§ So much for the legislative and executive powers of the new body. I now came to a very difficult and complicated matter, namely, the matter of Finance. I spoke earlier of some of the changes which have come over Ireland since 1893. In no respect has the situation altered more completely than in the financial relations of Ireland to the United Kingdom as a whole. Under Mr. Gladstone's Bill of 1893, there was an estimated contribution from Ireland of over £2,000,000 to the Imperial Exchequer, being roughly at that date the surplus of Irish revenue derived from taxation over Irish expenditure on local services. That was the state of things in 1893. What is the state of the account today? We felt it to be a matter of so much difficulty and importance that we called to our aid the services of an expert Committee who were directed, amongst 1415 other things, to ascertain and consider the financial relations between Ireland and the other component parts of the United Kingdom as they exist to-day.
§ The Committee, which was presided over by a very distinguished ex-Civil servant, Sir Henry Primrose, made an exhaustive examination, and presented last autumn an able and an instructive Report. We have not been able to adopt the scheme recommended by the Committee, but we have derived the greatest advantage from their conclusions and suggestions, and we are deeply indebted to them for the ability and the impartiality with which they conducted their task. There is no longer any reason why their Report, which was made for the information of the Government in the first instance, should be treated as confidential, and it will in due course be laid before Parliament. The facts collected in that Report and other figures, which will be circulated in a White Paper with the Bill after the Bill is introduced, show, in short, that while in 1895–6 the true Irish revenue in round figures was £8,000,000, and the actual local expenditure on Irish service was about £6,000,000, the former—that is, the true Irish revenue—has risen, according to our estimate for the coming financial year, 1912–13, to about £10,840,000, and the expenditure on Irish services to about £12,350,000. In other words, the surplus of £2,000,000 has been turned into a deficit, which will in all probability next year amount to about £1,500,000. That is a remarkable transformation, and it is of the utmost importance that its causes and its significance should be accurately appreciated.
§ Sir JOHN LONSDALEDoes that include the contribution for National Insurance?
§ The PRIME MINISTERI have purposely taken it for next year. This year the contribution for National Insurance does not come in, but next year it will. The growth of Irish revenue is largely due to increases in the rates existing, and to the imposition of new taxes since 1895. The increase in the proportionate yield of certain duties, such as those on tobacco and beer, has been more than set off by the decrease in the proportionate yield of other duties, and particularly the duty on spirits. But if you turn to the other side of the account, it will be found that the greater growth of Irish expenditure on 1416 local services has been slightly but substantially in excess of the same rate of growth in Great Britain. To what is that increase to be attributed? The answer is: To three distinct causes. In the first place, to new Irish requirements which have made successful appeals to the Imperial Exchequer. Under that head fall Land Purchase, the Department of Agriculture, and the much larger provision for national education. That is the first reason.
The second head is the Development Grant, which is due to the application of the theory of what is called Equivalent Grants. When a new Grant is made to England, Scotland and Ireland at once step in and claim an equivalent whether they need it or not. The third head—and by far the larger part of the whole—some £3,000,000—may be put down to Old Age Pensions, National Insurance, Labour Exchanges, and Postal Services. I need not point out that under the existing system it is no one's interest to be economical, and, on the other hand, it is to everyone's interest to make fresh and growing demands upon the Imperial Exchequer. A poor country, mainly agricultural, is, for financial purposes, yoked with a rich country, mainly industrial, and the standard and scale of financial provision suitable to England has been necessarily, and almost automatically, applied to Ireland. That is conspicuously the case in regard to Old Age Pensions and Postal Services.
In this way, as I have said, a surplus of £2,000,000 has been converted into a large deficit. But let no one suppose that we have reached the end of the process. The charges under the Land Purchase and the Insurance Acts will increase year by year to a greater extent than those for Old Age Pensions will diminish, and if you continue the present system, you will have to add to the deficit year by year. There is no other way in which you can finance Unionism as a working policy. In the speech made at Belfast this week by the right hon. Gentleman the Leader of the Opposition (Mr. Bonar Law) he dealt with this topic, and in the name of the Unionist party he offered to Ireland, not only Tariff Reform—
§ Mr. REMNANTI thought you said it was dead.
§ The PRIME MINISTERIf it rises from the grave, it will be very curious some day to see the manner in which he will 1417 blend Irish and Colonial preference. He offered, not only Tariff Reform, but he went on to say—I quote his words—as to Unionist policy:—
It will be our endeavour to develop in every possible way the resources of Ireland.At whose cost?
§ Mr. BONAR LAWThe right hon. Gentleman has left out one remark I made—
so long as they are in partnership with us.
§ The PRIME MINISTERWith all respect to the right hon. Gentleman, in the whole course of my Parliamentary experience I have never known a more pointless interruption. That is what I was saying. If you continue what he calls this partnership—if, in other words, you continue to adopt Unionist methods for Ireland, and refuse to grant Home Rule, you are going to develop Irish resources at the cost of the British taxpayer. That is what this sort of partnership means if it means anything, and that is why I say to the House of Commons that, although we have now to face a deficit of £1,500,000 as compared with what twenty years ago was a surplus of £2,000,000, if you go on working this partnership on Unionist lines, the deficit of £1,500,000 will swell and swell and swell to dimensions which none of us can forsee. Home Rule, as we believe, will be, among other things, a means of adjusting Irish finance to Irish needs, and giving Irishmen a direct interest in economy which under the partnership they have not got, and a direct responsibility for waste which under the partnership they have not got, and so of gradually reducing this deficit, and in time, as we hope and believe, of producing a surplus which will be available for future common purposes. The Bill, therefore, by recognising this deficit as a necessary starting point, anticipates the future when Irish income will balance, and more than balance, Irish expenditure. Provision is made, as I shall show in a few moments, for dealing with that situation when it arises.
In the meantime, the collection of all taxes other than duties of postage—we propose to transfer the Postal services altogether in Ireland to the Irish Executive—the collection of all taxes other than these, whether imposed by the Imperial Parliament or the Irish Parliament, is retained as an Imperial service, and the 1418 produce of all such taxes, whether Imperial or Irish, will be paid into the Imperial Exchequer. How, then, will local finance in Ireland be in practice arranged? First, as regards expenditure, the obligation will lie upon the Irish Parliament to pay the cost of all Irish services. I, of course, except the reserved services which, so long as they are reserved and until one or other of them is transferred, will continue to be an Imperial charge. Secondly, from what funds and in what manner will the Irish Parliament be enabled to discharge their obligations? There will be every year transferred from the Imperial to the Irish Exchequer a sum, which is called in the Bill "the Transferred Sum" representing the cost, as determined by a body called the Joint Exchequer Board, to the Exchequer of the United Kingdom at the time of the passing of the Act of the Irish services other than postal. That is what the Transferred Sum represents. That will be the first head of the revenue of the Irish Executive. Secondly, they will get the Irish Postal revenue. That fellows from the transfer of the Postal services to them. Further, as this Transferred Sum plus the Postal revenue would only suffice, and barely suffice, to balance the account and make both ends meet, it is, in our opinion, expedient and equitable that Ireland should be further enabled not only to defray the necessary expense of setting up the new administration, but also be provided with a reasonable margin. A further sum will be given to them which will ultimately be £200,000, but which in the first years will amount for a short term to £500,000, and, after that term expires, will be reduced by £50,000 a year until it reaches £200,000. The result of this arrangement is that Ireland will get the full benefit of all economies she makes in her local administration, but if she spends more than comes to her in the manner I have described, she will have to find the money for herself.