Lords Sitting of 23 July 1869

MINUTES.
PUBLIC BILLS—First Reading— Courts of Justice Salaries and Funds* (215); Cinque Ports Act Amendment * (216); Contagious Diseases (Animals) * (217); Contagious Diseases* (221).
Second Reading—Prevention of Gaming (Scotland* (206); Debts of Deceased Persons* (169).
Committee— Poor Law (Ireland) Amendment (No. 2)* (205).
Committee— Report — High Constables' Office Abolition, &c* (99).
Report—Endowed Schools* (192–220); Medical Officers Superannuation (Ireland)* (180); Fines and Fees Collection * (155); Local Government Supplemental (No. 2)* (183).
Third Reading—Assessed Rates* (174); Endowed Hospitals, &c. (Scotland)* (175); Seamen's Clothing* (189); Queen Anne's Bounty (Superannuation Allowances)* (185), and, passed.

IRISH CHURCH BILL.
Returned from the Commons, with the amendments made by the Lords to the amendments made by the Commons to the amendments made by the Lords, and the consequential amendment, agreed to; and the amendments made by the Lords to which the Commons had disagreed and on which the Lords have insisted, agreed to.

RAILWAYS (INDIA)—FINANCIAL STATEMENT.
THE DUKE OF ARGYLL: My Lords, I have to lay on the table certain despatches lately received from the Governor General of India on the construction of railways in that country, together with the reply which, on behalf of Her Majesty's Government, I have made to the Government of India with reference to that important question. The construction of railways has so important a bearing on the subject of the finances of our Indian Empire that I have thought this a convenient opportunity for fulfilling the pledge which I gave the noble Duke (the Duke of Somerset) at an early period of the Session that I would make a statement with regard to the se finances. The "Indian Budget" is a term altogether inapplicable to the financial statements made from time to time to the British Parliament by Secretaries of State for India. The British Parliament does not authorize the expenditure in India nor vote the Indian taxes, the estimate of expenditure and income for the year being made by the Finance Minister in India before the Legislative Council there. All that could be done here is to give an explanation of the state of matters brought before the Indian Legislature. I do not propose to trouble your Lordships at any length with the statement of the Budget for the current year, because to the se who do not remember the pre-existing state of Indian finance, the figures for the present year have little significance. I shall state very shortly the Estimate for the current year; but I am most anxious to give the House an idea of the state of Indian finance by placing before them a comparison of the last year for which we have completed accounts with the beginning of the last decennial period. The last year for which we are in possession of completed
522
accounts is the year 1867–8, the tenth since the Mutiny; and, in order to give an idea of the general progress of Indian finance, I propose to compare the revenue and expenditure of that tenth year since the Mutiny, with the year preceding the Mutiny. I shall then state the regular Estimate for 1868–9, and the Budget Estimate for 1869–70. I will first state the increase of revenue arising from our Indian Empire since the Mutiny —that is, compare the revenue of 1856–7 with the revenue of 1867–8. In the year immediately preceding the Mutiny the revenue stood at £33,378,026; whereas the revenue for 1867–8 stood at £48,534,412; in other words there has been an increase in the ten years of £15,156,386, or 45½ per cent on the whole revenue of the Indian Empire. First of all, in the excise there is an increase of £1,318,581, duo to an additional duty on distilleries; and in assessed taxes an increase of £653,848, due to the imposition of a new tax, the license tax, which is substantially a modified income tax. Customs show an increase of £1,380,735, arising from a revised tariff, but not generally from increased duties; on the salt tax there is an increase of £2,133,037, a large portion of it being due to increased duties; and stamps of £1,573,481; while the electric telegraph, a new item, amounts to £241,947; thus showing that of the whole £15,000,000 of increase, £7,301,620 is due to sources of revenue on which there has been increased or new taxation. Turning next to that portion of the increase not due to this cause, the land revenue shows an increase of £2,083,727; opium of £3,912,043; the post office of £399,487; law and justice of £667,108; marine of £295,573, and miscellaneous of £707,714. These items of increase are peculiarly satisfactory, especially the increase in the customs duties, since concurrently with this increase in the total receipts there has been a very large reduction in the duties levied immediately after the Mutiny. There has been very much the same process, indeed, in India as in this country of diminishing the number of articles on which duties are levied, and in many cases of reducing the rates levied on the se articles. Generally speaking, the tariff stood before the Mutiny at 5 per cent, with some exceptional classes at 3½ to 10 per cent;

523
cotton piece-goods being at 5 per cent, and cotton thread, twist, and yarn at 3½ per cent. Now, on fifty-five classes out of sixty-six the duty is 7½ per cent, including cotton thread, but cotton twist and cotton piece-goods are still at 3½ and 5 per cent respectively. The land revenue has increased in all the provinces of India, and this is peculiarly satisfactory, because it is going on concurrently with more moderate assessment and a lower rate. In some cases we do not now take more than 50 per cent from the net produce of the soil, whereas in former times upwards of 66 per cent was taken. This shows, then, a pretty steady increase in the land revenue. In the Punjaub the increase is £112,000; in Madras, £412,000; in Bombay, £710,000; in Bengal, £282,000; and in Oude, £362,000. No doubt one of the minor causes of the increase is that we have had, to a certain extent, confiscated estates subsequent to the Mutiny, and we have had the resumption of rent-free estates also to a small extent; but, as far as I can make out, some £250,000 would fully account for the whole increase due to these sources, and the rest of the increase must be attributed to the increase of cultivation and the general prosperity of the people. With regard to opium, which stands at a very high figure, I find that in the ten years since the Mutiny, the net receipts from opium have risen from £3,861,045 to £7,049,447, being an increase of £3,188,402. It may be interesting to your Lordships to have a short statement of the increase of Indian trade during the same period, which is also peculiarly satisfactory as showing the progress of the property of the Empire. The imports in the year before the Mutiny were—£28,608,284, while in 1866–7 they were—£44,291,496; showing an increase of £15,683,212. The exports in the year before the Mutiny were — £26,591,877, while they now stand at £50,202,777; showing an increase of £23,610,900. To the increase in the imports cotton goods contribute £8,247,960, and cotton twist and yarn £1,488,152; metals for the purpose of railway construction figure very largely, contributing also. As regards exports it is satisfactory to find that the export of raw cotton has increased from £1,437,949 before the Mutiny to £19,756,489, the increase being £18,318,540; and that the export of grain has also
524
nearly doubled, having increased from £2,587,456 to £4,168,935; the increase being £1,581,479. With regard to agricultural produce, including seeds for the purpose of making oil, wool, coffee, tea, and jute, these have increased since the Mutiny by £22,358,887. This, remember, is a comparison of two ordinary normal years, and it by no means gives an adequate idea of the resources of our Indian Empire as regards production, when there are any unusual circumstances stimulating production, for, in 1865–6, during the American War, the imports increased from £28,608,000 to £56,156,000; and the exports from £26,591,000 to £67,656,000; of which raw cotton alone accounts for £34,000,000, and grain for £2,660,000. This increase of exports and imports is a most satisfactory indication, not only of the existing trade of the country, but of its enormous resources, whenever any extraordinary circumstances bring high prices to bear to stimulate production. The postal increase is another gratifying item, for the letters and newspapers received for delivery have increased from 37,260,000 to 67,978,000. Before passing to items of expenditure, I wish to call the attention of the House to a statement which has been made in this country that our Indian Empire has for a great many years been in a state of chronic deficit. This is an inaccurate statement of the facts of the case. There was, of course, an enormous deficit in the year of the Mutiny, and for four or five years afterwards there was also a very large deficit; but of the seven years which succeeded 1861, when the Mutiny deficits came to an end, three have shown either small deficits or an actual surplus. In 1861–2 the deficit was the nominal one of £50,000; in 1863–4, there was a surplus of £78,000; in 1864–5, there was a deficit of only £193,000; while, in 1862–3, there was a surplus of £1,800,000; in 1865–6, one of £2,766,000; this last being partly due to a mere question of account, but partly also to a large increase in the opium revenue. The year 1866–7 was altogether exceptional, only eleven months being taken, owing to a change in the system of accounts; and in 1867–8 there was a deficit of £1,000,000
I now proceed to give an account of the expenditure for 1867–8. The revenue, as I have already stated, being £48,534,412; the expenditure was

525
£49,542,107, leaving a deficit of a little more than £1,000,000. This increase of expenditure, which is a little more than the increase of revenue, arises, in the first place, from the military expenditure in India and in England. Exclusive of military buildings, the army showed an increase of £1,863,625 in India; and £1,457,755 in England; making a total of £3,321,880. Together with this there is an increase in the police force of £1,341,085; making for the internal defence of India an increase of £4,662,465. In public works the increase of expenditure during the same period was £1,943,689; and in the charges connected with the collection of the revenue, £2,180,483. Law and justice stand for £824,980; science and education for £536,903; superannuation and retiring allowances £548,044; interest on the increase of debt, since the Mutiny, £2,684,408; and, lastly, the loss on the guaranteed interest to railway companies over and above the traffic returns, which is £1,136,238; thus accounting for £14,500,000 out of the total increase of £15,000,000. The other items are such as are not easily classified. I will now refer to one or two of the items on which an enormous increase has arisen. First, as to the army. Before the Mutiny the number of European troops was 45,522 and the Native army numbered 249,153; making a total of 294,675; the cost being £12,781,916; while the police force cost only £1,093,040; so that the total cost of the army and police was £13,874,956. There are now 64,704 Europeans and 122,984 Natives, a total of 197,688 men, at a cost of £16,054,061 for the army, and £2,374,290 for the police, showing a total of £18,428,351; or an increase on the year before the Mutiny of £4,553,395. Lord Canning, before he left India, estimated that when the immediate exigencies of the Mutiny should have passed away the cost of the army and police would be £15,266,378, whereas it has been £18,428,351—showing, therefore, that the military expenditure for India was not only very much in excess of what it stood at before the Mutiny, but also considerably in excess of what Lord Canning estimated for the necessities of our Indian Empire. Perhaps it may not be thought quite fair to compare the expense of the army with its expense before the Mutiny, because undoubtedly
526
everyone believed that the expense of a much larger European army must necessarily be greater. It is, perhaps, fairer, therefore, to compare the military expenditure of last year with the lowest point to which it has been reduced since the Mutiny—namely, 1863–4, when the expense was reduced to £14,546,410; it now stands at £16,054,061, being an increase of £1,507,651, in addition to an increase in the cost of military buildings of nearly £1,000,000, to which I shall afterwards refer. I have endeavoured to ascertain the causes of this very large increase, with the view of seeing whether any reduction could be made, and I have directed the attention of Lord Mayo and the Government of India very earnestly to the question whether considerable economy might not be carried out in the military expenditure. A considerable portion of the increased cost can, however, be satisfactorily accounted for. I find from the speech of Sir Richard Temple, the Finance Minister for India, in the Indian Council in the early part of the year, that much of this increased expense has arisen from the necessity of giving increased pay and better clothing to the troops. Then there is a considerable increase on account of providing for the wives and families of a larger number of married soldiers. A third cause is the increased pay to Native troops; a fourth, a large increase in the cost of the medical staff; a fifth, the extension of batta; a sixth, the cost of Staff corps; and a seventh, compensation to Nativ o troops for the great rise in the price of provisions in India. These various causes are calculated by Sir Richard Temple to account for an increase of £950,000. Then there are the following causes of increase in England, owing to the very much larger number of European troops kept in India. The cost of transport of troops has increased by £255,713, the charges for recruiting by £420,231, the retired pay pensions and furlough allowances by £460,199; thus accounting for an increase of £1,136,143. There remains another £1,000,000 for which I confess I am unable to account, and I earnestly trust that, the attention of the Government having been directed to the point, some economy may be effected both in England and in India with regard to the military expenditure required for the latter. With regard to recruit-

527
ing, a joint Committee is now sitting on behalf of the War Office and the India Office, and I hope that the result of their labours may be a considerable reduction in the cost; for I cannot help expressing an opinion that the increase in the cost of recruiting is inordinately large, and that a considerable saving may be effected. The expenses of law and justice account for an increase of £741,798, which is satisfactorily accounted for by such items as the establishment of a new system of registration, which is likely to pay for its own cost—the multiplication of small cause courts in the Mofussil and other districts, the very large outlay on gaols and prisons, the administration of justice in the Punjaub and Oude, and the increased salaries of Judges. I now come to another formidable item of the increased charge on the Indian revenue —the interest on the increasing amount of debt. The total amount of debt raised since the Mutiny is £50,425,000; but £7,648,000 having been paid off, the net increase, at the end of 1868, was £42,777,000. The whole debt of India immediately before the Mutiny stood at £53,489,115, while now it stands, I am sorry to say, at £96,251,543, the average rate of interest on the whole being £4 13 s. 8d. per cent. A very large portion of the debt being raised during the difficulties of the Mutiny, when our credit was considerably damaged, the rate of interest was higher than it would otherwise have been; but our recent loans have been raised on very favourable terms—namely, in England at only 4 per cent, and in India at 4½. The total increased charge due to this increase of debt is £2,305,000. The state of our Indian credit is extremely satisfactory, being better than any of the great European States, for France, I believe, pays something more than 4 per cent on its national debt. Another large item of increase is the loss on the guaranteed railways; for in 1867–8 the total expenditure on this account stood at £1,768,744; the total amount of capital guaranteed to railway companies at the close of 1867 was £75,020,436, and during 1868–9 and 1869–70 it is calculated that there will be an increase of £10,000,000. Observations have lately been made in India which would convey the impression that the Indian Government have no control over the expenditure which occurs in this country, and
528
that considerable economy might be effected in it. The fact is that the items of expenditure in this country are very few, and, excepting that of recruiting, they are such that there is very little chance of any diminution being effected on them. There are charges connected with the collection of revenue in India amounting to £275,381, and direct charges on the revenue of India, including the army, debt, superannuations, furlough allowances, &c, amounting to £6,681,806, added to which is the guaranteed interest on railways, £3,494,317, making a total of £10,451,504, independently of certain items which are mere matters of account. The result, then, is that while our revenue is increased by upwards of £15,000,000, our expenditure has increased rather more; so that there is an actual deficit upon the ordinary income and expenses of our Indian Empire for the last year for which we have completed accounts of a little more than £1,005,000. Before passing to 1868-9 and. 1869–70, I wish to explain an item which has recently appeared in Indian expenditure, and which is likely to occupy a much more prominent place in future years—I mean extraordinary expenditure for public works. In the last Minute which Lord Dalhousie recorded before he left India, reviewing his own administration, and referring to the frequent deficits in Indian revenue and expenditure, he says—
"But these apparent deficits are caused by the enormous expenditure which the Government is now annually making upon public works, designed for the general improvement of the Indian Empire. Wherefore a large annual deficit must and will continue to appear unless the Government shall, unhappily, change its present policy, and abandon the duty which I humbly conceive it owes to the territories entrusted to its charge. The ordinary revenues of the Indian Empire are amply sufficient to meet all its ordinary charges; but they are not sufficient to provide for the innumerable and gigantic works which are necessary to its due improvement. It is impracticable to effect, and absurd to attempt, the material improvement of a great empire by an expenditure which shall not exceed the limits of its ordinary annual income."
This, I need hardly observe, points to the absolute necessity of continuing great public works, and of meeting the cost by special loans. Now, in November 1865, in answer to a despatch from the Government of India on this subject, my noble Friend the then Secretary of State (Viscount Halifax), replying to the Government of India with reference to irri-

529
gation works, which constantly amounted to much more than £500,000 sterling, gave a qualified assent to the proposal that this expenditure should be met by separate loans, of which a separate account should be kept. During the few months when the noble Marquess (the Marquess of Salisbury) held the seals of the India Office he replied very much to the same effect, and he approved the principle of providing by special loans for such outlay as roads, barracks, and remunerative public works, but he refused to include in it prisons or gaols. His immediate successor, Sir Stafford Northcote, declined to allow other than remunerative works to be included in such loans; and in July 1868, he sent out a definitive despatch regulating the works in future to be met by special loans, and to be called extraordinary works. His decision was that irrigation and "special fund" works should alone be included under this head. Now, had the decision of the noble Marquess been adhered to, and barracks and great military buildings been included in extraordinary public works, the Indian expenditure and revenue would now have shown no deficit. The deficit has not been above the sum expended on great military buildings. A great scheme for new barracks has cost for the last five or six years more than £1,000,000 annually. I am not questioning the policy of Sir Stafford Northcote's decision, but simply pointing out that it more than accounts for the deficit. Under that decision, which I have not thought it necessary to reverse, we have in 1867–8 a new item for extraordinary public works. In that year irrigation cost only £219,255, and other works at Bombay—special fund works, against which assets were expected to be set off—£382,613, besides £594 on State railways, making a total of £602,462. This increased the deficit in 1867–8 from £1,000,000 to £1,600,000. I now come to the regular Estimate of 1868-9. The accounts are now made up to the end of March, but the regular Estimate is made up when three-quarters of the year have elapsed. We have, therefore, the regular Estimate for the year which ended. March, 1869; but we can only guess at the actual result, and circumstances have occurred in India which lead us to believe that there will be some deficit in revenue, 'and a considerable excess in expenditure, The regular Es-
530
timate of revenue for 1868–9 was £49,389,734, which, compared with the previous year, showed an increase of £855,322; while the expenditure was reckoned at £50,464,203—leaving another deficit on ordinary expenditure and income of £1,074,469. Then there are extraordinary works to be met by loans to the extent of £1,838,455; leaving a total deficit on ordinary and extraordinary expenditure of close upon £3,000,000. I am sorry to say that, owing to the very severe drought which has prevailed over a large part of India, there is reason to believe that the revenue is not likely to meet the expectations originally formed of it, and I really believe that but for the energetic efforts of the Government—of which we hear very little because actual famine has not occurred —there would this year have been actual famine over a large part of the North-Western Provinces, Central India, and the Punjaub. This is likely to affect the finances of the country both by deficient land revenue and increased expenditure. I have received an account showing that in the North-Western. Provinces the average harvest is 17,000,000 maunds, whereas this year it is expected to be only 7,000,000 maunds, and in the Punjaub 470,000 persons have been receiving direct relief, 89,000 being employed on relief works which are anything but remunerative. I am happy to say that not only has the threatened famine been mitigated by the direct action of the Government, in the form of charity and relief works; but also by a considerable increase in the irrigated districts, showing that the natives are more and more taking advantage of the irrigation canals supplied them in former years, and how advantageous it is that irrigation works should be generally promoted. In the district of Meerut, the increase over the average of the last five harvests amounts to no less than 38,000 acres; and in Moozuffurnuggur there is an increase of 118,500 acres. the Irrigation Report for the North-Western Province says—
"We find that the land irrigated in 1868 exceeded that irrigated in 1867 by 195,000 acres, made up as follows:—Sugar-cane, 11,000 acres; rice, 12,000 acres; Indian corn, 43,000 acres; cotton, 44,000 acres; and miscellaneous, including all inferior grains, 85,000 acres. The increase of cotton is attributed to the market, and that of Indian corn and inferior grain is regarded as proof that the instructions of Government to push

531
that cultivation as far as possible have been kept constantly in mind. Good crops have been raised on nearly 500,000 acres; and 2,000,000 acres have been preserved from pressure of famine. The khurreef irrigation is 64 per cent more than that of the previous year."
This is a most satisfactory statement as regards the progress of irrigation in the North-Western Provinces; and I repeat what I have said, that had it not been for the action of the Government and the increase of the irrigated land we should this year have had over a large part of India a famine hardly less severe than that which desolated Orissa a few years ago. I now come to the current year. The estimated revenue is £49,394,000, and the expenditure £49,342,000, showing a small surplus of £52,000. The estimated expenditure for public works extra ordinary is £3,565,000, of which £2,705,000 is for works of irrigation, and £360,000 for railways. The only new item in the income of this year to which I shall advert is the conversion of the license tax into an income tax. When I came into Office I found that Sir Stafford Northcote had sent out a despatch to the Government of India pointing out that the certificate or license tax was really nothing but an income tax, and one of a very unjust kind; for while the servants of the Government were assessed as under an income tax, and while the commercial classes were assessed upon their assumed rate of profit, landowners, house owners, and fund holders escaped; and he expressed an opinion that under a better and more equal system the tax might be made much more productive. One of the first steps I took, after I came into Office, was to inform the Indian Government that Her Majesty's Government entirely approved its conversion into an avowed income tax operative on all classes within the sweep of its operation, and that course was accordingly adopted by my noble Friend (Lord Lawrence) before he left India, and sanctioned "by the Legislature. The proceeds are not reckoned very high, because at present the rate is only 1 per cent, but Sir Richard Temple calculated that in the present year it would produce something like £900,000. The result, my Lords, of this statement is simply this — that on our ordinary income and ordinary expenditure—remembering always that we are including Government public works in the ordinary expenditure—there is an average annual
532
deficit of £1,000,000, and that on extraordinary public works to be met avowedly by loans, there is an estimated expenditure of from £2,000,000 to £3,000,000 annually. On the whole, it is impossible to deny that the condition of Indian finances is fairly satisfactory. Considering that the public debt amounts to little more than two years' income of revenue, and that we are able to raise money at 4 per cent, I may fairly say this much. Nevertheless we are not in such a condition as to be careless with regard to expenditure, either ordinary or extraordinary. There has been much dispute among the se versed in Indian affairs as to how far the se irrigation works called remunerative can, in reality, be found directly remunerative to the State. I cannot doubt that irrigation, if done in a careful and economical way, must, in time, be remunerative to the State; and I believe that this very year — although there are no direct returns from water rates, and although we cannot get at the amount directly due to the se works — we have been saved from famine in many districts by the works executed in former years, and saved to a large amount the loss of land revenue which must have naturally followed such a visitation. The last point to which I would direct attention is the construction of railways. I do not know whether the House is aware of the exact footing upon which the Government stands in regard to Indian railways and guaranteed companies. It is commonly supposed that guaranteed railways have been constructed by what is called private enterprize; but I hardly think it can be called so when the money is raised on the credit and authority of the State, under an absolute guarantee of 5 per cent, involving no risk whatever to the shareholders, and sacrificing on the part of the Government every chance of profit, while taking every chance of loss. The system is this—We guarantee the companies 5 per cent upon every shilling of the money which they pay into the Treasury here, that being subject to no deduction except in the case of actual loss upon the working expenses of the line, which has very rarely occurred; and even where it has occurred the Government has flinched from charging it to the guaranteed interest of the company for fear of affecting the credit of railway stock in the market. But

533
that is not all. Not only does the Government guarantee 5 per cent, but it engages that if there be any profit on the working of the line, one-half only of it shall go to the Government, until its own advances have been re-paid, and after that the whole profit and surplus above 5 per cent goes, not to the Government, but to the companies. The Government thus lends money at 1 per cent above that which it could command by direct loans in the market, and if there is any profit the Government gives it to the companies; while any loss is borne by the former. Very soon after I came into Office my attention was directed to this question, and I could not help asking myself why the Government should not have the benefit of its own credit and raise the money directly at 4 per cent. I consulted very competent persons, and among them my right hon. Friend Mr. Childers, who, having lately been chairman of one of the se companies, would, I expected, be able at least to see the question from the railway companies' point of view. He, however, was unable to see why the Government should sacrifice its own credit in this way, and boar all the loss while unable to share in any of the profits, and he entirely agreed in the conclusion to which I was inclined to come, that the Government should raise this money directly. I brought the subject before the Members of the Council, and, after prolonged discussion, they agreed that we ought at least to try the experiment of a less extravagant mode of raising the money, and a less extravagant mode of spending it. So far I had come to this conclusion when despatches arrived from my noble Friend (Lord Lawrence) and from the present Governor General upon the question of railway construction, and I was rejoiced to find that they took the same view, urging it with a force which made it irresistible. I now, therefore, lay on the table the reply we have given to the se despatches, authorizing the Government of India to undertake the construction of railways by themselves, raising the money upon their own credit, and expending it by their own officers. The guaranteed companies may be regarded from either of two points. They may be regarded as agents for the raising of the money, or as agents for the expenditure of it. Now, as regards the first point, there is no advan-
534
tage to be gained by the employment of companies — on the contrary, there is a loss incurred, inasmuch as the Government of India could raise the money required directly at least 1 per cent cheaper than it is now raised through these companies. Again — regarding them as agents for the expenditure of the money, it must be remembered that the directors of these companies are gentlemen in London who employ contractors to make these lines or send out engineers to hire the labour necessary for their construction. Now, why cannot the Government take precisely the same course, entering into a contract where it seems advisable, or, under other circumstances, employing labour ourselves? To these questions I apprehend but one answer can be given—namely, that the Government can raise money better and expend it better than the guaranteed companies can. I may give an instance of the excessive inconvenience and cost of the present system. The other day, upon one of the most important lines in India—the Great Indian Peninsula Line—the bridges and other extensive works necessary for carrying the railway through a difficult country came down by the run. These works were found to be of so defective construction that they were wholly insecure, and when the engineers began to mend the bridge they found the structure so rotten that it was necessary to take it down. More than £1,300,000 sterling had been paid for the re-construction of these works, on every shilling of which the Government have had to give a guarantee of 5 per cent. This is a most extravagant system. The railway shareholders have hardly any interest in the working economy of the lines. It is the 5 per cent guarantee which gets the money, and the shareholders calculate very little as to whether twenty years or so hence there may be a surplus above the 5 per cent. With regard to the construction of the lines, I may remark that the companies have their own engineer, and the Government a consulting engineer; the result being that there is a division of responsibility between the two, and there are frequent disputes in consequence. For instance —there is a dispute now going on between the engineer of the Great Indian Peninsula Company and the consulting engineer of the Government as to whose

535
fault it was that such bad works were constructed on the line; and you will, of course, always have such disputes as long as there is divided responsibility. Let the Government undertake the construction of the lines, and you will have single responsibility and single management; and it will be contrary to the nature of things if you do not have a considerable reduction in the cost of Indian railways. When Lord Dalhousie assented to these arrangements he must have had in his mind a state of things very different from that which exists at present. The credit of the Indian Government is much higher now than it was then, and we have been driven step by step into conditions as regards our terms of agreement with these companies which Lord Dalhousie never contemplated, and which, I am sure, he would never have sanctioned. I believe the time has now come—except with regard to the small extensions of existing lines, which probably ought to be given to the existing companies—when the Government of India ought to take into its own hands the construction of new lines at its own cost. I shall not detain the House by any explanation as to the particular selection of lines, which your Lordships will find referred to in the despatches which I now have the honour of laying upon the table. My noble Friend near me (Lord Lawrence) after a careful consideration of the subject, has recommended that various lines of railway, upwards of 9,000 miles in length, should be constructed in our Indian Empire in the course of the next ten or twenty years, and that we should proceed by the direct action of the Government, taking advantage of its own credit and its own agency. One of these lines will connect the port of Bombay with the province of the Punjaub, and it will be of the greatest importance both for developing the great commercial and productive re-, sources of the Punjaub, and with reference to the military defence of our Indian Empire. This is a line which certainly ought to be undertaken by a company or by the Government, and which Her Majesty's Government has itself determined to undertake. There is another most important consideration which is dwelt upon by my noble Friend in the Minute I have laid upon the table; it is that many of the se lines will go through important Native States, into which, as a conse-
536
quence, a very large amount of European labour will be introduced, and it is therefore very inexpedient that the se lines should be out of the control of the Indian Government. On all these grounds I trust that the House will give its approval to the course which Her Majesty's Government have taken in regard to this very important question of Indian railways.
The noble Duke then presented (by command) a Correspondence with the Government of India respecting Railways (India). Also, Report on Railways (India) for the year 1868–9.
VISCOUNT HALIFAXsaid, he was sure their Lordships had heard with the greatest pleasure the statement of his noble Friend respecting the state of the finances of India. This was, he believed, the first occasion on which a statement of such a kind had been made in that House. It had always, heretofore, been made in the House of Commons; but as the vote to which they came was merely formal, he saw no good reason why a statement, the sole object of which was to inform the people of this country of the state of our Indian Empire, should not be brought forward in their Lordships' House. He confessed, however, that he was in some respects disappointed with his noble Friend's statement, which, he could not think, showed a satisfactory state of the Indian finances. He attached the greatest importance to the financial status of any country, but more than of any other to that of India, where we could not draw upon the resources of the country for any considerable addition to the taxation, and where therefore it was the more necessary to be watchful as to the expenditure. It might be that he was the more impressed with the necessity of paying attention to economy in India, because he had the superintendence of Indian finance at a time when there was a large annual deficit, but his noble Friend would admit the paramount importance of keeping the ordinary expenditure within the ordinary income. He did not think it necessary to refer to the period before the Mutiny, because since that time a complete revolution in almost every respect had taken place in India. For three or four years the expenditure, in consequence of the Mutiny, caused enormous deficits of £8,000,000, £14,000,000, £10,000,000 and £4,000,000 in sucees-

537
sive years. This state of things, however, came to an end in 1860–1, and for the next five years there was either an insignificant deficit, or a fair surplus. In the last of the five years, 1865–6, there was a large surplus, partly owing to the receipts of railroads in previous years not having been brought to account in the se years, as it ought properly to that been; but if the surplus in the se five years after deducting the deficiencies was divided equally amongst them it would give an average annual surplus of between £800,000 and £900,000. In the next year, however, matters changed for the worse. In the year 1866–7 there was a deficiency of £2,500,000; in 1867–8 a deficiency of about £1,000,000; and, in 1868–9, an estimated deficiency of £1,000,000, which from recent accounts seemed likely to be swelled to £1,500,000 or £2,000,000. This is independent of any extraordinary expenditure for public works. In three years of profound peace there had been a deficiency of near £5,000,000. The interest of the money borrowed to meet this had, of course, to be added to the expenditure. Beyond this, the balances in the treasuries had been reduced. He could not call this a satisfactory state of things for the past. He came now to the present year, in which his noble Friend anticipated, that, without any increase of income, they should be able, by reducing the expenditure to the extent of £1,000,000, to produce a practical equilibrium. He must say that he entertained great doubts as to the practicability of reducing the expenditure in India to such an extent. The revenue of India had steadily increased to a very large extent, but during the same time the expenditure had as steadily increased still more. The additions to the expenditure being higher than that to the income by about £1,000,000, and the tendency to increase was strong and he believed inevitable. His noble Friend had said, and said very truly, that the demands of the local administration constantly required an increase of expenditure. The cost of administering justice in a civilized way was very much greater than that of administering a system of patriarchal justice, under which a man was punished, for example by cutting off his hand, instead of being imprisoned for, perhaps, a couple of years, rendering necessary, of course, the maintenance
538
of expensive gaols. It was the same thing in regard to the police; and, again, the introduction of Europeans into the interior of India rendered it necessary to establish courts up the country capable of trying Europeans. All these things, and many others which he could mention, added very seriously to the expenditure in India. The expense of living-had likewise greatly risen, rendering necessary an increase in the rate of wages. In every possible way, in fact, the expense of the civil administration of India went on increasing year by year, and he feared it must continue to do in spite of every effort that might be made to keep it down. [A noble LORD: So much the better.] That might be so in some ways, but the increased expenditure could only be met by increased taxation, and it was not quite certain that this would be so much the better, and satisfactory to the people of India. His noble Friend had referred to the extraordinary increase of the military expenditure. That resulted to a considerable extent from the employment of a large number of European troops; and the greater cost of living rendered necessary increased allowances of various kinds. The pay and allowances to officers which were formerly regarded as liberal, were now barely sufficient to meet their expenses; and, taking all things into consideration, he could not say that he felt very sanguine about a reduction of expenditure, either civil or military, and he was quite sure that it would require the most strenuous efforts both of the Home and of the Indian Governments to effect any material reduction. Neither, on the other hand, did he see the prospect of any great increase of the revenue. The great source of income was the land revenue, which increased but very slowly indeed. In 1865–6 it was £20,343,000; in 1867–8 it fell to £19,900,000; and the regular Estimate for 1868–9 was £20,225,000. Another important item was the revenue from opium, which had yielded about £6,000,000 sterling per annum for the last year or two. The Chinese were, as he had heard, beginning to grow opium for themselves, and they might also derive supplies of that article from Persia and other countries not subject to our rule. These circumstances might seriously affect the demand for Indian opium. A diminution either of the quantity of

539
opium which the Chinese took from India, or of the price for which it was sold, would cause a large reduction of the Indian revenue. It was obvious that this large item of revenue was obtained from a very precarious source, and any great or sudden falling off under this head would place the finances of India in a very awkward position. He now came to the question of the expenditure on reproductive works. His noble Friend had quoted from a Minute by Lord Dalhousie in regard to public works. Now, contemporaneously with the issuing that Minute, Lord Dalhousie raised a loan of £2,000,000, professedly for public works, but, somehow or other, the money was entirely spent on the ordinary expenditure of India. He did not differ from his noble Friend as to the value of reproductive works, but he thought that much care and caution— which was not often exercised in India —was required in order to insure that the works were so well chosen and so well executed as to afford a reasonable prospect of their proving really reproductive. By a truly reproductive work he did not mean a work that would merely benefit the district in which it was situated, but one that would at least pay the interest upon the money spent on its execution. He confessed to being very sceptical as to the actual money return from what were called reproductive works in India. Many persons doubted the increase of revenue which was said to have arisen in the favourite case of the irrigation of the Delta of the Godavery; and Sir William Denison, the late Governor of Madras, whilst bearing testimony to the improved condition of the people, could not satisfy himself as to the increased revenue of the district. The other favourable case was that of the Jumna Canals. "With regard to these canals which we had not constructed, but only cleared out and improved, he believed they now paid a fair interest not on the sum which they cost to construct, but on the sum expended by us in repairing them. It was notorious that the Ganges Canal did not pay, the Baree Dooab Canals did not pay, and the same remark applied to several other cases. The irrigation works executed by a private company in Madras and in Orissa did not pay, and the Government had been compelled to buy them up. He mentioned these facts, in order to
540
show how extremely cautious they ought to be in selecting works which would be reproductive in the sense of being likely to pay within a reasonable time the interest on the money laid out upon them. His noble Friend said he believed that the expenditure on irrigation had prevented famine in certain districts, and therefore prevented a falling off in the land revenue. That was a most beneficial result, but if the only effect of the expenditure of public money in that way was to prevent a falling off in the revenue, whence was to come the money to pay the interest on the outlay on the se works? It was obvious that it must be obtained by additional taxation. He believed that whilst works of this character might be undertaken with great advantage, it was necessary to exercise the greatest care in examining the estimates both of the cost of construction and also of the probable returns to be derived from them. With regard to railways in India, when they were originally introduced into that country, it was found that Government guarantee was necessary to enable the companies to raise the requisite capital for their construction. It was at that time deemed a great object—and he thought it was a great object—to promote private enterprize in that country. They had heard much of the mischief of double government in India; but never was there a more complicated system of management than that connected with the se guaranteed railways. He was glad, therefore, that the Government had determined to try the experiment of constructing railways by Government officers. He had great confidence in the judgment of his noble Friend (Lord Lawrence) who had recommended this course. With respect to the lines, he quite agreed as to the two lines mentioned by his noble Friend. The line up the Indus would be very advantageous for bringing down the produce of the Punjaub and for sending troops to Upper India from Kurrachee. The line to the Punjaub was indispensable, not only for opening up the country, but for its defence; and in his opinion, as parts of these lines passed through the territories of Native princes, it was quite right that the whole staff which was there employed, should be under the complete control of the Government. Before sitting down he would for one

541
moment refer to a point to which he was sorry to advert. He had attempted to induce unguaranteed capital to seek investment in India, and he confessed it went very much against his feelings when he saw that English capital would go into any other country in the world without a guarantee except India, and that there it would not go unless guaranteed. His noble Friend had said very truly that, with respect to India, capitalists had got to be so dependent on the Government that they would not do anything by themselves. He gave them every encouragement, and he was in very great hopes that it would be found worth while for English gentlemen to send capital there without a guarantee, but the result of the experiments of the Light Railway Company had grievously disappointed him. He believed the noble Marquess (the Marquess of Salisbury) had given a guarantee to that company, but the necessity for doing so had probably been occasioned very much by the pressure on the money market at home. He did not blame anybody in the least for having done so, but all he could say was that it was a great disappointment to him that the attempt which he had made had failed. On reading the speech of Sir Richard Temple he felt greatly gratified to see that the measure for which he had been responsible—namely, the introduction of a paper currency—had succeeded. When that measure was first introduced, the amount of the paper currency was £3,500,000; it had now increased to between £10,000,000 and £11,000,000. He believed that now a paper currency was used in many parts of India, and if measures were taken for the issue, to some extent, of smaller notes than the se at present in circulation, it would be a great convenience and a great saving. There was nothing which had effected so great an improvement in India, or which would cause so great a revolution there, as the introduction of railways. He believed that it would go far to break down caste and prejudice, and to carry civilization to the utmost bounds of our Empire. To extend civilization to India was the appointed mission of— what was one of the most marvellous things in the history of the world—our rule in India. That there had been blots and were shortcomings in our administration he could not deny, but he
542
believed that there was no one who knew anything about our administration in India but must be sensible of the blessing it was to that country, and it was his conviction that it would gradually lead to the civilization of one of the most populous and most extensive portions of the globe, and that our Indian Empire would be one of the grandest ornaments of the British Crown.
THE MARQUESS OF SALISBURY: My Lords, I wish to join in the congratulations, which have been expressed by the noble Viscount who has just sat down, to the noble Duke for the very able and luminous statement with which he has favoured the House. I am sure it is a great gratification to us that the noble Duke has not thought himself debarred by the fact of his sitting in this House as Secretary of State for India from explaining the great affairs of our Indian Empire, and I think what the noble Duke has done will redound to the advantage, not only of this House, but of the country. I do not know that I have any criticisms to add to the se of the noble Viscount (Viscount Halifax). I agree with the noble Viscount in the view which he has taken of the dangerous nature of Indian finance. It appears to me that Indian financiers are not so cautious or prudish on the subject of deficits as we are in England. Indeed, a French rather than an English feeling on the subject appears to prevail in India. They are content to go on from year to year with a deficit on a very hazardous surplus, and they do not think that the security of their finances is at all compromised by such occurrences. I believe, in the present instance, the difficulty has arisen from the decision of Sir Stafford Northcote with regard to the building of barracks to which the noble Duke has referred. I quite admit it is a wise thing to build barracks, and a virtuous thing to meet the expense of building them out of revenue instead of by loan; but a great deal of the beauty of virtue is taken away when the consequence of doing so is a deficit. I confess it seems to me that it is the duty of the se who have the charge of the finances of India to take some energetic steps to bring the present state of things to an end. No doubt we are promised a surplus for the year just come in; but it is only a surplus of £50,000, and in England we should

543
think that a very small one to go on with on ordinary occasions. No doubt we have been satisfied to go on with a much smaller surplus, but it is the rule to secure a much larger. In this country moreover we have no source of revenue at all comparable in its hazardous character to the revenue derived from opium. You may raise new taxes in India if you can; but it is one of the most difficult things in the world. A great part of your revenue is raised from the land, and you cannot increase the charge on it. In England we may go to the Customs; but the moment the Indian financier raises his Customs he has all the Manchester school down on him. I do not blame them; they are right to look after the trade of England. I mention it to show that these financiers of India are in this particular position— that they have not the command of the resources that are usually available to a Government, because they have to consult the private interests of a commercial community in a far distant land. There is little to hope for in the way of increased revenue from excise, because the natives of India do not consume much of what is the subject of excise duties. I fear, under these circumstances, there is but one thing to be done, and that is to press on the noble Duke to go a little slower with the great military expenditure. That is the great sinner. I do not mean the expenditure on the regular army, but on these great barracks. If you insist on spending a large sum every year in building these barracks, and have not taxes to enable you to meet the expense, it is a matter of necessity that a deficit must ensue. There are one or two observations in the speech of the noble Viscount (Viscount Halifax) to which I should like to advert. The noble Viscount seemed to doubt the value of assisting reproductive works, because Government does not get full interest for the money sunk in them. But that is scarcely the correct method of estimating this part of our Indian policy. It should be borne in mind that the State when expending money in reproductive works is not in the position of a man seeking investment for his capital, but rather in the condition of a man who makes a road to his property. When a man makes a road to his estate the tolls may no doubt bear part of the expense, but he looks
544
to be repaid over and over again in the long run by the general prosperity the new facilities for traffic bring to his estate. In like manner railways have been made in England, to the loss of those who made them, but the property through which they have run has greatly increased in value. So the railways in India have not paid, nor can we expect them to pay of themselves at present, but the Government has been no loser by them because they have greatly raised the tax-paying powers of the district through which they pass; and in the case of all reproductive works undertaken in India we may expect that they will raise the tax-paying powers of the natives, and repay the Government in the end. Unless this policy is continued I confess I am unable to see a way out of the dilemmas surrounding us. Another observation I have to make is on the remarks of the noble Viscount with respect to railways being made without State aid. Now, I am perfectly satisfied that if the State wants a railway it must pay for it in one shape or other. The idea that it could ever be otherwise arose out of that gigantic delusion which prevailed in this country some years since — that if you made a railway anywhere, under the sea or across the Sahara, it would be sure to pay somehow or other. The consequence of that delusion was that railways were constructed in this country that were absolutely ruinous to those who originally constructed them; and, as is well known, many small unremunerative lines in country districts have been attached to remunerative trunk lines so that the inhabitants of the large towns are paying, in the shape of increased fares, for the facilities granted to the rural districts. In India it is still more true that except as between two large towns a railway will never pay, and inasmuch as private investors have no interest in improving the population, as compared with the interest of the Government, it is not to be expected private investors will make railways in thinly populated districts at a loss, without a guarantee of present profits from the Government. But it does not follow that it would not be for the interest of the Government to make these lines, for they might be profitable not in the direct return they yielded, but in the effect they had in raising the condition of the people. I

545
quite agree with the noble Duke in the opinion that it is absurd to pay 5 per cent for money when you can raise it at 4; but I do not agree with the opinion, rather implied than expressed, that it has been always absurd to pay 5 per cent.
THE DUKE OF ARGYLL: I did not say that.
THE MARQUESS OF SALISBURY: The noble Duke disclaims that opinion, and I believe he is right in his disclaimer. There was a time when Government could not have got, I will not say the necessary capital, but the necessary experience, for carrying out railway schemes successfully without the assistance afforded by the original companies. Still it does not follow that what was necessary for the starting of any system in India is necessary for carrying it on. I am very glad to find the noble Duke has been able to overcome difficulties which have hitherto prevented our making railways through Native States. These lines ought to be made as quickly as money can be raised for constructing them. I will conclude, as I began, by thanking the noble Duke for his very interesting statement, and by expressing an opinion that, in spite of some of the fears he expressed and the drawbacks he anticipated, still, on the whole, the finances of India are such as to justify the most sanguine expectations of all those who have looked forward with confidence to the future of India.
LORD LAWRENCE: I do not think I can add anything to what has been said on the finances of India; but I do not like to let the debate close without saying a few words upon the subject. No man who has ever lived in India— certainly no Governor General who has ruled there—has paid a more anxious attention to the finances of the country than I have. Before I went out as Governor General I talked with the noble Viscount (Viscount Halifax) upon all the salient points connected with Indian finance of which he has spoken, and I believe that upon all important points we were mainly, if not entirely, agreed. [Viscount HALIFAX: Hear!] When I arrived in India my first desire was to reduce expenditure. But on examining into affairs I found that in all expenditure connected with the civil administration of the country it was quite hope-less to think of making any reduction.
546
Not only had prices largely increased, but the allowances of all the subordinate officers of the civil establishments, more especially of all Native officials, was ridiculously and even miserably low. One of the first things we had to do under these circumstances was to increase the emoluments of these officers, and this added considerably to the expenditure of the country. Turning then to the military department, I found we had an army of something like 72,000 English soldiers. During my administration that army was reduced by 7,000, and the Native army was also reduced, though not in the same proportion. But notwithstanding this large reduction the military expenditure in India was somewhat larger when I left India than when I arrived. The noble Duke (the Duke of Argyll) has fully explained the causes of that increase, so that it is unnecessary for me to follow him in this respect. I do not think we could safely reduce the English army below its present strength of about 64,000 men; because we must remember that this 64,000 includes all men in hospital, all the weakly and convalescent, and all the troops passing to and fro between the seaports and the inland stations. Nothing could be more ruinous to our interests in India, more disastrous to our prestige, or more damaging in our finances, than the making of an undue reduction in the English army. I do not mean to say that some slight reduction might not be made, but even on that point there are great doubts; and these doubts increase the more when one inquires into the difficulties which would arise in making these reductions. Some people believe we have too large a Native army, and that a very large saving might be made by reducing the Native strength. I am not a military man, nor do I aspire to be a great authority on military subjects; but no man can live long in India, and pass the greater portion of his time in those parts of India most liable to insurrection, without being convinced that the Native army is not unduly large. It is quite absurd, too, to suppose that the English army of India requires to be as large as it is to keep the Native army in order, and that a reduction of the English army might be safely made if the Native army were first reduced. I am convinced that that is a cardinal error. Any-

547
one acquainted with India, on casting his eye over the map, will see that large portions of the country are populated by races more or less warlike and numerous beyond appreciation. The population of British India alone does not fall short of 200,000,000 of people, exclusive of marauding tribes, which add materially to the ordinary elements of danger. I do not think, therefore, any considerable military reduction is possible; and, on the other hand, I am afraid we cannot look for any large increase of revenue for many years to come—certainly not such an increase as will enable the Government to spend large sums in reproductive works in addition to providing for the ordinary expenditure. The land revenue of India only increases in considerable cycles of years—in several parts of India it is fixed for periods of thirty years—and it is obvious that during those periods no increase can be expected, for all increase which may be looked for is reckoned in the permanent settlement, and in that way £2,000,000 have been anticipated. No increase in the excise revenue can be reasonably expected; and the opium revenue is in its nature uncertain and insecure; and, notwithstanding that of late years it has systematically increased, the present year exhibits a falling off. In my opinion the salt tax, which falls chiefly upon the poor, is too high, and if there were any surplus, it ought to be applied in the reduction of this tax, as far as this can be carried out without loss of revenue. I do not anticipate that the revenues of India will largely increase; but while I do not think we shall be able to reduce the expenditure very much, still we ought to do all that is possible in that direction. One subject in which the people of India take a vital interest is the expenditure of the Indian revenues in England, and there is a feeling in India that the people of that country are not fairly dealt with. Even though it were untrue, the existence of that feeling would be in itself a great evil, and if there be any foundation for that opinion the authorities in England ought to be willing to put things straight. In the ease of the Abyssinian War, for instance, all the ordinary expenses of both the Indian and the English troops serving beyond the seas in Abyssinia were charged against the Government of India on the
548
pretext that to have done otherwise would have been to save so much money to the revenues of India. I think that was a fallacious view of the question, and I hold that we should have dealt with India on that occasion exactly in the same way that England deals with India as regards English troops. The moment English soldiers leave England for Indian purposes the expenses are borne by the Indian revenues; but the moment the troops pass beyond the frontiers of India all the expense, whether ordinary or extraordinary, is made to fall on the English revenues. That is a fair and just rule, and it should be uniformly applied;— there ought not to be two rules, one applicable to troops leaving England for India, and another applicable to troops leaving India for Imperial purposes. With regard to public works, I consider that expenditure for works of a reproductory character ought to be raised by loan, and should not be charged to ordinary expenditure. Hitherto there has been a great conflict of opinion in India on this point, and many influential people have argued that not only should we charge reproductive works, but also extraordinary works, such as barracks, upon the revenue of India. I believe the late Secretary of State for India, put the thing on the right and true basis— namely, that where it is reasonably to be expected that there will be a moderate return for the expenditure it is right and proper the money should be raised by loan; and, on the other hand, that works, however important, which did not produce a direct return should, as far as possible, be charged to the ordinary revenue of India. With great deference to the noble Marquess (the Marquess of Salisbury) it would never do to reduce the speed with which the barracks are being erected. On the grounds of humanity and policy, and even of finance, it is much better that they should be constructed at the quickest rate consistent with economy. The English army in India has increased with enormous rapidity since the Mutiny; barracks of an inferior description have been run up; and in the course of years these have become much deteriorated. The re-construction of them was one of the matters pressed upon me, and one of the first I took in hand; and I was zealously supported by the Commanders-in-Chief. But I greatly fear that, with all the pres-

549
sure mat can be put on, the re-construction of the barracks will take ten or twelve years. This is a matter of the utmost consequence. The barrack accommodation affects the sickness and mortality of the troops, and their efficiency in the event of emergency. Some four or five years ago a statement was circulated in the English papers to the effect that the mortality among English troops in India was 70 per 1,000; I believe that estimate to be excessive, but still the mortality is very large, and a very considerable proportion of that mortality is due to insufficient barrack accommodation. The result of the construction of new barracks and of the making of various changes has been that we have reduced the mortality very largely, and I am very sanguine that, with the completion of the barracks and the adoption of better sanitary arrangements, the mortality of the British troops in India will not very much exceed that of our troops in the colonies. I do not take a gloomy view of the finances of India, but I do think every fair means of adding to her income ought to be tried, avoiding such as will be oppressive and unpopular to the people of the country. What is remarkable is that a number of people cry out for expenditure without thinking where the money is to come from; but if the tax touches them in the slightest degree then there is a strong clamour for examination and revision. Untunately, the period for which the income tax was imposed was allowed to expire. A year had scarcely elapsed before it was found necessary to impose an income tax of 1 per cent; but that will not give us the revenue sacrificed, and at the same time it is insufficient to keep things straight and in order in case of any great emergency or unlooked-for misfortune. There is great importance in times of peace not only in trying to make both ends meet, but to have such a margin as will admit of a reduction in taxation. I am fully impressed with the enormous advantages which India will gain by carrying out a large system of irrigation. Irrigation is to the greater part of India what drainage is to agriculture in this country; and I am convinced that if proper places are selected, and the works are judiciously carried out we shall not only re-pay ourselves the whole of the money incurred in making canal irrigation, but
550
we shall largely add to the revenue of the country. No doubt some of the most important of the public works in India have not paid in a financial point of view; but it must be remembered that the science of the construction of canals was not well understood by the engineers in India. But I am perfectly certain that, in course of years, you can get not only a fair revenue from these canals, but that you will be able to set aside sufficient to re-pay the original capital. The statement made by the noble Viscount (Viscount Halifax) with reference to the canals of the River Jumna was scarcely correct. It is quite true that these canals did exist under the Native rule, but to a very poor extent. But scientifically I believe it was an error in constructing the canals to take the lines which had been used for the old canals. Nevertheless, these canals during the last thirty years have not only repaid the whole of the capital expended, but have also given an annual return of 5 per cent upon the capital during the whole of that period. I think, therefore, that I am warranted in saying that that is a good financial result. As to the question of railways, I think credit should be given to those who commenced the present system. It is only right we should recollect that but for the old companies we should not have had these works in India—certainly not so early as we did. In those days there was a great difficulty in embarking in large works of that kind, and had it not been for the energy and spirit with which the original companies took up the subject the railways would never have been in existence. We have now some 4,000 miles and upwards of railways in India, and in the course of next year the original scheme which embraced, the whole Continent of British India will be completed. Probably the railways constructed in India will not cost less than £18,000 per mile. But I am convinced, not only from my own observation but from consultation, with every class of people in India, English or Native, that the present railway expenditure in India is enormous, excessive, and unreasonable, and that if we took the works into our own hands we could carry them out at a very considerable reduction. Now, when we consider that at the very least we want 10,000, 20,000 or 30,000 miles of railways more than we now have in India,

551
it is easy to conceive what an enormous sum would be saved if, instead of paying £18,000 per mile, the railways cost only £12,000 per mile. If that result could be effected, instead of the guarantee system which now entails so serious a burden on India, we should not only repay ourselves the interest on the money we have had to borrow, but we should have a margin whereby to repay the capital invested. For these reasons, my Lords, I trust that the authorities in India will take works of this nature more immediately under their supervision.
LORD LYVEDEN: I think, my Lords, that the public is very much indebted to any Minister who awakens its attention to subjects so important as the finance of India. I quite agree with the noble Viscount (Viscount Halifax), moreover, that the manner in which the noble Duke has treated this subject is very satisfactory, whatever the prospects may be. I wish, however, he had gone a little more into detail. He entered very explicitly into what has occurred in the past, but, declining to be prophetic, he gave us very little information as to what the intentions of the Government were as to the future. Now, my Lords, it is evident that there are only two ways in which these deficiencies can be remedied in the future— either by diminution in the expenditure or by an increased revenue. The first mode of diminishing the expenditure that has been referred to is the reduction of the military expenditure; but no one, I trust, will propose at present to relieve India from any of that expenditure by the diminution of the European forces. It is plain that, after the experience of the Indian Mutiny, it would, be almost madness to withdraw, at this moment, any of the European forces from that country. I believe, too, that a reduction in the barrack expenditure would be a great evil. Such a reduction would almost inevitably be attended by an increase of disease among the troops; and, therefore, on the point of economy as well as of humanity, it is advisable that the expenditure in barrack accommodation for the troops should be kept up. If the expenditure be not absolutely necessary at all times, it would, at all events, be wrong at the present time to make any reduction in that direction. Now, my Lords, in old times, we were told that the revenue of India
552
was not elastic; but we now find, I am glad to say, that it does to some extent possess that quality. My hon. Friend Sir Richard Temple has, I am glad to see, had the courage to propose the re-imposition of the income tax. I believe that there never was a greater mistake than that committed by Sir Charles Trevelyan in withdrawing that tax after it had once been imposed. But I am willing to confess that I should be sorry to see that tax increased, and that the tax is one which, in my opinion, should, as a rule, be kept for the difficulties of war. Among the topics upon which my noble Friend the noble Duke in his statement did not enlarge is the question of cotton. That subject is one of great importance. It would, of course, be hard upon India to force the cultivation of cotton upon its inhabitants, but I do think that the Indian Government are bound to provide roads and machinery for the transport of the cotton to the seaports. Ought the question of cotton to stand in this position, that when the American market is closed, as it was during the American war, a stimulus is to be given to the cultivation of cotton in India, but when that source of obtaining cotton is re-opened no further demand will arise from Manchester? The subject is one to which the attention of the Government ought to be directed. Then comes the question of the gold currency, which is also of great importance. I think that the adoption of a gold currency is very advisable. The noble Lord (Lord Lawrence) knows the importance of this, and with his force of mind I wonder that he did not carry it into effect while he was in India. Sir Richard Temple has gone very elaborately into several matters which he thinks of moment in the present financial state of India. I venture to think that my noble Friend (the Duke of Argyll) may with much advantage direct his attention to the Uncovenanted Service. My noble Friend stated what he would do in respect of railways; but I suppose he did not allude to lines in respect of which there is already a guarantee; I suppose he referred to railways which may be promoted in future—because I never could understand why the Government should have guaranteed 5 per cent on railways, inasmuch as the natural effect is to make parties invest in railways so guaranteed rather than in

553
Government securities, which would pay them only 4 per cent. The complaint I make of my noble Friend's statement is that it does not go far enough. He has not gone into the state of India generally. He has not gone into such political details as might have enabled your Lordships to form an opinion as to whether there is a reasonable certainty of continued peace, or whether there is any reason to apprehend war. My noble Friend the Secretary of State for Foreign Affairs need not be afraid that I am about to indulge in any observations on the Central Asia question. That is not what I mean; but I think my noble Friend the noble Duke might have given us some information as to our relations with the Native States, and as to the communications recently had with Native Rulers, more particularly with Shere Ali. My noble Friend has perhaps thought he ought to confine himself to such a statement as that suggested some time ago by my noble Friend (the Duke of Somerset), to which I presume we are indebted for the speech made this evening by any noble Friend the Secretary for India. My noble Friend may, perhaps, intend that a more general statement shall be made to the House of Commons by the Under Secretary. Nothing can be more hopeful than the language used by Sir Richard Temple in his splendid peroration. I trust that his anticipations may be realized; but the speech delivered by my noble Friend this evening does not enable me to see exactly what are the grounds for these anticipations. With regard to the question of public works, I must say that I do not think there ought to be any diminution in them. I cannot agree with my noble Friend the noble Viscount (Viscount Halifax) that there has been exaggeration in reference to the remunerative works. I think that such works ought to be paid for out of a special fund, and that ordinary works ought to be paid for out of the ordinary revenue. I have no doubt, however, that all these matters will have the careful consideration of my noble Friend at the head of the India Office.
EARL FORTESCUEhoped that the noble Duke would give every attention to the improvement of the sanitary condition of the barracks in India. By doing so he would promote efficiency, economy, and the interests of humanity.
554
It would have been impossible to allow the barracks to remain in the disgraceful and murderous state they had been in some time ago; but he hoped the noble Duke would go further, and with all reasonable speed take measures for further improving the barrack accommodation for the soldiers.
THE DUKE OF ARGYLL,in reply, said, that in a communication which he had received from Lord Mayo, his Lordship attached much importance to the fact that the equilibrium of Indian finance was about to be restored. The surplus would be only a small one, but there would be a surplus. Their Lordships must be aware that there were peculiar elements of uncertainty in all Indian budgets. First, there was the danger of droughts; next, the danger of a deficit in the revenue from opium; and, thirdly, the possibility of frontier wars. Some of those wars had cost, not only hundreds of thousands, but millions of money. So far, however, as regarded the Estimate of the present year, there appeared to be, not a deficit, but a surplus. "With regard to the growth of cotton, one of the projected lines of railway would open up an important cotton growing district. He had been strongly urged by a deputation from Manchester to assist an undertaking which was expected to be of much value to our commercial interests, and he had sent out an engineer to report on it, who was now on his way home. He was sure that the Government in India would give their best attention to the cotton question.
Then the Correspondence with the Government of India respecting Railways (India) ordered to be printed (No. 219); Report on Railways (India) for the year 1868-9 ordered to lie on the Table.

EXTRADITION TREATY WITH FRANCE.

  QUESTION.
  LORD CHELMSFORD: My Lords, I rise to put a Question to the noble Earl the Secretary for Foreign Affairs. In 1843 an extradition treaty was entered into between this country and France, and, in the same year, an Act of Parliament was passed giving effect to that treaty. The offences named in the treaty were not numerous. They consisted of murder, attempt to murder, forgery, and fraudulent bankruptcy. The treaty

  555
  was in existence from 1843 till 1865; but, so far as any action on our side was concerned, it remained a dead letter during the whole of that period, because not a single criminal was delivered up by us to France. That arose from the view the chief police magistrate took as to the course which he ought to pursue when persons were brought before him for extradition under the treaty. He thought it his bounden duty not to give up an accused person unless he were satisfied on the evidence before him that there would be a conviction if that person were put upon his trial. I think that view of the matter was hardly in accordance with the terms of the treaty. I believe that what was intended by the treaty was this—that an accused person should be given upsupposing the evidence brought before the magistrate were such that, if the offence were committed in this country, the accused would be committed for trial. There was also a misapprehension as to the effect of a judgment par contumace; the chief magistrate being of opinion that such a judgment put a person out of the category of an accused person. Therefore, when it was found that a person had been condemned par contumace in his absence, the chief magistrate said—"This is a convicted and not an accused person, and, therefore, I must discharge him." Now the magistrate was entirely in error with regard to the French law in this respect, because, in point of fact, a person who has been convicted par contumace is, on being apprehended or delivered up, tried in exactly the same way as any other accused person, the previous judgment par contumace having no effect whatever upon the proceedings. Then the French Government had another ground of dissatisfaction, in regard to the proof required of the documents which were transmitted from France. The depositions which were certified by the Juge d' instruction, and authenticated by the signature and official seal of the Minister of Justice, were not admitted as evidence in this country, unless the person producing it proved that it was a true copy of the original depositions. These various sources of dissatisfaction induced the Government of France to give notice, in 1865, that, under the terms of the treaty, they would put an end to it within six months. The noble Earl, who was then, as he is now, Secretary of State for
  556
  Foreign Affairs (the Earl of Clarendon), sent Sir Thomas Henry, the chief magistrate at Bow Street, over to France to negotiate on the subject with the French Government. I must admit that the noble Earl could not have selected a person better fitted to conduct the negotiations. The noble Earl stated, on a former occasion, that it was mainly owing to his ability and to the zeal with which he conducted the negotiations that we were extricated from a position of some embarrassment. On Sir Thomas Henry's return the noble Earl had a Bill prepared, which would have removed many of the causes of dissatisfaction, and which applied generally to the proof required in all cases under the extradition treaties. I am much surprised that there should have been the least disposition in any quarter to prevent that Bill passing into law. Soon afterwards, however, the then Government went out of Office, and Lord Derby's Administration was formed. The Bill framed by the noble Earl (the Earl of Clarendon) was then found at the Foreign Office, and I, having at that time the honour to hold the Great Seal, was charged with the introduction into your Lordships' House of that measure, which I entirely approved. That measure of course received the cordial support of the noble Earl, and the simple object of it was to enact that when the documents and depositions transmitted from France in reference to the extradition of offenders were certified by the Judge or the magistrate to be true copies, and when that fact was further authenticated by signature and seal of the department of the Minister of Justice, they should be taken without further proof to be evidence in all our courts of justice. Of course, the Bill was easily passed through this House with the concurrence of the noble Earl, and was sent down to the House of Commons, where, to my infinite surprise, great jealousy existed in certain quarters as to the objects which the French Government had in view in desiring the continuance of a treaty; because they thought the design of the French Government was to lay hold of political offenders, under the pretence of preferring some criminal charge against them. There was not, however, the slightest ground for any such imputation. It is expressly laid down in the law, as to extradition, of France, and it is made a

  557
  point of honour, never to deliver up or to demand any political offender, and if a person who is a political offender is given up under an extradition treaty for another offence, he is, if acquitted, or in the event of his conviction after the expiration of his sentence, warned that he must leave the country within a certain period, and it is only when he neglects to do so that he can be apprehended and tried for the political offence. So strict, indeed, were the French on this point, that when a person had committed several criminal offences, and was delivered up under an extradition treaty for one of them, he could not be tried for the other offences without a fresh application being made for the extradition of the offender. The feeling, however, which prevailed in the House of Commons induced them to determine that the Bill should not be in force for a longer period than twelve months. Accordingly the Bill passed, its duration being limited to that term. In 1867, it was found necessary to continue that Bill for another year; and, in 1868, the same course was pursued; but, on each occasion, it was necessary for the Government to apply to the French Government to continue the treaty, and I must say that the French Government, though somewhat dissatisfied, had acted with the greatest courtesy and forbearance, and yielded to the application. In 1868, a Select Committee of the House of Commons was appointed to inquire into the whole law and practice of extradition. I should, however, state that the French Government were so desirous of removing any jealousy which might exist with regard to their supposed anxiety to get hold of political offenders, that they expressed their willingness to have a clause introduced into the Bill to the effect that the magistrate in this country should himself decide whether the offence with which a person might be charged was of a political character, and if he came to the conclusion that it was, he might at once discharge the accused. Well, the Select Committee, to which I just referred, drew up a Report, on which was founded a Bill. That Bill, which is now, in all probability, in the Foreign Office, was prepared in 1868. We have now nearly arrived at the end of the Session of 1869, but still that Bill has not been introduced into Parliament. There is undoubtedly a very strong feeling
  558
  in France of annoyance and dissatisfaction at the delay which has occurred; and a Minister has said publicly that it seemed rather surprising that the Government of England had taken three years to decide whether they would agree to an extradition treaty precisely similar to the fifty-six treaties which France has entered into with other countries. In conclusion, I beg to ask the Secretary of State for Foreign Affairs, Whether it was his intention to bring in a Bill this Session to enable Her Majesty to conclude an extradition treaty with the Emperor of the French?
  THE EARL OF CLARENDON: I understand perfectly the feeling which has induced my noble and learned Friend to bring forward this subject, and I am much obliged to him for having dealt with it in so conciliatory a manner. It is not my intention, nor have I, indeed, the power, to bring forward a Bill of Extradition this year. The noble and learned Lord has, I think, himself indicated the extreme difficulties which stand in the way of dealing with this question. As he remarked, there was considerable opposition to the very simple Bill which was brought forward by himself, so great was the jealousy and fear entertained by the House of Commons lest political offenders should be delivered up. I think, however,- it is of very great importance that we should have an extradition treaty, not only with France, but also with other countries; for it is a great disgrace — particularly now that the means of intercommunication between different countries have been so much improved—that this kingdom should be a harbour and asylum for all the rogues in the world. The Bill which had been prepared laid down the principles on which extradition treaties were to be concluded not with France only, but with all the countries of Europe. The Foreign Office and the Home Office have been in communication on the subject, and the Bill has been ready for upwards of two months; but it has fallen, like many others, a victim to the exigencies of measures of greater magnitude and importance—as, for example, the Irish Church Bill and the Bankruptcy Bill, by which so much of the time of the Session has been occupied. It was really found impossible to bring it forward; and I am quite sure that the noble and learned Lord, with his

  559
  great Parliamentary experience, must feel that it would be extremely inconvenient to introduce Bills of this character, on which great difference of opinion exists, and protracted discussions are likely to arise, unless there is a reasonable prospect of passing them. As far, however, as the Foreign Office is concerned, I engage that this shall be one of the first Bills which shall be brought in by that Department next year. I hope that no injury will result from the delay thus occasioned, because we have already received the assent of the French Government to a satisfactory arrangement on this matter.

  CONTAGIOUS DISEASES BILL [H.L.]
  A Bill to amend the Contagious Diseases Act (1866)—Was presented by The Lord NORTH BOOK; read 1a. (No. 221.)
  House adjourned at half past Eight o'clock, to Monday next, Eleven o'clock.