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 cla.s.ses. 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 cla.s.ses 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.

These last would have joined on all occasions in urging a further and still a further increase of income tax, and would never have consented to a tax on consumption. The income tax would finally absorb all other taxes.

Another great objection to the income tax now is that it would have the effect of perilling the reduction of the 3 per cents.

The Duke, Rosslyn, and I were decidedly against income tax. Lord Bathurst and Lord Melville, as well as the Chancellor, less decidedly so, but still in favour of abiding by the reduction of the beer and leather tax. Aberdeen said nothing, neither did Sir G. Murray, so they were understood to go with the majority.

Goulburn acknowledged the discussion had to a great extent changed his opinion, and that he was not then prepared to propose the tax.

Herries seemed much in its favour; but more, as it seemed to me, because he wished to maintain a large surplus according to the decision of the Finance Committee than for any good reason. Peel was decidedly for a property tax.

He wished to reach such men as Baring, his father, Rothschild, and others, as well as absentees and Ireland. He thought too it was expedient to reconcile the lower with the higher cla.s.ses, and to diminish the burthen of taxation on the poor man. I accede to the principle; but I doubt whether taxes on consumption do really press more heavily on the poor man than an income tax. What he has to look to is not the actual price of the article he wants, but the proportion which his wages bear to that price. It matters little to him what the price of candles may be, if he has not money wherewith to purchase them. That system of taxation is best for the poor man which most tends to increase the funds for the employment of labour; and every disturbance in the system, every alteration of demand, does intrinsic mischief.

After this matter was decided, Peel behaving most fairly, and declaring he would support the decision of the Cabinet whatever it might be, and that in this case the decision of the Treasury was to be princ.i.p.ally looked to, we talked of Queen Donna Maria, in whose name Don Pedro has established a Regency in Terceira.

I read Leopold's letter to Lord Aberdeen, in which he refers to his letter of February 11, for the statement of his views in taking the Greek coronet, saying that he only acceded from courtesy, and as a matter of form, to the protocol, and further urging some alteration in the frontier. He has made an application for a joint guarantee by the three Powers of a loan of 60,000,000 paras, or 2,400,000. Now we only agreed to guarantee 50,000 a year, and that for troops. Nothing will be said upon this point till he has withdrawn his letter. He seems to be Aberdeen's pet. I do not think, had the Greeks searched Europe, they could have found a man whose character was more congenial to their own.

_March 17._

Leopold has withdrawn his obnoxious letter.

_March 18._

House at five. Debate on the Duke of Richmond's motion for a select Committee on the state of the labouring cla.s.ses, and the effect of taxation upon the productive powers of industry.

A most dull debate, till Lord Holland spoke. I answered him. Lord Lansdowne next, then the Duke. I spoke, showing the impracticability of the Committee. I however showed up Committees rather too much. This Lord Lansdowne took hold of, not very fairly, but he did it well.

We had in the House 69; they 39.

With proxies we had 140 to 61. My uncle voted in the minority, and so did Coplestone. Dudley, Lord Malmesbury, Lord Gower, voted with us.

The Whigs, Brunswickers, and Canningites were in the minority. The Duke of c.u.mberland was there.

I find we have some recruits--in proxies Lord Lauderdale, Duke of Bedford, Downshire, Lord Wilton; and Lord Jersey sits behind us. He has now Lord Lauderdale's proxy. All this is consequent upon Lord Rosslyn's accession.

Lord Grey has now no one left. No one expressed a wish to turn out the Ministers.

_March 19._

It seems that in the House of Commons Huskisson made a friendly speech, finding he can do no harm, and Lord Althorp a very friendly one. In short, everybody seems to be of opinion that the worst thing that could be done would be to turn out the Government.

Peel says, and so does Herries, that the House is in favour of an income tax. That what we have determined upon is the best for this year, but that next year there must be an income tax.

Cabinet. Leopold wants more money. It was agreed he should have 70,000 pounds a year loan guaranteed to him for seven years, instead of 50,000 pounds.

The holders of 4 per cents. are to have the option of 100 pounds stock 3 1/2, or 70 pounds stock 5 per cents. Trustees may only convert into the 3 1/2 per cents.

_March 20._

Chairs at 11. They have made some alterations in the letter to the Indian Government respecting their conduct, and have praised Lord William for his _perseverance_, &c. This is contrary to the Duke's view and to mine. I shall see whether I can allow their amendments.

I find they have likewise altered much in the letter relative to Batta.

_March 23._

The Duke, Lord Bathurst, and Rosslyn went away at 2 to the Cabinet, where they decided against the Jew Relief Bill. The bishops have intimated that they must unanimously oppose it.

Debate on Lord Clanricarde's motion on the eternal Terceira question. The Duke spoke very well. The House was flat. The division with proxies 126 to 31, 4 to 1. We have now of Whig proxies Bedford, Lauderdale, Wilton, Downshire, Belhaven, Meldrum, and Lord Jersey.

_March 24._

Cabinet dinner at Sir J. Murray's. Considered what course should be adopted upon P. Thompson's motion for a committee to revise taxation. Peel still hankers after the property tax, and rather unwillingly opposes this motion.

However, it will be done on the ground that the remission of such a question to a committee would derange, by existing apprehensions and hopes, the whole industry of the country. In fact it would likewise vest the Government in the committee. Peel, Planta, and Holmes all think the division will be close. I do not apprehend that, if the debate be well conducted.

Had a long conversation with the Duke upon Indian matters. The recollections of his youth are strong upon him, and he still clings to the old forms.

_March 25._

Read some evidence before the Commons on the China trade.