CONTENTS OF No. 437.-OCTOBER, 1913. PAGE ART. 1.-THE FINANCIAL DIFFICULTIES OF FEDERALISM- 315 ART. 2.-BRITISH INDIA BEFORE PLASSEY - 337 1. The Early Annals of the English in Bengal. By C. R. Wilson. Two vols. Calcutta: Thacker and Co., 1895, 1900. 2. Bengal in 1756-1757. (Indian Records Series.) Edited ART. 3.-HEREDITY AND ENVIRONMENT IN REGARD TO 1. Heredity. By J. A. Thomson. London: Murray, 1908. ART. 4.-SHELBURNE AND WINDHAM 1. The Life of William, Earl of Shelburne, afterwards 2. The Windham Papers. With an introduction by - 364 - 384 ART. 5.-THE VAGARIES OF RECENT POLITICAL ECONOMY 406 1. The Principles of Political Economy. By Henry Sidgwick. London: Macmillan, 1883. 2. Cours d'Économie Politique. Par Vilfredo Pareto. Lausanne, 1906, And other works. Art. 6.-TROUBADOURS: THEIR SORTS AND CONDITIONS 1. The Forest Resources of the World. Bulletin 83. 2. Forestry (Journal of the Royal English Arboricultural Society). London: Laughton. 426 441 ART. 8.-LADY SHELLEY AND HER ACQUAINTANCE- 2. Correspondence of Lord Burghersh, 1808-1840. ART. 9.-INDIAN PROGRESS AND TAXATION 1. Statement exhibiting the moral and material Progress and Condition of India during the years 1911-12 and the nine preceding years. India Office, 1913. 2. Indian Unrest. By Sir Valentine Chirol. London: Macmillan, 1910. And other works. PAGE 464 483 ART. 10.-THE WHOLE-WORLD NEEDS OF THE NAVY - 493 ART. 11.-PROFIT-SHARING 1. Report on Profit-Sharing and Labour Co-Partnership in the United Kingdom, by the Board of Trade (Labour Department). London: Wyman, 1912. 2. Co-operative Production. By Benjamin Jones. Two vols. Oxford: Clarendon Press, 1894. 1. Geschichte des Herbstfeldzuges von 1813. By Major Friederich. Berlin: Mittler, 1903-4. 2. Geschichte des Frühjahrsfeldzuges von 1813. By General-Leutnant Rudolf von Caemerer. Two vols. Berlin: Mittler, 1909. And other works. ART. 13.-GERMANY UNDER WILLIAM II, 1888-1913 2. Kaiser und Reich, 1888-1913: 25 Jahre preussisch- ART. 14.-THE TWO LAND CAMPAIGNS 1. Rural Regeneration in England. By William Sutherland. London: Methuen, 1913. 2. A Unionist Agricultural Policy. By a Group of Unionists. London: Murray, 1913. 3. The Occupying Ownership of Land. By Bevil Tollemache. London: Murray, 1913. - 509 531 - 556 582 THE QUARTERLY REVIEW. No. 437.-OCTOBER, 1913. Art. 1.- THE FINANCIAL DIFFICULTIES OF FEDERALISM. THE question of the substitution of a federal system of government for the United Kingdom in place of the existing unitary system has been widely discussed, but very little attention appears to have been given to an important, if not dominant, phase of this question, namely the problem of reconstructing the national finances on a federal basis. Even in high places there exists a contempt for economics which it is difficult to justify. Almost every great political question of the day will be found to rest ultimately upon an economic base; but British statesmen and politicians habitually treat finance as a secondary consideration, and appear to entertain a pious hope that somehow or other financial matters will ultimately adjust themselves on a sound and equitable basis. Illustrations of the dangers which attend such an attitude are afforded in the unsatisfactory relations that exist between national and local finance, the position of our Gold Reserves and of the Post Office Savings Bank, and the condition into which Irish finances, including Land Purchase, have been allowed to drift. In the interesting paper which he read before the British Association in September 1912, Mr Herbert Samuel claimed that the constitution of the United Kingdom was neither federal nor unitary. There are separate judiciaries, he said, in England and Wales, in Scotland and in Ireland, the House of Lords having the characteristics of a Federal Court of Appeal. The executive, he pointed out, is largely decentralised; ScotVol. 219.-No. 437, Z land and Ireland have their own Ministers; and of the fifteen Cabinet Ministers who deal with domestic affairs, only four exercise functions over the whole of the United Kingdom. The legislature, he said, is in the main unitary, but shows several traces of federalism. The legislation which it has passed is largely decentralised, nearly onehalf of the statutes applying only to parts of the United Kingdom. Now, whether Mr Samuel's dictum that the Constitution of the United Kingdom is neither federal nor unitary be correct or not, there can be no question that in fiscal matters the United Kingdom is a unit. There is only one consolidated fund for the United Kingdom, into which the gross proceeds of all taxation throughout the three kingdoms are paid. The whole system of Imperial finance is based upon the assumption that each of the three kingdoms should contribute to the common expenditure by equal taxes. When the union between Great Britain and Ireland was finally completed by the consolidation of the two Exchequers in 1816, Great Britain took over the Irish debt of 112,000,000l.; and it was agreed that henceforward all expenses incurred, together with the interest and charges on all debts hitherto contracted, were to be defrayed indiscriminately by equal taxes to be imposed on similar articles in each country, subject to such exemptions and abatements in Ireland and Scotland as circumstances might appear to demand. The final step in the equalisation of taxation in the two islands was, however, not taken until 1852, when Mr Gladstone introduced into Ireland the Income Tax, which up to that time had not been imposed there. It may be pointed out that Land Tax, Inhabited House Duty, Railway Passenger Duty and Patent Medicine Duties, are not leviable in Ireland at present. It will be desirable now to consider briefly the main characteristics of our fiscal system. In the first place it may be said that the United Kingdom has adopted the general policy of imposing fairly heavy duties on a restricted number of commodities, and taxes on a limited number of sources of direct taxation. This policy has in the main been justified, at least so far as the yield of taxation has been concerned, because, apart from the heavy additions made to the burden of the direct taxpayer by the Budget of 1910, the growth of revenue in the past twenty years has been largely due to the increased yield of taxes, and only in part to new taxes or to increases of old taxes. It may be claimed on behalf of this policy that it is much less expensive to collect revenues from a limited number of duties or taxes. The tax revenue of the United Kingdom may be divided into two groups, namely, (1) direct taxes, and (2) indirect taxes. The revenue derived from direct taxation during the year ending March 31, 1912, was 82,432,000Z., or 53.4 per cent. of the total tax revenue. The principal sources of direct taxation were as follows: Income Tax, 44,334,000l.; Estate Duties, 25,182,000l.; Stamps, 9,564,000Z.; House Duty, 2,110,000l. The indirect taxes are comprised under the heading of Customs and Excise. For the year ending March 31, 1912, Customs yielded 33,596,000l., the principal items being as follows: Tobacco, 17,342,000l.; Tea, 6,159,000l.; Foreign and Colonial Spirits, 4,216,000l.; Sugar, 3,059,000l.; Wine, 1,088,0007. The average amount of customs duties collected in the United Kingdom between 1905 and 1908 was 32,986,000l. per annum, or 15s. per head of the population. The average amount of customs duties collected in the principal protectionist countries during the same years was considerably less per head of population. In France the average amount was 9s. 2d. per head; in Germany 10s. 9d. per head; and in the United States 14s. 3d. per head. For the year to March 31, 1912, Excise yielded 38,250,000l., the principal items being Spirits, 18,511,000l.; Beer, 13,328,000l.; Licences, 5,556,000l. The total revenue derived from indirect taxation was therefore 71,846,000l., or 46.6 per cent. of the total revenue from taxation. The general tendency of Imperial finance has for many years been in the direction of placing the burden of taxation more and more upon the shoulders of the direct taxpayers. In 1871 the direct taxpayer contributed only 30 per cent. of the total tax revenue; in 1881, 35.5 per cent. ; in 1891, 43.5 per cent.; in 1901, 48.8 per cent.; and in 1912, 53.4 per cent. It is not possible here to go into all the political and economic consequences which have resulted from this great change of policy, but it is a matter which deserves the close attention of all politicians and economists. |