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working classes out of rates and taxes. flatter themselves that these domestic luxuries are consistent with those warlike necessities, and that the revenue is of infinite expansion, as if the millennium were at hand. But we have too many irons in the fire, and too many vulnerable points

in India, in all Asia, in America, in Egypt, in South Africa. Suppose that after this war we were to drift into another, accompanied by a revolt in South Africa or elsewhere, and that at the same time the delicately balanced equilibrium of our commercial prosperity were to suffer disturbance. How should we then look back on our increase of internal as well as external expenditure, and with what provision for the future?

So far from increasing, we ought now to begin to diminish our internal expenditure. It is not difficult to indicate many weak points, but one is sufficient for the present. The local subventions, annually transferred from central to local revenues, cannot be sound finance. One power collects them, another spends them. The locality which spends them has but little interest in their being economically imposed, and the Exchequer which collects them even less interest in their being economically expended. Intended to relieve rates, they have risen with rates, and have only added to local extravagance. Nor is it an answer to say that this is the business of each locality. Taxes and rates only differ in words; the persons who pay are the same, and to increase their rates is to diminish both their ability and their willingness to pay their taxes, and vice versa. Moreover, local subventions are largely paid out of death duties, which, being taxes on national capital, ought not to be expended locally, or even annually, but put to reserve. Indeed, Sir, it is time to form a national reserve. It is time to view internal in the light of external, and local in the light of central,

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expenditure. It is time to consider our national finances as a whole; and if Parliament were to give notice that, after a term of ten years so as to avoid temporary difficulties, all local subventions should cease, the nation would then have over ten millions a year to pay for this and for future wars. Si vis pacem, para bellum.

MR. AUSTEN CHAMBERLAIN ON FISCAL POLICY

FROM The Times, MONDAY, OCTOBER 19, 1903. The Chancellor of the Exchequer is to be congratulated on his speech which you report this morning. He recognizes that there are other things to be considered besides imports and exports. He rises to the hopes which you expressed in your article yesterday, when you said:

The country will expect the Government to apply them'selves seriously to the questions of national defence, and 'particularly to the reform of the War Office and the Army, while their late colleague is educating the country as to the I conditions of the international industrial struggle.'

He sees that we must consider our national finances as a whole. He sees that more import duties may be necessary for other purposes than retaliation on protectionist nations and for other purposes than the effort to make the British Empire self-supporting. He sees that they should be used to lower the income-tax to a peace level, from which we may raise it hereafter to pay for war. In truth, the Government has many excellent reasons for import duties and for indirect taxes in general without going beyond the purpose of revenue, which after all must remain the main purpose. More indirect taxation would not only relieve the income-tax and provide a reserve for war, but would also tend to equalize direct and indirect taxpayers, and to make the

general body of consumers feel the immense and increasing expenditure, which at present they regard with too light a heart. So far as the cost of production is not unduly raised, the policy of increasing import duties for the sake of revenue would be for the general good. The new Chancellor of the Exchequer therefore is on the right path. But I venture to suggest that he has not yet realized how entirely it is his duty to recall the agitated mind of the people from visionary schemes of retaliation to the national revenue, expenditure, and debt, which are by no means in a satisfactory state for discharging the necessary functions of government.

In the first place, he does not really prove that it is the general good of the nation to empower the Government to impose import duties, beyond the main purpose of revenue, for the further purpose of retaliating on foreign nations who send us our imports but refuse to take our exports free. Statistics force him to admit that our exports are not diminishing. Like the Prime Minister and like his father, he concentrates attention on the familiar fact that we are not balancing our imports by our exports, but does not prove that we are not balancing them out of income. Hence, though it may be true that some classes might be benefited by import duties levied on the whole community, provided always that extreme care were taken not unduly to raise the cost of production, yet it does not follow that a policy for the benefit of these classes would be for the general good. The foreign trade of our great mercantile country is conducted by an automatic machinery, in which our imports are balanced by a highly complex sum comprising exports, freights, interest on foreign loans, dividends on foreign stocks, bankers' commissions and remittances from abroad, together with occasional shipments of bullion from home. So long as this whole balance is

struck out of the income of the general body of our traders, without diminishing the general capital of the country, one does not see how it can be for the general good, for the sake of particular classes, to plunge into an alteration of our system of free trade. Now, the Prime Minister has himself confessed in his Economic Notes' that he can find no evidence that we are living on our capital.

Secondly, the Chancellor of the Exchequer does not seem to perceive that the retaliatory policy is at present placed before the country in a very indefinite and ambiguous manner. The Prime Minister proposes duties on our imports from foreign nations, in order to induce them to take our exports to them free; and, when this object has been gained, then to remit those duties. Mr. Joseph Chamberlain proposes duties on our imports from foreign nations, in order that we may permanently get these imports free from our own colonies. But these two objects are inconsistent. Suppose that in the future a duty is placed on a given commodity, say corn, which we have hitherto imported in great quantities from the United States. Our colony of Canada could grow more corn in consequence. But suppose, again, that the United States were thereupon to agree to take our exports free. In pursuance of Mr. Balfour's policy we should have to remit the duty on corn imported from the United States. But what would then become of Canada? She would immediately begin to lose on the corn we encouraged her to grow. While, on Mr. Balfour's plan, the import duties might be temporary and end in a universal system of free trade, they must, on Mr. Joseph Chamberlain's plan, be permanent and end in an Imperial system of protection. It is evident that the country will have to make up its mind between a temporary and a permanent policy of duties on imports from foreign nations. A temporary retalia

tory policy against foreign nations would not benefit our Colonies, but the reverse; to benefit our Colonies their production must be permanent, and the retaliatory duties on our imports from foreign nations must be permanent. The country has to choose between Mr. Balfour and Mr. Chamberlain. Their policies are not the same, but have objects which are inconsistent. Universal free trade is one thing; a self-sufficing Empire, protected by permanent import duties against foreign nations, is another thing.

Thirdly, the Chancellor of the Exchequer has hardly as yet perhaps realized the difficult problem of the relation of the State to trade. It is highly desirable that all nations should take our exports free, that the British Empire should be self-supporting, and that English farmers, manufacturers, exporters, and all the labourers working for them should grow rich. It does not follow that Government is able to ensure these desirable ends by the simple machinery of import duties and preferential tariffs. There is much to be said against giving them the power. The Government cannot have one continuous fiscal policy. The present Government has split upon it. It has divided its own party, and cannot bind the Liberal party. Are we to oscillate between free trade and fair trade at every change of Ministry? How can Mr. Chamberlain guarantee a permanent arrangement with the Colonies, which are likely to quarrel with us if any arrangement turns out unsuccessful? When we proclaim an Imperial commercial union of the British Empire contra mundum are we quite sure that the world will not combine to attack the scattered units of the British Empire? At home, again, there is the danger of Customs-house politics, of the constant lobbying of wire-pullers, and of the agitation of different classes of traders, each wanting to get