CHAPTER V

WAR FINANCE--TAX OR LOAN

(_1854_)

The expenses of a war are the moral check which it has pleased the Almighty to impose upon the ambition and l.u.s.t of conquest, that are inherent in so many nations. There is pomp and circ.u.mstance, there is glory and excitement about war, which, notwithstanding the miseries it entails, invests it with charms in the eyes of the community, and tends to blind men to those evils to a fearful and dangerous degree. The necessity of meeting from year to year the expenditure which it entails is a salutary and wholesome check, making them feel what they are about, and making them measure the cost of the benefit upon which they may calculate.--GLADSTONE.

The finance of 1854 offered nothing more original or ingenious than bluntly doubling the income tax (from seven pence to fourteen pence), and raising the duties on spirits, sugar, and malt. The draught was administered in two doses, first in a provisional budget for half a year (March 6), next in a completed scheme two months later. During the interval the chancellor of the exchequer was exposed to much criticism alike from city experts and plain men. The plans of 1853 had, in the main, proved a remarkable success, but they were not without weak points. Reductions in the duties of customs, excise, and stamps had all been followed by increase in their proceeds. But the succession duty brought in no more than a fraction of the estimated sum--the only time, Mr. Gladstone observes, in which he knew the excellent department concerned to have fallen into such an error. The proposal for conversion proved, under circ.u.mstances already described, to have no attraction for the fundholder. The operation on the South Sea stock was worse than a failure, for it made the exchequer, in order to pay off eight millions at par, raise a larger sum at three and a half per cent., and at three per cent. in a stock standing at 87.[331] All this brought loudish complaints from the money market. The men at the clubs talked of the discredit into which Gladstone had fallen as a financier, and even persons not unfriendly to him spoke of him as rash, obstinate, and injudicious. He was declared to have destroyed his prestige and overthrown his authority.[332]

POWERFUL SELF-DEFENCE

This roused all the slumbering warrior in him, and when the time came (May 8), in a speech three and a half hours long, he threw his detractors into a depth of confusion that might have satisfied the Psalmist himself. Peremptorily he brushed aside the apology of his a.s.sailants for not challenging him by a direct vote of want of confidence, that such a vote would be awkward in a time of war. On the contrary, he said, a case so momentous as the case of war is the very reason why you should show boldly whether you have confidence in our management of your finances or not; if you disapprove, the sooner I know it the better. Then he dashed into a close and elaborate defence in detail, under all the heads of attack,--his manner of dealing with the unfunded debt, his abortive scheme of conversion, his mode of charging deficiency bills. This astonishing ma.s.s of dry and difficult matter was impressed in full significance upon the House, not only by the orator's own buoyant and energetic interest in the performance, but by the sense which he awoke in his hearers, that to exercise their attention and judgment upon the case before them was a binding debt imperatively due to themselves and to the country, by men owning the high responsibility of their station. This was the way in which he at all times strove to stir the self-respect of the House of Commons. Not sparing his critics a point or an argument, he drove his case clean home with a vigour that made it seem as if the study of Augustine and Dante and the Fathers were after all the best training for an intimate and triumphant mastery of the proper amount of gold to be kept at the bank, the right interest on an exchequer bond and an exchequer bill, and all the arcana of the public accounts.[333] Even where their case had something in it, he showed that they had taken the wrong points. Nor did he leave out the spice of the sarcasm that the House loves. A peer had reproached him for the amount of his deficiency bills. This peer had once himself for four years been chancellor of the exchequer. 'My deficiency bills,' cried Mr.

Gladstone, 'reached three millions and a half. How much were the bills of the chancellor whom this figure shocks? In his first year they were four millions and a half, in the second almost the same, in the third more than five and a quarter, in the fourth nearly five millions and a half.' Disraeli and others pretended that they had foreseen the failure of the conversion. Mr. Gladstone proved that, as matter of recorded fact, they had done nothing of the sort. 'This is the way in which mythical history arises. An event happens without attracting much notice; subsequently it excites interest; then people look back upon the time now pa.s.sed, and see things not as they are or were, but through the haze of distance--they see them as they wish them to have been, and what they wish them to have been, they believe that they were.'

For this budget no genius, only courage, was needed; but Mr. Gladstone advanced in connection with it a doctrine that raised great questions, moral, political, and economic, and again ill.u.s.trated that characteristic of his mind which always made some broad general principle a necessity of action. All through 1854, and in a sense very often since, parliament was agitated by Mr. Gladstone's bold proposition that the cost of war should be met by taxation at the time, and not by loans to be paid back by another generation. He did not advance his abstract doctrine without qualification. This, in truth, Mr. Gladstone hardly ever did, and it was one of the reasons why he acquired a bad name for sophistry and worse. Men fastened on the general principle, set out in all its breadth and with much emphasis; they overlooked the lurking qualification; and then were furiously provoked at having been taken in. 'I do not know,' he wrote some years later to Northcote, 'where you find that I laid down any general maxim that all war supplies were to be raised by taxes.... I said in my speech of May 8, revised for Hansard, it was the duty and policy of the country to make _in the first instance_ a great effort from its own resources.' The discussions of the time, however, seem to have turned on the unqualified construction.

While professing his veneration and respect for the memory of Pitt, he opened in all its breadth the question raised by Pitt's policy of loan, loan, loan. The economic answer is open to more dispute than he then appeared to suppose, but it was the political and moral reasons for meeting the demands of war by tax and not by loan that coloured his economic view. The pa.s.sage in which he set forth the grounds for his opinion has become a cla.s.sic place in parliamentary discussion, but it is only too likely for a long time to come to bear reproducing, and I have taken it as a motto for this chapter. His condemnation of loans, absolutely if not relatively, was emphatic. 'The system of raising funds necessary for wars by loan practises wholesale, systematic, and continual deception upon the people. The people do not really know what they are doing. The consequences are adjourned into a far future.' I may as well here complete or correct this language by a further quotation from the letter to Northcote to which I have already referred. He is writing in 1862 on Northcote's book on _Twenty Years of Finance_. 'I cannot refrain,' he says, 'from paying you a sincere compliment, first on the skill with which you have composed an eminently readable work on a dry subject; and secondly, on the tact founded in good feeling and the love of truth with which you have handled your materials throughout.' He then remarks on various points in the book, and among the rest on this:--

LETTERS TO NORTHCOTE

Allow me also to say that I think in your comparison of the effect of taxes and loans you have looked (p. 262) too much to the effect on labour at the moment. Capital and labour are in permanent compet.i.tion for the division of the fruits of production. When in years of war say twenty millions annually are provided by loan say for three, five, or ten years, then two consequences follow.

1. An immense fact.i.tious stimulus is given to labour at the time--and thus much more labour is brought into the market.

2. When that stimulus is withdrawn an augmented quant.i.ty of labour is left to compete in the market with a greatly diminished quant.i.ty of capital.

Here is the story of the _misery_ of great ma.s.ses of the English people after 1815, or at the least a material part of that story.

I hold by the doctrine that war loans are in many ways a great evil: but I admit their necessity, and in fact the budget of 1855 was handed over by me to Sir George Lewis, and underwent in his hands little alteration unless such as, with the growing demands of the war, I should myself have had to make in it, _i.e._ some, not very considerable, enlargement.

Writing a second letter to Northcote a few days later (August 11, 1862), he goes a little deeper into the subject:--

The general question of loans _v._ taxes for war purposes is one of the utmost interest, but one that I have never seen worked out in print. But a.s.suming as _data_ the established principles of our financial system, and by no means denying the necessity of loans, I have not the least doubt that it is for the interest of labour, as opposed to capital, that as large a share as possible of war expenditure should be defrayed from taxes. When war breaks out the wages of labour on the whole have a tendency to rise, and the labour of the country is well able to bear some augmentation of taxes. The sums added to the public expenditure are likely at the outset, and for some time, to be larger than the sums withdrawn from commerce. When war ends, on the contrary, a great ma.s.s of persons are dismissed from public employment, and, flooding the labour market, reduce the rate of wages. But again, when war comes, it is quite certain that a large share of the war taxes will be laid upon property: and that, in war, property will bear a larger share of our total taxation than in peace. From this it seems to follow at once that, up to the point at which endurance is practicable, payment by war-taxes rather than by taxes in peace is for the interest of the people at large. I am not one of those who think that our system of taxation, taken as a whole, is an over-liberal one towards them. These observations are mere contributions to a discussion, and by no means pretend to dispose of the question.

II

DISPUTE WITH THE BANK

In the autumn he had a sharp tussle with the Bank of England, and displayed a toughness, stiffness, and sustained anger that greatly astonished Threadneedle Street. In the spring he had introduced a change in the mode of issuing deficiency bills, limiting the quarterly amount to such a sum as would cover the maximum of dividends payable, as known by long experience to be called for. The Bank held this to be illegal; claimed the whole amount required, along with balances actually in hand, to cover the entire amount payable; and asked him to take the opinion of the law officers. The lawyers backed the chancellor of the exchequer.

Then the Bank took an opinion of their own; their counsel (Kelly and Palmer) advised that the attorney and solicitor were wrong; and recommended the Bank to bring their grievance before the prime minister.

Mr. Gladstone was righteously incensed at this refusal to abide by an opinion invited by the Bank itself, and by which if it had been adverse he would himself have been bound. 'And then,' said Beth.e.l.l, urging Mr.

Gladstone to stand to his guns, 'its counsel call the Bank a trustee for the public! Proh pudor! What stuff lawyers will talk. But 'tis their vocation.' Mr. Gladstone's letters were often prolix, but n.o.body could be more terse and direct when occasion moved him, and the proceedings of the lawyers with their high Bank views and the equivocal faith of the directors in bringing fresh lawyers into the case at all provoked more than one stern and brief epistle. The governor, who was his private friend, winced. 'I do not study diplomacy in letters of this kind,' Mr.

Gladstone replied, 'and there is no sort of doubt that I am very angry about the matter of the opinion; but affected and sarcastic politeness is an instrument which in writing to you I should think it the worst taste and the worst feeling to employ. I admire the old fashion according to which in English pugilism (which, however, I do not admire) the combatants shook hands before they fought; only I think much time ought not to be spent upon such salutations when there is other work to do.'

In a letter to his wife seven years later, Mr. Gladstone says of this dispute, 'Mr. Arbuthnot told me to-day an observation of Sir George Lewis's when at the exchequer here. Speaking of my controversy with the Bank in 1854, he said, "It is a pity Gladstone puts so much heat, so much irritability into business. Now I am as cool as a fish."' The worst of being as cool as a fish is that you never get great things done, you effect no improvements, and you carry no reforms, against the lethargy or selfishness of men and the tyranny of old custom.[334]

Now also his attention was engaged by the controversies on currency that thrive so l.u.s.tily in the atmosphere of the Bank Charter Act, and, after much discussion with authorities both in Lombard Street and at the treasury, without committal he sketched out at least one shadow of a project of his own. He knew, however, that any great measure must be undertaken by a finance minister with a clear position and strong hands, and he told Graham that even if he saw his way distinctly to a plan, he did not feel individually strong enough for the attempt. Nor was there time. To reconst.i.tute the Savings Bank finance, to place the chancery and some other accounts on a right basis, and to readjust the banking relations properly so-called between the Bank and the state, would be even more than a fair share of financial work for the session. Before the year was over he pa.s.sed a bill, for which he had laid before the cabinet elaborate argumentative supports, removing a number of objections to the then existing system of dealing with the funds drawn from Savings Banks.[335]

The year closed with an incident that created a considerable stir, and might by misadventure have become memorable. What has been truly called a warm and prolonged dispute[336] arose out of Mr. Gladstone's removal of a certain official from his post in the department of woods and forests. As Lord Aberdeen told the Queen that he could not easily make the case intelligible, it is not likely that I should succeed any better, and we may as well leave the thick dust undisturbed. Enough to say that Lord John Russell thought the dismissal harsh; that Mr.

Gladstone stood his ground against either the reversal of what he had done, or any proceedings in parliament that might look like contrition, but was willing to submit the points to the decision of colleagues; that Lord John would submit no point to colleagues 'affecting his personal honour'--to such degrees of heat can the quicksilver mount even in a cabinet thermometer. If such quarrels of the great are painful, there is some compensation in the firmness, patience, and benignity with which a man like Lord Aberdeen strove to appease them. Some of his colleagues actually thought that Lord John would make this paltry affair a plea for resigning, while others suspected that he might find a better excuse in the revival of convocation. As it happened, a graver occasion offered itself.

FOOTNOTES:

[331] Northcote, _Financial Policy_, p. 242; Buxton, _Mr. Gladstone: A Study_, pp. 154-5.

[332] Greville, Part III. i. pp. 150, 151, 157.

[333] Not many years before (1838), Talleyrand had surprised the French inst.i.tute by a paper in which he pa.s.sed a eulogy on strong theological studies; their influence on vigour as well as on finesse of mind; on the skilful ecclesiastical diplomatists that those studies had formed.

[334] See Appendix.

[335] 17 and 18 Vict., c. 50.

[336] Walpole's _Russell_, ii. p. 243 _n_.

CHAPTER VI

CRISIS OF 1855 AND BREAK-UP OF THE PEELITES

(_1855_)

Party has no doubt its evils; but all the evils of party put together would be scarcely a grain in the balance, when compared with the dissolution of honourable friendships, the pursuit of selfish ends, the want of concert in council, the absence of a settled policy in foreign affairs, the corruption of certain statesmen, the caprices of an intriguing court, which the extinction of party connection has brought and would bring again upon this country.--EARL RUSSELL.[337]

The administrative miscarriages of the war in the Crimea during the winter of 1854-5 destroyed the coalition government.[338] When parliament a.s.sembled on January 23, 1855, Mr. Roebuck on the first night of the session gave notice of a motion for a committee of inquiry. Lord John Russell attended to the formal business, and when the House was up went home accompanied by Sir Charles Wood. Nothing of consequence pa.s.sed between the two colleagues, and no word was said to Wood in the direction of withdrawal. The same evening as the prime minister was sitting in his drawing-room, a red box was brought in to him by his son, containing Lord John Russell's resignation. He was as much amazed as Lord Newcastle, smoking his evening pipe of tobacco in his coach, was amazed by the news that the battle of Marston Moor had begun. Nothing has come to light since to set aside the severe judgment p.r.o.nounced upon this proceeding by the Universal opinion of contemporaries, including Lord John's own closest political allies. That a minister should run away from a hostile motion upon affairs for which responsibility was collective, and this without a word of consultation with a single colleague, is a transaction happily without a precedent in the history of modern English cabinets.[339] It opened an intricate and unexpected chapter of affairs.

The ministerial crisis of 1855 was unusually prolonged; it was interesting as a drama of character and motive; it marked a decisive stage in the evolution of party, and it was one of the turning points in the career of the subject of this biography. Fortunately for us, Mr.

Gladstone has told in his own way the whole story of what he calls this 'sharp and difficult pa.s.sage in public affairs,' and he might have added that it was a sharp pa.s.sage in his own life. His narrative, with the omission of some details now dead and indifferent, and of a certain number of repet.i.tions, is the basis of this chapter.

I

LORD JOHN'S RESIGNATION

On the day following Lord John's letter the cabinet met, and the prime minister told them that at first he thought it meant the break-up of the government, but on further consideration he thought they should hold on, if it could be done with honour and utility. Newcastle suggested his own resignation, and the subst.i.tution of Lord Palmerston in his place.

Palmerston agreed that the country, rightly or wrongly, wished to see him at the war office, but he was ready to do whatever his colleagues thought best. The whigs thought resignation necessary. Mr. Gladstone thought otherwise, and scouted the suggestion that as Newcastle was willing to resign, Lord John might come back. Lord John himself actually sent a sort of message to know whether he should attend the cabinet. In the end Lord Aberdeen carried all their resignations to the Queen. These she declined to accept, and she 'urged with the greatest eagerness that the decision should be reconsidered.' It is hard at this distance of time to understand how any cabinet under national circ.u.mstances of such gravity could have thought of the ignominy of taking to flight from a motion of censure, whatever a single colleague like Lord John Russell might deem honourable. On pressure from the Queen, the whigs in the government, Lord John notwithstanding, agreed to stand fire. Mr.

Gladstone proceeds:--

Lord John's explanation, which was very untrue in its general effect, though I believe kindly conceived in feeling as well as tempered with some grains of policy and a contemplation of another possible premiership, carried the House with him, as Herbert observed while he was speaking. Palmerston's reply to him was wretched. It produced in the House (that is, in so much of the House as would otherwise have been favourable), a flatness and deadness of spirit towards the government which was indescribable; and Charles Wood with a marked expression of face said while it was going on, 'And this is to be our leader!' I was myself so painfully full of the scene, that when Palmerston himself sat down I was on the very point of saying to him unconsciously, 'Can anything more be said?' But no one would rise in the adverse sense, and therefore there was no opening for a minister. Palmerston [now become leader in the Commons] had written to ask me to follow Lord John on account of his being _a party_. But it was justly thought in the cabinet that there were good reasons against my taking this part upon me, and so the arrangement was changed.

Roebuck brought forward his motion. Mr. Gladstone resisted it on behalf of the government with immense argumentative force, and he put the point against Lord John which explains the word 'untrue' in the pa.s.sage just quoted, namely, that though he desired in November the subst.i.tution of Palmerston for Newcastle as war minister, he had given it up in December, and yet this vital fact was omitted.[340] It was not for the government, he said, either to attempt to make terms with the House by reconstruction of a cabinet, or to shrink from any judgment of the House upon their acts. If they had so shrunk, he exclaimed, this is the sort of epitaph that he would expect to have written over their remains: 'Here lie the dishonoured ashes of a ministry that found England in peace and left in it war, that was content to enjoy the emoluments of office and to wield the sceptre of power, so long as no man had the courage to question their existence: they saw the storm gathering over the country; they heard the agonising accounts that were almost daily received of the sick and wounded in the East. These things did not move them, but so soon as a member of opposition raised his hand to point the thunderbolt, they became conscience-stricken into a sense of guilt, and hoping to escape punishment, they ran away from duty.' Such would be their epitaph. Of the proposed inquiry itself,--an inquiry into the conduct of generals and troops actually in the field, and fighting by the side of, and in concert with, foreign allies, he observed--'Your inquiry will never take place as a real inquiry; or, if it did, it would lead to nothing but confusion and disturbance, increased disasters, shame at home and weakness abroad; it would convey no consolation to those whom you seek to aid, but it would carry malignant joy to the hearts of the enemies of England; and, for my part, I shall ever rejoice, if this motion is carried to-night, that my own last words as a member of the cabinet of the Earl of Aberdeen have been words of solemn and earnest protest against a proceeding which has no foundation either in the const.i.tution or in the practice of preceding parliaments; which is useless and mischievous for the purpose which it appears to contemplate; and which, in my judgment, is full of danger to the power, dignity, and usefulness of the Commons of England.' A journalistic observer, while deploring the speaker's adherence to 'the dark dogmatisms of medieval religionists,' admits that he had never heard so fine a speech. The language, he says, was devoid of redundance. The att.i.tude was calm. Mr. Gladstone seemed to feel that he rested upon the magnitude of the argument, and had no need of the a.s.sistance of bodily vehemence of manner. His voice was clear, distinct, and flexible, without monotony. It was minute dissection without bitterness or ill-humoured innuendo. He sat down amid immense applause from hearers admiring but unconvinced. Mr. Gladstone himself records of this speech: 'Hard and heavy work, especially as to the cases of three persons: Lord John Russell, Duke of Newcastle, and Lord Raglan.' Ministers were beaten (January 29) by 325 to 148, and they resigned.