That is, by the end of 1897 France and Russia will have 58 battleships against 39 British, unless we have a new Naval Programme at once.

The following tables are compiled from materials collected by the same authority:

It will be seen from the foregoing table how much commerce the British navy has to defend in comparison with those of France and Russia. It appears, too, that for the first time in history both France and Russia are spending more than Britain in building new war ships. Between them they are spending more than double as much as Britain. Our naval supremacy cannot last long under such conditions.

It appears that, estimating the expenditure on the British navy at £15,500,000, we are only spending 1.6 per cent. on the value of our sea-borne commerce by way of naval assurance, and 12.7 per cent. on the value of our mercantile marine. Taking the French naval expenditure at £10,964,000, the French are spending 3.9 per cent. in proportion to their seaborne commerce, and over 105 per cent. in proportion to the value of their mercantile marine. Taking the Russian naval expenditure at £5,040,000, Russia is spending over 9 per cent. in proportion to her seaborne commerce, and 166 per cent. in proportion to the value of her mercantile marine. That is, France is spending on her navy 2 times as much in proportion to her sea-borne commerce as we are spending, and Russia is spending six times as much in the same proportion as we are spending. In proportion to the value of her mercantile marine France is spending eight times, and Russia thirteen times, as much as we are spending.

In proportion to the population of their respective colonies and dependencies, England is spending on her navy £4.5 per hundred subjects; France is spending on her navy.£31.4 per hundred. France is, in this proportion, spending seven times as much as we are spending. Russia has really_no.colonies and dependencies requiring naval protection. In whatever

1 Of this £1,919,927 is under the Naval Defence Act.

aspect, therefore, naval expenditure be regarded, France and Russia are spending far more than England is spending.

Large as is the amount which our navy costs, that amount is small considered as an insurance upon the commerce which our navy protects, and trifling in comparison with the insurance which France and Russia are prepared to pay. If our nation is to continue in the future, as it has been for two centuries, undisputed mistress of the seas, and if the imminent danger of national ruin is to be averted from our shores, it is necessary (1) that a large increase in our naval expenditure should be ungrudgingly sanctioned by Parliament and the country, and (2) that ministers who have shown themselves indifferent to our naval supremacy, and have recklessly hazarded the security of our homes and the very existence of our Empire, should be removed from power.

CHAPTER XVI.

FINANCE OF THE GLADSTONIAN GOVERNMENT.1

If there was one thing which, according to the Liberal tradition of fifteen years ago, the Liberal party possessed which was denied to the benighted Tories, it was the key to successful finance. The tradition was not an unreasonable one. From 1850 to 1874 the Conservative party had never been in office with a majority in the House of Commons. They had accordingly had no opportunity of dealing in a comprehensive manner with the National finances. On the other hand, the Liberal party had been almost continuously in power, and periods of great financial elasticity and commercial prosperity had enabled Mr. Gladstone to make great readjustments in National taxation, and to crown successive years with "surplus" Budgets. The two great "booms" of the century, it may be noted, occurred within this period, the one which followed the opening up of the country by railways and the discovery of gold in Australia, and the other remarkable one which succeeded the Franco-German war. On the other hand, when the Conservatives at last obtained office with a majority in 1874, things were already just upon the turn towards the down-grade, which continued slowly until, in 1878, the failure of the City of Glasgow Bank and the events which followed it shattered for the time the commercial stability of the country. There were troubles, too, abroad between 1876 and 1880, which necessitated large expenditure in naval and military preparations. Deficits took the place of the annual surpluses to which the country had become accustomed. Liberals lifted up their voices in righteous denunciation, and "Tory finance was one of the objects of fiercest attack and ridicule during the first Midlothian Campaign. The experience of his 1880-86 administration, however, taught Mr. Gladstone a lesson. A surplus of £933,364, with which, thanks to a readjustment of the malt duty, he was able to begin in 1880-81, became a deficit of £8,642,5432 in 1885-86. The experience of the Conservative Government of

1 Unionist finance, as contrasted with the finance of the previous Gladstonian Government, is dealt with in Chapter X., and the subject of taxation generally in Chapter XXIII.

2 Including £6,000,000 secured by the suspension of the Sinking Fund.

1886-92 taught him another lesson, for during these six years there was always an annual surplus, the aggregate of which amounted to 11,997,814. A monopoly of successful finance could no longer be claimed for the Liberal party.

Mr. Gladstone returned to power in 1892, and for the first year, during a part of which he was in office, the revenue just balanced the expenditure, the actual sum to the good at the end of the year being £20,000, which, as Sir William Harcourt very justly remarked, was "a pretty tight fit." But when provision came to be made for the following year, there was no question of surplus. The cloven foot of a deficit appeared. When the accounts were cast up, Sir William Harcourt found that he was called upon to meet an estimated deficit of £1,574,000. The expedient adopted to find the necessary money was a simple one. In the previous year it had been strongly urged that the income taxpayer was entitled to a remission of one penny, and it was with some reluctance that the Unionist Government had refused this concession. Sir William Harcourt, however, had no scruple in substituting for the contemplated remission of one penny an increase of one penny. Such an increase is of vastly more significance now than it was twenty years ago. It used always to be easy to lower the income tax whenever there was a surplus available, for such a reduction was popular with a large body of the electorate. Now, under the electoral control of non-income taxpayers nothing is more difficult than to effect a reduction of this tax, and income taxpayers have some reason to fear lest every penny added should be a permanent burden. When Mr. Gladstone appealed to the country in 1874, political power was largely in the hands of the payers of income tax, and Mr. Gladstone proposed to abolish that tax altogether. When Mr. Gladstone returned to office in 1892 he found that political power had passed almost entirely into the hands of non-payers of income tax, and his first financial expedient was to impose an increased tax at the rate of 7d. per pound on the income taxpayer. No political party, and probably no statesman, can plead entire innocence of opportunism, but the annals of our history present no parallels to the opportunism of Mr. Gladstone's public career, and of the Liberal party under his inspiration.

Lavish expenditure was a favourite charge of Mr. Gladstone and his followers against the finance of Conservative administrations. It is instructive, therefore, to find that the estimated expenditure for 1893-94 was £91,464,000, a "gigantic total," as Sir William Harcourt truly observed, and the highest annual expenditure on record, with the exception of 1885-86, the last year of Mr. Gladstone's previous administration, when the figure was £92,223,884. In the last year for which the esti

mates were framed by Mr. Goschen (1892-93), the expenditure was £90.375,000, so that there is in one year an increase of £1,100,000-a good commencement in the direction of that retrenchment which, according to the theories of Mr. Gladstone's earlier life, was the essence of sound finance. In this connection it may be noted that, however anxious may be the supervision of the Treasury, the careful examination of the estimates by the House of Commons is one of the great safeguards against extravagant expenditure. Nobody has insisted more strenuously than has Mr. Gladstone upon a scrutiny of the estimates as being the primary business of Parliament, and no one has protested more vigorously against "supply" being thrust into the background to make room for the legislative schemes of the Government. But in no session of Parliament have the facilities afforded for the examination and discussion of the estimates been more unsatisfactory than during that of 1893, when the estimates were thrust aside and hustled into September to make room for the abortive Home Rule measure which proposed to saddle the unfortunate taxpayers of Great Britain with heavier burdens than ever.

Party politicians on both sides inevitably appeal to totals when these are favourable to themselves, and ignore circumstances for which the Government may be wholly irresponsible. Thoughtful men, however, recognise that annual income and expenditure may be controlled by conditions which it is beyond the power of the Government of the day to influence, and that finance does not necessarily deserve laudation when there is a surplus or condemnation when there is a deficit. But, on the other hand, if one is to go below the surface at all, one must take account as well of these conditions indirectly bearing upon finance for which the Government is responsible, as of those which are beyond its control. Among the former is the influence of the conduct of the Government upon the public confidence, which is necessary for the prosperity of trade. That confidence began to decline in 1892, as the general election approached, and it disappeared altogether when the reins of power passed into the hands of the Gladstonian party. It is idle to expect that commercial and industrial confidence can be maintained under the rule of a Government whose conduct and principles are antagonistic to the views and the interests of the vast majority of those on the employment of whose capital and energy the development of our commerce and our industries depends. Subject to these observations, and leaving it to each political student to draw his own inferences, the following is a bird's-eye view of the results of the first year of Harcourt finance. The figures are from the "Statistical Abstract" for 1893.