKER

The original Question before the House is that I leave the Chair, in order that the House in Committee should consider a financial Resolution, and upon that Motion the hon. Member for Hackney (Mr. Fawcett) moved an Amendment. That Amendment is now before the House. If the House think fit to allow the Amendment to be withdrawn, the original Question will be put from the Chair, and the debate will proceed.

MR. FAWCETT

thought, after the positive assurance of the Under Secretary of State for India, that a serious and earnest attempt should be made to reduce the expenditure in every Department connected with India, and that Natives were to be largely employed in the Public Service, he should be placing the House in a false position by asking for an expression of opinion upon the question of a reduction of expenditure which had been promised. He therefore begged permission to withdraw his Amendment, though he reserved the right of asking the House next year, if necessary, to express an opinion upon the extent to which the promises of the Under Secretary of State for India had been carried out.

Amendment, by leave, withdrawn.

Question again proposed, "That Mr. Speaker do now leave the Chair."

Motion made, and Question proposed, "That the Debate be now adjourned."—(Sir George Campbell.)

Motion agreed to.

Debate adjourned till To-morrow.