THE FISCAL OUTLOOK.
IT is quite clear that one of the chief preoccupations of the coming Parliament must be finance. Not only has the war cost a great deal more than was expected, but it is evident that there must be an increase in our military and naval expenditure. We do not grudge, and do not believe that the nation will grudge, making the necessary sacrifices, but it is idle to talk as if the question of finance were not one which must be faced, and in a very serious spirit. We are not alarmists as to the extra charges which must be incurred in remodelling the Army, and believe, indeed, that what is wanted is rather a better dis- position of the funds already devoted to military purposes than increased lavishness. Still, both here and in the case of the Navy there will probably be for the next year or BO demands for "extra" money that cannot be refused or post- poned. Any increase of artillery and of mounted troops is sure to be expensive, and such an increase must be made. But granted that we shall have in the interests of a sane Imperialism—and no Imperialism can be called sane which does not pay its way—to provide for a larger expenditure, it is essential that the money should be provided in a far- seeing and businesslike manner, and not by any hand-to- mouth expedients. We are all for bearing the burden of lb Empire without flinching, and we believe most firmly that the responsibilities and duties of Empire are good for the national life. But one of the best and surest foundations of Empire is a sound system of finance. Not only is a full and easily replenished Treasury an immense source of strength in the hour of danger, but the only way to avoid those reactions of Little Englandism which do so much injury to the Empire is to prevent the financial burden pressing unevenly and in a way that galls. If we over- expand and over-spend and raise the money required for our. Imperial projects in foolish and wasteful ways, the nations' certain to be seized with the cold fit, and in an access of disgust and annoyance may throw away the best fruits of Empire, and undo in a moment of thriftless economy work that has cost the nation dear, not only in gold, but in blood and in the self-sacrificing efforts of her sons.
When, then, our rulers come to review the fiscal situa- tion, and to provide for the future as well as the past, it is greatly to be hoped, in the interests of the Empire, that they will do nothing to imperil the sanity and good sense of our existing fiscal system, but will provide for its development on sound lines, and so lay well and truly the financial corner-stone. We shall be told that of course they will do so, and that there is not the slightest fear of any other plan being adopted ; but in spite of that we hold that there is need of caution. Remember that the temptation to the Cabinet to depart a little from the old principles will be very great. An increased annual revenue will be required, and yet it will be by no means easy to heighten the existing taxes. That being so, the Government will, unless we are mistaken, have pressed upon them many new and ingenious fiscal expedients. Chief among them is likely to be some proposal for an Imperial Zollverein. It will be plausibly argued that it would be an excellent thing both to cement the Empire and to provide for the cost of Imperialism by inaugurating a system under which there should be Free-trade within the Empire, but a small tax on one or two prime commodi- ties. to be paid, however, only when the commodities were produced outside the Empire. For example, wheat and sugar produced within the Empire would still be free, but foreign wheat and foreign sugar would pay a tax which, we shall be told, would, though small in amount, give us several millions a year. Against all such specious pleas the Government must stand firm, for in such an abanden- ment of the principle of the free and open market would lurk the seeds of destruction not merely for our fiscal system, but also for the Empire. The Empire rests upon Free-trade and on the policy of the "open door," and the moment that policy is abandoned and an attempt is made to act in the monopolist spirit which prevailed in the Spanish and Dutch Empires, at that.moment our Empire will begin to decline. Protection would breed count- less jealousies and quarrels at home and among the Colonies in their relations to each other and to the Mother- country, and it would also raise the bitterest animosity abroad,—the kind of animosity that men felt for Spain in the seventeenth century. Canada, Australia, and New Zealand would each fancy that the other was preferred in our Imperial tariff, and would demand redress, while our traders at home would be equally certain that the Colonies were not playing fair. As it is, our ports are open to all, and no part of the Empire can plead favouritism, while lands fte outside the Empire, though they may profess to hate us, know and appreciate the fact that commercial equality and a free opportunity to all follow the British flag. But though we cannot help feeling that an effort will be made to manipulate the fiscal developments required by the war in a Protectionist direction, we do not believe that the Cabinet will yield. At any rate, the present Chancellor of the Exchequer is quite sound on the matter. Nothing could have been better than the way in which he protested in his recent speech at Liverpool against t so-called "commercial union" with the Colonies. He did not, he declared, believe in the idea of pre- ferential duties in favour of our Colonies as compared with foreign countries on the imports of the United Kingdom. Any such duties would be dangerous in the utmost degree to foreign trade, which was essential to the prosperity of this country. "This great question," he went on, "could only be approached and dealt with on the principle of Free-trade. His own opinion was that any person in our Colonies or in this country who founded his views as to the future on the possibility of any solution of this ques- tion except on the basis of Free-trade was founding his views upon a foundation of sand, and he would not for the world, having some experience in matters of this kind, hold out to our fellow-subjects in the Colonies that we could deal with the question on any other basis than Free.. trade." We sincerely trust that this is the spirit which will prevail, and that even if, as seems possible, Sir Michael Hicks-Beach goes to the Admiralty or the War Office, his view will still be accepted by the Government as a whole.
If the Government determine, as we hope and believe they will, to have nothing to do with any proposals for raising revenue by Protective or semi-Protective measures, to what sources shall they go for more money ? They can- not, we think, raise the Income-tax, though we hold that they may very well keep it at a shilling. Again, they cannot add to the taxation on tea or tobacco with any prospect of substantially increasing the yield. There remains an addition to the Beer-duty, but this is not likely to be adopted. What new source of revenue, then, is open to them ? In our belief, their best plan will be to deal with our licensing system, and to divert into the Treasury money now literally thrown at the heads of the possessors of existing licenses. Owing to legislation and the practice of the licensing authorities, the licenses to sell intoxicants have been so greatly restricted that nowadays to be granted a license is to be granted a share in a very valuable monopoly. But the State asks practically for no payment in respect of its grant of monopoly rights. It improvidently gives the license away almost for nothing to any well-conducted person who may happen to live in a house licensed the year before. But though the State asks nothing for the license, the lucky grantees ask a great deal for them and the expectation of renewal, and immense sums are paid for licensed premises. This fact shows how great a source of revenue the State is neglecting. Surely it should be the business of the Chancellor of the Exchequer to stop this waste, and to say to the grantees, We grant you a license, but you must pay for it the price, or at any rate something like the price, which we know you could get to-morrow if you sold the expectation of receiving it next year ' ? We cannot, of course, enter here in detail upon the way in which the State could best keep for itself the value of the licenses it now distributes gratis, but it is obvious that the State can and ought to make use of this great national asset. By doing so it might, we believe, secure a very large annual addition to the national income, and secure it without increasing the price of the poor man's beer. The plain fact is, the huge price which a public-house, or even a beer-house, when endowed with a license, will fetch is conferred upon it by the State's grant of a license, and it is only just that the State should get the benefit of the monopoly it has created. The circumstance that it created that monopoly for moral and not fiscal purposes does not matter. Surely these are considerations which must not go unrecognised when the country requires an increase of revenue.
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