The New English Budget (February 1857)

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In Marx's Notebook for 1857, in his entry for February 20, this article is entitled "The Budget of Lewis". The rough drafts which are extant consist of two parts: "The Budget of Sir G. Lewis" and "Direct and Indirect Taxation".

London. Feb. 20, 1857.

Financial theatricals have suffered a severe shock at the hands of Sir George Lewis, the present Chancellor of the Exchequer. With Sir Robert Peel, the delivery of the financial statement had become a sort of religious act, to be performed with all the solemnities of State etiquette, magnified by great efforts of rhetorical plausibility, and never to be done. under five hours' time. Mr. Disraeli imitated, and Mr. Gladstone almost exaggerated, Sir Robert's ceremonious behavior toward the national purse. Sir George Lewis dared not infringe upon the tradition. So he made a four hours' speech; crawling, drawling, bobbing around, till he was all at once interrupted by peals of laughter, caused by scores of honorables seizing their hats and rushing out of the House.

"I am sorry," exclaimed the dismal actor, "to continue my speech to an audience of reduced numbers; but I must state to those who remain, what would be the effect of the proposed alterations."

When still one of The Edinburgh Review sages, Sir George Lewis was renowned for ponderousness of argumentation rather than for solidity of argument or sprightliness of diction. His personal shortcomings account certainly, to a great extent, for his Parliamentary failure. Yet there were other circumstances, altogether beyond his control, which might have discomfited even a regular Parliamentary prize-fighter. According to Sir William Clay's indiscreet statement before his Hull constituents, Lord Palmerston had originally made up his mind for a continuance of war-taxation during a time of peace, when the threatening income-tax motion which, at the meeting of the Commons, was announced by Mr. Disraeli and seconded by Mr. Gladstone, compelled him at once to beat a retreat, and to change his financial tactics all of a sudden. At shortest notice, therefore, poor Sir George Lewis had to alter all his estimates, all his figures, his whole scheme, while his speech, prepared for a war budget, had to be served up for a quasi peace budget—a quid pro quo that might have been entertaining if it had not been drowsy. But this is not all. The budgets of Sir Robert Peel, during his administration from 1841 to 1846, derived an extraordinary interest from the fierce struggle then raging between Free Traders and Protectionists, profit and rent, land and town. The budget of Mr. Disraeli was looked for as a curiosity, involving as it did the revival or final abdication of Protectionism, and Mr. Gladstone's budget was unduly exaggerated as the financial settlement, for a septennial period at least, of triumphant Free Trade. The social conflicts reflected iii those budgets endowed them with a positive interest, while the budget of Sir George Lewis could at the outset only claim the negative interest of forming the common point of assaults for the enemies of the Cabinet.

The Budget of Sir G. Lewis, so far as his original ways and means are concerned, may be resumed in very few words. He strikes off the nine additional pence of the income-tax imposed for the war; reducing it thus from 1s. 4d. in the pound to 7d., at which rate it is to continue till 1860. On the other hand, the whole war-tax on spirits, and part of the war-tax on sugar and tea, are to be retained. This is all.

The income-tax of the present financial year, including the additional 9d. of the war-taxation, produces a revenue of more than £16,000,000, raised from the different classes of society in about the following mariner:

Schedule A—Real Property	8,000,000
Schedule B—Farmers	1,000,000
Schedule C—Public Funds	2,000,000
Schedule D—Trades and Professions	4,000,000
Schedule E—Salaries	1,000,000
Total	16,000,000

From this tabular statement it is evident that the income-tax weighs exclusively upon the upper and middle classes; indeed, more than two-thirds of it is made up from the incomes of the aristocracy and the higher ranks of the middle class. But, what with the other war-taxes—what with the high prices of provisions and the rising rate of discount, the lower layers of the English middle class have been severely pinched by the income-tax, and are therefore most impatient to throw it off. Nevertheless, the cries they raised would hardly have been re-echoed in the press, and certainly not in the House of Commons, if the aristocracy and upper middle class had not taken the lead of the agitation, eagerly seizing the opportunity to hide their narrow-minded selfishness under the broad mask of philanthropy, and getting rid of an impost, the burden of which they are unable to shift on the shoulders of the multitude. While in France, during the time of the République honnête et modérée, the establishment of an income-tax was warded off by branding it as surreptitious socialism, in England the abolition of the same tax is now attempted by pleading sympathy with popular sufferings. The game has been played very cleverly. On the return of peace, the spokesmen of the petty middle class turned their attack not upon the income-tax itself, but only on its war-surplus and its unequal distribution. The upper classes feigned to embrace the popular grievance, only to sophisticate its original meaning, and to convert a cry for diminished taxation of small incomes, into a cry for the exemption from taxation of large ones. In the heat of combat, and the impatience of immediate alleviation, the lower middle class were neither aware of the shuffle played upon them, nor did they care about terms which secured the support of powerful allies. As to the working-classes, without organs in the press, and without votes in the electoral bodies, their claims were quite out of the question.

Sir Robert Peel's Free-Trade measures rested notoriously on the income-tax as their basis. It will be easily understood that direct taxation is the financial expression of Free Trade. If Free Trade means anything, it means the removal of customs, excise duties, and all imposts directly interfering with production and exchange.

Now, if taxes are not to be raised by customs and excise duties, they must be directly derived from property and income. With a certain amount of taxes, no abatement can take place in the one mode of assessment without a corresponding increase of the other. They must rise and fall in inverse ratio. If, then, the English public want to do away with the greater part of direct taxation, they must be prepared to lay heavier duties on commodities and materials of manufactures—in one word, to renounce the Free-Trade system. Thus, indeed, the present movement has been interpreted on the Continent of Europe. A Belgian paper says that

"at a meeting held at Ghent to discuss the policy of Free Trade or Protection, one of the speakers urged the new opposition in England to the income-tax as proof of a change of the national opinion in favor of protection."

Thus, in one of their recent addresses, the Financial Reformers of Liverpool utter their apprehension lest Great Britain should return to the principles of restriction.

"We can," they say, "scarcely believe in the possibility of such an exhibition of national infatuation; yet every reflecting man of ordinary intellect lutist see that it is to this end, and to nothing else, that the present efforts tend."

As Free Trade, and consequently direct taxation, are in Great Britain offensive weapons in the hands of the industrial capitalist against the landed aristocrat, their common crusade against the income-tax bears witness of the same fact economically which was politically demonstrated by the Coalition Cabinet—the lassitude of the British middle classes, and their longing for compromises with the oligarchs, in order to escape concessions to the proletarians.

Sir G. Lewis, in striking sail before the Anti-Income-Tax League, exhibited at once the reverse of the medal. No remission of the paper duty, no forsaking of the fire-insurance tax, no abatement of the wine duty; but, on the contrary, increase of the import duties on tea and sugar. According to the settlement of Mr. Gladstone, the duty on tea was to be reduced from 1/6 per pound, first to 1/3, and then to 1/; and the sugar duty from £1 per cwt., first to 15/, and then to 13/4. This refers to refined sugar only. White sugar was to 1w reduced from 17/6 successively to 13/2 and 11/8; yellow sugar from 15/ to 11/8 and 10/6; brown sugar from 13/9 to 10/7 and 9/6; molasses from 5/4 to 3/9. The war arrested this settlement; but according to the law passed in 1855, it was now to be realized successively in 1857 and 1858. Sir G. Lewis, who, on the 19th April, 1855, had raised the tea duty from 1/6 to 1/9 per pound, proposes to throw its reduction over four years—diminishing it to 1/7 for 1857-58, to 1/5 for 1858-59, to 1/3 for 1859-60, and finally to 1/. With the sugar duty, he proposes dealing in a similar way. It is known that the supply of sugar has fallen below its demand, and that its stocks are reduced in the markets of the world—there being in London, for instance, at present only 43,700 tuns, against 73,400 two years ago. Thus the prices of sugar are, of course, rising. As to tea, Palmerston's Chinese expedition has succeeded in creating an artificial limitation of supply, and a consequent rise of prices. Now, there is no economist who will not tell you that, in a period of dearth and rising prices, any reduction of duty, to benefit not only the importer but the general consumer also, must be sudden and striking. Sir G. Lewis asserts, on the contrary, that, with rising prices, reductions of duty are the surer to accrue to the benefit of the consumer the less they are perceptible. This assertion stands on a level only with his strange doctrine that Post-Office charges are a direct tax, and that complication constitutes the redeeming feature of taxation.

Decrease in the income-tax to be counterbalanced by the increase in the duties on tea and sugar—the latter being common necessaries with the British people—means evidently diminishing the taxes on the rich by augmenting the taxes on the poor. Such a consideration, however, would not have interfered with the vote in the House of Commons. But there are the tea-dealers, who have entered into large contracts and arrangements on the express faith, as they say, in the statement made on the 19th of April, 1856, by Sir George Lewis in the House of Commons—a statement again repeated to them by the Board of Customs on the 11th November, 1856—to the effect that "the duty on tea would be reduced to 1s. 3d. on the 6th of April, 1857." There they are, standing upon their bond and upon budget morality. And there is Mr. Gladstone, glad to revenge himself upon Palmerston, who quite treacherously ousted the Peelites, after having used them to overthrow, first the Derby administration, then Russell, and lastly their own patriarch, old Aberdeen. Besides, as the author of the financial settlement of 1853, Mr. Gladstone must of course defend his own standard budget from Sir G. Lewis's irreverent violations. Accordingly, he gave notice that he should move the following resolution:

"That this House will not agree to any addition to the rates chargeable by the Custom-duties Acts of 1855, upon the articles of tea and sugar."

I have so far touched upon one side of the budget only—its ways and means. Let me now look at the other side of the balance-sheet—the proposed expenditure. If the proposed ways and means are characteristic of the present state of official English society, the intended expenditure is still more so of its actual government. Palmerston wants money, and much money, not only to plant firmly his dictatorship, but also to indulge his taste for Canton bombardments, Persian wars, Naples expeditions, &c. Accordingly he proposes a peace establishment costing about £8,000,000 in excess of the highest expenditure since the peace of 1815. He wants £65,474,000, while Mr. Disraeli contented himself with £55,613,379, and Mr. Gladstone with £56,683,000. That the views of the Oriental war-glory should, in due course of time, dissolve in heavy tax-gatherers' bills, was an event of course to be anticipated by John Bull.

But the annual surplus taxation accruing from the war cannot be estimated at more than £3,600,000, viz.: £2,000,000 for Exchequer bonds falling due in May, 1857; £1,200,000 for the interest of £26,000,000 of new funded debt, and £8,000,000 of unfunded debt; lastly, about £400,000 for the new sinking fund, corresponding to the new debts. The war balances do not, then account, in fact, for half of the surplus expenditure claimed by Lord Palmerston. But his military estimates do. The whole Army and Navy estimates from 1830 to 1840 did not average £13,000,000, but they amount in the Lewis budget to £20,699,000. If we compare them with the total military estimates of the last five years preceding the war, we find that the latter reached 1849 to £15,823,537; in 1850, to £15,320,944; in 1851, to £15,555,171; in 1852, to £15,771,893; in 1853-54, to £17,802,000, the estimates of 1853-54 having themselves been fixed with the prospect of an imminent war.

Clinging to the orthodox Whig doctrine that the sap of the tree is destined to afford food for the vermin, Sir G. Lewis pleads the increased national wealth as shown by the export and import tables of 1856, as a reason for the increased Government expenditure. If the conclusion were true, the premise would, nevertheless, remain false. It suffices to point at the many thousands of destitute workmen now roaming through the streets of London and applying at work-houses for relief; at the broad fact resulting from the official revenue returns that, during the year 1856, the British consumption of tea, sugar and coffee has considerably declined, simultaneously with a slight increase in the consumption of spirits; at the trade circulars of the past year, which, as acknowledged by Mr. Wilson himself, the present Secretary of the Treasury, plainly prove that the profits of the British trade of 1856 bear a contrary proportion to its enlargement. It would seem that the natural tactics of an opposition leader would be to direct his main batteries against this extravagant expenditure. But in so doing Mr. Disraeli would risk being stabbed in the back by his own retainers, should he directly front this aristocratic lavishness. He is, therefore, driven to the over-refined maneuver of resting his motion against the Palmerston Budget, not on its extravagant expenditure for 1857 and 1858, but on its prospective deficiency of revenue in 1858-'59, and in 1859-'60.

At all events, the House of Commons debates on the Budget will be highly interesting, not only that the fate of the present Administration hungs upon them, and that they will exhibit the curious spectacle of a Disraeli-Gladstone-Russell coalition against Palmerston; but the very dialectics of a financial opposition which insists upon the abolition of the income-tax, forbids the increase of the sugar and tea duties, and dares not openly strike at extravagance in expenditure, must prove quite a novelty.