£50,782,000. The surplus which Disraeli had computed at £461,0001 had reached £2,460,000. Seldom had the revenue proved more elastic; unhappily, however, the panic dread of France which had arisen in 1851, and which had not yet been allayed, forced the ministry to propose fresh expenditure for both army, navy, ordnance, and militia, and reduced the estimated surplus of 1853-4 to about one-third of the actual surplus of 1852-3, or to £807,000.

A surplus of this character was not large; and it was also affected by one consideration. Technically, the income-tax expired in 1853; and Mr. Gladstone, like Disraeli, was obliged to attend to the remonstrances of the critics who objected to the tax itself or to its inequalities. Unlike Disraeli, however, Mr. Gladstone shrank from the almost impracticable task of distinguishing between permanent and industrial incomes; and, instead of attempting to remedy a possible inequality by a readjustment of the income-tax itself, decided to redress the balance by imposing a fresh tax on property. Realty in England was originally subject to the payment of a heavy succession duty on each heir succeeding to the estate; for—as has been well said—"the casualties incident to feudal tenure were practically taxes on succession." But the country gentlemen

1 Disraeli's first Budget is in Hansard, vol. cxxi. p. 11. I have not thought it necessary to give any minute detail of it. The estimated expenditure is in ibid., p. 27; the estimated revenue and surplus in ibid., p. 34. 2 The figures in the Budget were as follows:

--Ibid., vol. cxxv. p. 1355; and cf. p. 1423.

3 Mr. Trevor, quoted in Report of Commissioners of Inland Revenue, 1870,

vol. i. p. 94.

of England in the seventeenth century succeeded in liberating their persons and their property from the old feudal obligations which they had inherited; and a Parliament of landlords in the eighteenth century refrained from resuming the burdens. from which their ancestors had relieved themselves. In the seventeenth century a probate duty was first imposed; in the eighteenth century a legacy duty was first introduced. But the probate duty pressed with unequal severity on the smaller estates, and a proposition to extend the legacy duty to real property was rejected by an unreformed House of Commons. 1

Hence a tax was already in existence, applicable to all personal property which passed by will, and which had never been extended to real property and to personal property passing by settlement. Mr. Gladstone decided in 1853 on terminating these exemptions. He anticipated that, as the new tax gradually came into force, it would add some £2,000,000 a year to the resources of the State. With this sum at his disposal, he was able to make an elaborate proposal for the reluction of the income-tax. That impost he proposed to continue for two years at 7d. in the pound, to reduce it after two years to 6d., and after three years to 5d. Thus he desired to provide for the ultimate abolition of twosevenths of the income-tax, and to supply, or rather more than supply, the deficiency by a succession duty.

The introduction of a succession duty constituted the main feature of the Budget of 1853. In addition, Mr. Gladstone applied the income-tax to incomes exceeding £100 a year, charging them, however, at a lower rate than that at which larger incomes were taxed; he extended the tax to Ireland, remitting at the same time the debts recently created due

1 The scheme for extending the legacy duty to real property was withdrawn after it had been carried through one of its stages by the Speaker's casting vote in 1796. Report of Commissioners of Inland Revenue, 1870, vol. i. p. 97.

2 The succession duty was expected to produce £500,000 in 1853-54, £1,200,000 in 1854-55, £1,600,000 in 1855-56, and £2,000,000 in 1856-57. Hansard, vol. cxxv. p. 1399. The usual criticism at the time was, that these estimates were much too low; they proved to be much too high. Report of Commissioners of Inland Revenue, 1870, vol. i. p. 97.

from Ireland to the Treasury; and he increased the duties on Scotch spirits from 35. 5d. to 4s. 8d., on Irish spirits from 25. 8d. to 35. 4d. a gallon, assenting to the proposal which Naas had made, and which the Whig Ministry had hitherto resisted, that allowance should in future be made for the waste of spirits in bond.

These various changes raised the surplus of £807,000, with which Mr. Gladstone set out, to one of £2,151,000. With this surplus he proposed to repeal the duty on soap;1 to reduce the duties on tea, advertisements, carriages, dogs, men-servants, apples, cheese, cocoa, butter, raisins, and on 133 other articles; to abolish the duties on 123 other articles, to reduce the rates of postage to the colonies, and to trust largely to the recovery, which all experience proved invariably took place in the revenue after remissions of taxation, to replace the loss which these changes would in the first instance involve.

A Budget of this comprehensive character had rarely been brought forward by any financier. It emphasised in a striking

1 The repeal of the tax on soap marks an epoch in financial history which is worth observing. Adam Smith had condemned taxation on the necessaries of life, especially mentioning salt, leather, soap, and candles. Wealth of Nations, vol. iii. p. 337. The tax on salt was largely reduced in 1822 (ante vol. ii. p. 125), and expired in 1825; the tax on leather in 1830 (ibid., p. 443) ; the tax on candles in 1831 (ibid., vol. iii. p. 203). The repeal of the tax on soap, therefore, completed the work which Adam Smith had advocated nearly a century before. Cf. Dowell's History of Taxation, vol. ii. p. 322.

2 These changes involved the following loss :

Carriages, Men-servants, Dogs, Horses, Post-Horses.

370,000

Tea

3,000,000

Postage, Colonial

40,000

Apples, Cheese, Cocoa, Nuts, Eggs, Oranges, Lemons,

manner the superiority of Mr. Gladstone to Disraeli. But Mr. Gladstone was not satisfied with this great scheme. Consols which could be paid off at a year's notice stood at a little over par. The New 3 per cents., which could not be paid off for another twenty years, stood at about 103. The difference between the price of these two stocks represented the value of the guarantee of the Government to pay 3 per cent. on the "new threes" for a further twenty-one years. Mr. Gladstone assumed that, by guaranteeing some of the stock which had no guarantee, he could appropriate for the public benefit the increased value which would thus be imparted to it. He therefore decided to offer the holders of the Old 3 per cent. stock the right of exchanging it either for Exchequer Bonds or for 31 or 2 per cent. stock. Not more than £30,000,000 either of Exchequer Bonds or of the New 2 per cent. stock was to be issued, but no limit was to be placed on the issue of the New 3 per cent. stock.1

nate.

Such, briefly stated, were the great financial proposals of 1853. From one point of view they were singularly unfortuThe new succession duty did not realise one-fourth of the sum which its author was advised that he might rely on obtaining from it. Long before two years were over, circumstances occurred which made it necessary indefinitely to postpone the proposal for progressively reducing the income-tax, and which, by depressing the price of stock, made any large voluntary conversion of debt impracticable. The financial arrangements of 1853, therefore, compare unfavourably with. those of 1842 and 1845. Peel's great Budgets can be judged

1 Exchequer Bonds were practically a new security. They were to bear interest at the rate of £2, 155. per cent. up to 1864, and at the rate of £2, 10s. per cent. up to 1894. Hansard, vol. cxxv. p. 818. Mr. Gladstone felt himself able to float them from the circumstance that the outstanding Exchequer Bills only bore, at the time, £1, 10s. per cent. interest. Holders of Consols and Reduced Threes were to be at liberty to exchange £100 of either of them for Exchequer Bonds, or for £82, 10s. New 3 per cent. stock, producing £2, 175. 9d. a year and irredeemable for forty years (ibid., p. 829), or for £110 of irredeemable 2 per cent. stock (ibid., p. 833). In addition to these proposals, Mr. Gladstone simultaneously arranged for the consolidation of the old South Sea stocks. Ibid., p. 814. But this portion of his scheme was not of sufficient importance to make it necessary to dwell upon it.

from their results. Mr. Gladstone's first Budget can only be judged from its intention. Yet in breadth, in comprehension, in boldness, in knowledge, and in originality it may be compared with Peel's greatest efforts. Search English history from the days of Halifax to the present time, and it is impossible to try it by a severer test.

Yet there was one defect in the Budget which was indeed characteristic of its author, but which ought to have hindered its proposal. It was marked by the over-confidence

The defect

of a good man who believed in the regeneration of the Budget. of the world. Youth naturally looks forward, and, though Mr. Gladstone had passed his forty-third birthday, he retained in middle age the physical vigour and the mental freshness of youth. With a supreme faith in the ultimate improvement of mankind, he could not bring himself to believe that progress would be interrupted in his own time by the calamity of a great war. Instead of dealing with a known present, he was thus induced to rely on an unknown future, and to speculate on the growing revenue of coming years.

From the standpoint of a prudent financier, such confidence was unwise. The sad experience of accumulated centuries has proved that man is among the most cruel and combative of animals; and, till either his nature be altered, or the deeper causes which lie at the root of modern wars be extirpated, fighting will not cease in the world. There is reason for fearing, indeed, that the order which emanates from civilisation in itself leads to war. For order produces the growth of population; and peoples overtaking their means of subsistence. struggle to conquer the opportunities which they find it more. difficult to obtain at home in the possessions of their weaker neighbours. The same great laws which threw uncivilised hordes of Celts and Goths on early and medieval Europe are throwing equally great hordes of civilised Europeans on savage countries. Some great nations already encamped on the margin of the ocean are straining across the sea to new continents, are driving the Maori or the Indian into a narrower