Part 46

March 10.

Dined with the Duke. Cabinet dinner. Only the Peers there. The others detained by Lord Palmerston's motion on Portugal, on which there was a majority of two to one, 150 odd to 70 something. Huskisson made a very bad dull speech. We talked about a successor to the Speaker. They seem to think he will not resign now, as he would not get a good pension in the present temper of the House.

The candidates are Sir J. Beckett, Littleton, G. Bankes, Wynn of course. I mentioned Frankland Lewis as a good man, which he would be. I dare say the Chairs will think he should be elected unanimously.

It seems there must be a Bill of Indemnity for not taking the declaration, two Bishops, Chester and Oxford, not having taken it. The Duke finds he has at Dover, as Lord Warden.

We had some little conversation about the income tax, which the Duke is very hostile to, and I am glad we shall not have it.

March 11.

The Russians have at last sent their reply to our expostulatory note. I have not had time to read it. Lord Heytesbury calculates that the last war cost them 12,000,000£, but they endeavour to conceal the amount.

Peel told me the House was quite excited against the Bombay judges, and that the division fairly represented its real opinion.

March 12.

There was but one black ball in the election of Lord Clare, and the Chairs think that was put in by mistake; no one objected.

March 13.

Read Sir H. Parnell's pamphlet on taxation.

Cabinet room at two. I had only got half through the Russian answer when the Cabinet met for the subject of taxation.

I rather expected to find that the Duke had had communications with Goulburn, and that the idea of a property tax was given up. However, that seemed not to be the case. It was determined the whole beer duty should be given up in any case.

£ The expected revenue is 50,250,000 The expected expenditure 47,930,000 ---------- Surplus 2,320,000 Add by reduction of Four per Cents 777,000 By 1s. 6d. on British, and 2d. on Irish and Scotch Spirits 400,000 By stamps in Ireland 220,000 3,717,000 Deduct beer tax, £3,200,000, but the loss to the revenue from the probable increase of malt, calculated at 2,500,000 ---------- 1,217,000 Probable increase of revenue 450,000 ---------- Sinking fund 1,667,000

The conversion of stock into annuities is proceeding at the rate of 1,000,000 pounds a month, and the increased annual charge already is 250,000 pounds. Certainly to this extent the estimated three millions of surplus might be fairly reduced; but to reduce the surplus to 1,200,000 pounds or 1,600,000 pounds would be an entire abandonment of the system adopted by the Finance Committee and the Government.

It seemed to me that the members of the House of Commons were all in favour of the income tax; all the Peers against it. The Duke was strongly against it. He apprehended the reduction of establishments, and particularly the pressure of the tax on men of 1,200 pounds a year, and under.

If I imposed the income tax, I would make it the means of a thorough reconciliation between the higher and lower classes. In this manner only would it be effectual and make a strong Government.

I object greatly to Goulburn's deductions from the old income tax. He excepts occupiers; that is, as regards land occupiers, quite right; but he excepts manufacturing capital and capital engaged in commerce. Now, why should the man who has 100,000 pounds in a manufactory, and makes 10 per cent, on that sum, pay nothing, while the man who invests his 100,000 pounds in the funds gets only 3 1/2 per cent, and pays 5 per cent, out of that reduced profit? The man who has a manufacturing or commercial capital is a saving man. He can afford to pay something to the State, and why should he not? So the lawyer who may be making 10,000 pounds a year is to pay nothing. If he takes 5,500£. a year and becomes a judge, he pays 137 pounds 10 shillings. Yet his interest is still for life.

In all this there seems to me unfairness.

If the tax be imposed as it is proposed, it will be very difficult to include afterwards the classes now exempted. It will be impossible to take off the tax, and whenever a tax is unpopular, those upon whom it presses will say, 'Take it off. It is only adding 1/4 or 1/2 per cent. to the income tax.'

A real property tax is the fairest of all taxes--but an income tax is the most unfair even when it affects all income; but when it affects the income of some who have a life interest, and not the income of others in the same situation, it is most unfair indeed.

It is quite erroneous to suppose that those who pay an income tax are the only persons who suffer from it. The reduction of establishments, the diminished consumption, the increased economy in every article of expenditure on the part of those affected by it have necessarily the effect of reducing the wages of labour. The labourer may buy some things cheaper, but he has less wherewith to buy.

Sunday, March 14.

Saw Hardinge at two. Told him how we stood as to the question of taxation. He said he thought the income tax would be popular, but agreed with me in thinking it should be established on strictly just principles.

Cabinet at three. Goulburn read a new statement showing the surplus this year, if we reduced beer and leather, and next year too. The surplus this year is about 2 millions. Next year about 1,500,000£.

The income tax reaches the funds, and the Irish, and the parsimonious, and the rich--so far it is good, but it likewise reaches the man of 100£ a year. It tends to diminution of establishments, to diminished demand for labour. To create an alteration in demand generally.

It was proposed to exempt professions and trades. This was unjust, and it would have led to an entire separation and hostility between the landed proprietors and the united body of labourers and manufacturers.