always to be able to retain upon their own side a sufficient proportion of the people to enable them to stand on the defensive with a certain prospect of success. No reasonable man can suppose that Mr. Gladstone himself is at heart an enemy to either; but circumstances may prove stronger than the strongest of us; and in the course of nature the time cannot be far distant when the leadership of his own party must pass into the hands of other men-men of far different aspirations, and nurtured in far other traditions. When that time arrives, it is sincerely to be hoped that those classes of society which are the natural leaders of nations, let the term be sneered at as it may, the territorial aristocracy, the national clergy, and the chiefs of our great domestic industries, may be found firmly established in the esteem and affection of the people, and able to hold their own against all the revolutionary forces of modern times. But to insure this happy consummation no half measures will suffice. The two aristocracies, the commercial and the territorial, must meet the wishes and wants of the people in a liberal and generous spirit. The workman must have no grudge against his master, or the tenant against his landlord; the peasantry must be satisfied, even if it is at the cost of economic theories; for there can be no surer method of consolidating the influence of the landed proprietary than by multiplying the race of small occupiers and, it may be, of small owners, between whom and their wealthier neighbours no social jealousies can arise. If the aristocracy will do this of their own accord, though it should entail some pecuniary loss, and if the great employers of manufacturing labour will satisfy their own people, even on the same terms, the structure of English society may still remain substantially unchanged; our affections may still be allowed to twine themselves round existing institutions without fear of their being suddenly rooted up; we may still be able to gratify that longing for confirmed tranquillity' which is so powerful an instinct in human nature; and under purer and higher conditions the social repose and happiness of the eighteenth century may be reflected in the century to come.

T. E. KEBBEL.

THE CRISIS IN INDIAN FINANCE.

THE question of Indian finance has become one of vital importance for the British taxpayer.

In dealing with it two points may be assumed as axioms:
(1.) That in case of need England would have to assist India.
(2.) That the limit of taxation in India has been reached.

As regards the first, it is enough to say that financial bankruptcy would mean the complete collapse of our Indian Empire. National governments may survive great financial catastrophes, but a Government like ours in India, where a mere handful of foreigners rule two hundred millions of an alien race by the prestige of moral superiority, would fall of itself under the confusion and disgrace of having to pass through the Insolvent Debtors' Court. Now it is plain, I take it, that, coûte que coûte, England does not mean to lose its Indian Empire. It follows that, if India cannot pay its way, England will have to come to the rescue, and, either by contributing its money or pledging its credit, avert such an enormous misfortune as the bankruptcy of our Indian Empire.

The second point is equally clear. When hard pressed the other day to meet the expenditure caused by famine and the fall of silver, the Government of India, after reviewing all possible modes of increasing revenue, had to fall back on two taxes so obviously objectionable, that nothing but the direst necessity could have led any government to adopt them.

The one was an increase of the salt duty by 40 per cent. in the districts of Madras and Bombay, where, in the previous year, upwards of a million of souls were admitted to have died of famine.

The other, the imposition of a license tax, which virtually amounted to an income tax of 5 per cent., levied on incomes down to 48. a week.

This latter tax was estimated to produce only some 700,000l. or 800,000l. a year, and it has been found, as every one who knew anything of India predicted, so oppressive and unpopular, that the Government has been already compelled to repeal it as to the smaller class of incomes.

This amounts to a practical demonstration that the limit of

possible taxation in India has been reached, and that, as regards thr revenue side of the Budget, there is nothing to be hoped for but t slow growth in future years of such of the existing sources of reven as are susceptible of increase. In fact it would be more correct a say that the limit of taxation has been exceeded, for the presen“ amount is only kept up at the expense of a great deal of suffern and unpopularity, and our rule in India would be immensly strengthened if it were possible, by wise economy, to arrive at a surplus of 2,000,000l. and employ it in reducing obnoxious taxation. as for instance, in totally repealing the license tax, and levelling the salt tax down to the old rate in Bombay and Madras.

However, taking the revenue of India as practically a fixed figure. it is evident that the financial problem turns entirely on the question of expenditure.

Was the expenditure of India more or less than its revenue before the Afghan war, and how has it been affected by this war?

The first question is easily answered, for we have to deal with actual results, and not with mystified accounts and conjectural estimates. There is an impression that Indian finance is shrouded in such mystery that no one can hope to understand it. This is partiy true, for the accounts are often framed apparently for the express purpose of confusing, and are altered from time to time so as to make comparisons of different periods difficult; but any one who, like my self, has had practical experience in these matters, knows that there is no inherent difficulty in them, and that it would be just as easy to present the accounts of the Indian Empire in a clear and intelligible form as those of the Brighton Railway Company.

Where, however, the actual results of a series of years are summed up in accomplished facts and figures which are beyond dispute, the question of complexity of accounts disappears. If a man, at the end of five years, finds that his debts are larger and his balance at his bankers' less, he may safely conclude that he has been living beyond his means. So with a State; if actual revenue has exceeded actual expenditure, it must show itself in diminished debt or increased assets, or vice versû.

Now the actual position of India up to the close of the year 1877-78, which I take as showing the financial state before the Afghan war, and in the face of which that war was undertaken, was as follows, as shown by the figures of official returns.

The net increase of the debt of India since 1872, after making the requisite corrections for debts paid off and loans to native states and local bodies on the one hand, and diminished cash-balances on the other, was in round figures upwards of 25,000,000l. In other words, the actual result of the last five years of peace budgets had been an average deficit of 5,000,000l. a year.

But now comes in what is really the cardinal point in forming

any estimate of the actual state of Indian finance. Of this deficit of 25,000,000l., in round figures 20,000,000l. had been spent on what are called 'Productive Public Works,' leaving only about 5,000,000l.,. or 1,000,000l. a year, as the average deficit on ordinary revenue and expenditure. Are these Productive Public Works really a good asset, or are they not? If they are, they are a legitimate set-off against the debt incurred for them; and the position of Indian finance, apart from the Afghan war, though one of great difficulty, as might be expected after two such calamities had befallen it as the recurrence of famines and the fall of silver, would have been by no means desperate. In fact it would have been quite within limits which might have been met by a prudent policy and wise economy, without resorting to new and unpopular taxation.

But if the Productive Public Works are a bad asset, the fact will be indisputable that the settled policy of two generations of great Indian statesmen was reversed, and the policy which led to the Afghan war initiated by Lord Salisbury and Lord Lytton, at a time when the financial condition of India was one of extreme distress, and when the peace budgets of the previous five years had resulted in an average deficit of 5,000,000l. a year.

Now what do the facts answer to this all-important question of. the real money value of the Productive Public Works? All accounts and estimates published in India studiously endeavour to conceal the truth by mixing up both receipts and expenses of these extraordinary or so-called Productive Public Works with those of guaranteed railways, ordinary public works, local works, and so on, until it becomes difficult even for an expert to unravel the true result from such a mass of confusion.

But the Statistical Abstract of British India, published by the India Office in London, gives the results in a clear and intelligible form in a few lines, and here it is.

An expenditure of 9,650,000l. on works of irrigation during ten years up to 1878, produced no net return at all, but a loss of 67,000l. a year, being the excess of working expenses and repairs over gross receipts; while an outlay of 14,652,000l. during the same period, on minor railways constructed by the State, gave a net return of 88,000l. a year.

The net revenue, therefore, derived from an expenditure of upwards of 24,000,000l. in Productive Public Works, was 21,000l. a year, or less than 28. per 100l. on the capital, which had been raised at an average rate of 4 per cent.

In the face of such a result as this, how is it possible to contend that an Indian Budget is really balanced, while an expenditure of millions on works which give no return is treated as if it had never been spent, or had been spent on something which would reproduce the money? These works are These works are no doubt very desirable, and good

reasons may be given for most of them, but this does not alter the financial fact that the expenditure on them constitutes a real deficit of money spent over money received in the course of the year, which must be met by increased debt or increased taxation, just as much as if the money had been spent on fortifications or barracks. This brings us up to the commencement of the Afghan war. Since then, of course, everything has gone rapidly from bad to worse. The net public debt' of India will have been increased during the last two years by upwards of 13,000,000l., and the deficit of actual expenditure over actual receipt will have reached the formidable figure of 7,000,000l. a year, on an actual net revenue of not over 40,000,000l. a year.

For the present, however, I am dealing with the state of Indian finance as it stood at the time when the Afghan war was undertaken. When that war was begun it is impossible to deny the conclusion that during the five previous years of peace the National Debt of India had been increased by 25,000,000l., being the accumulation for that period of actual expenditure over actual income. How was this situation affected by the Afghan war?

Suppose everything had turned out as the Government hoped and expected, and that the war had terminated with the Treaty of Gundamuck, and we had remained in secure possession of our scientific frontier, with our Resident at Cabul, the financial result would have been as follows.

The first cost of the war would have been covered by about 3,000,000l., and the permanent additional military charge of the scientific frontier would have been, as a minimum figure, 1,000,000%. a year. This latter figure has been established in full detail by the first authority in the world on such a question, Sir Henry Norman, and no attempt has ever been made to answer his arguments or to impugn his estimates.

This of itself would have been a formidable aggravation of a financial situation, where, apparently, extensive reductions, instead of increased expenditure, were indispensable to save the Empire from drifting into bankruptcy. And be it remembered that in India economy practically means very much reduction of army estimates, for so many of the other heads of expenditure are fixed, that under this head alone is there scope for any reduction large enough to turn deficits of millions into surpluses. In the last two years of Lord Canning's viceroyalty, we turned a deficit of 6,000,000l. into a surplus, but how was it done? The army was reduced by 150,000 men, and 5,000,000l. out of the 6,000,000l. was saved on the military and naval estimates.

It cannot be wondered at, therefore, that statesmen like Lord Lawrence, Lord Northbrook, and others practically acquainted with the condition of our Indian Empire, viewed the new policy and the commencement of the Afghan war with the gravest alarm. Apart