XVIII

What will it Cost? Where is the Money to Come from?

Dear Mr.——,—A wise Imperial administrator once said to me that he was always having admirable schemes for reform, and for the development and improvement of the country over whose destinies he presided, brought before him—schemes which were often not only excellent on paper, but would no doubt have been very beneficial in practice. He made it a rule, however, before he began to consider them seriously and in detail, to ask: "What will it cost?" and to have a proper financial estimate made as a preliminary to any discussion of the merits. The next step was to ask: "Where is the money to come from? "By the time these two questions had been asked and answered, prudence and common-sense showed in the majority of cases that it would be inexpedient to proceed with the schemes. This no doubt was a depressing process, not only for the excellent people who advocated the particular project of page 98 amelioration, but also for the administrator anxious to do his best in his trust. But the facts were inexorable, and it was useless to quarrel with them.

After all, the process is one very well known to every private individual. Who is there who does not know of a dozen plans for effecting an enormous improvement in his method of life? Unfortunately, we are almost always brought up short by the two questions: "What will it cost?" and "Where is the money to come from?" In spite, however, of such private experiences, a vast number of people refuse to apply these two questions to public affairs, but act as if "What will it cost?" were a very small matter, and "Where is the money to come from?" no matter at all. The assumption is, of course, that the State possesses somewhere or other an inexhaustible fund out of which money can always be produced if only it is asked for with sufficient vehemence. This belief in the Fortunatus' purse of the State is indeed the greatest of all the illusions which perplex administration. Not only is it difficult to get the man in the street to see the error. It is often quite as difficult to bring it home to the statesman.

The administrator of whom I have just spoken, who is by nature far more of an optimist than a cynic, went on to say that though it was often very disappointing to have to give up fascinating schemes of improvement and reform on the grounds I have stated, he found his consolation in the thought that page 99 after all there was no better way of helping the mass of the people than by refusing to add to their financial burdens. To tax people as little as possible—that is, to allow them to spend their own money in their own way—is to endow them with no inconsiderable benefit. He who prevents a rise in taxation, and still more he who lowers taxation, is always and necessarily a public benefactor.

But though all this sounds so obvious, it is by no means the fashion at the present time. Men of the old school were wont to regard taxation as essentially an evil, though no doubt a necessary evil. The modern plan is to regard it as a positive benefit, and as a veritable source of national prosperity. The great goddess of taxation is invoked by both parties in the State—by the extreme Radicals and Socialists and by their opponents—as an all-powerful deity who, if only worshipped in the proper spirit and with appropriate rites, will prove the strongest and most helpful of political patrons. Again, in old days men found certain important objects for expenditure, and in view of the imperative character of those objects excused the grim necessity of laying fresh burdens upon the taxpayer. Now we begin at the other end. We suggest schemes of taxation in vacuo, and quite apart from the objects upon which the money when raised is to be spent. Indeed, we may now witness the amazing spectacle of politicians looking round for objects on which to spend taxes, page 100 which are to be raised in any case, and on their own merits. The enthusiasm of the votaries of taxation inclines one, indeed, to recommend to their attention Henry Kirke White's "Ode to Disappointment." With the alteration of a word or two, the opening passage might be used as an invocation to their deity:—

Come, sweet Taxation, come!
Not in thy terrors clad;
Thy chastening rod but terrifies
The wanton and the bad.
But we recline beneath thy shrine, etc. etc.

Though I fear I shall lay myself open to the taunt of being not only hopelessly behind the times, but poor-spirited, and also thoroughly unscientific, truth obliges me to confess that I take no pleasure in the new worship. I am oldfashioned enough to regard taxation per se with aversion. Save for the needs of law, order, and public justice, of national defence, of national health, and other essential public needs, I greatly prefer to let money fructify in the pockets of the individual rather than be sterilised in the Exchequer. Taxation there must be in a modern State, and heavy taxation; but let it be restricted as much as possible, and let us never forget that it is an evil, even when a necessary evil. In a word, I believe that what a statesman of a former generation called "the ignorant impatience of page 101 taxation" is in itself a very sound and healthy sign. I will go farther, and say that there is no way in which a statesman can do more for the people of the country which he is called upon to govern than by reducing taxation, provided that such reduction does not sacrifice the true interests of the country by starving some essential public service, by underpaying the men who are called upon to serve the State, by imperilling the national existence, or by neglecting Imperial responsibilities. I claim that those who desire to reduce rather than increase taxation, and who withstand proposals for placing vast new burdens on the taxpayer in the name of social reform, are often far truer friends of the people than those who imagine that you cannot spend too much and tax too much, provided only you have got a philanthropic object and a beneficent intention.

By raising unnecessarily large sums by taxation the State tends not to develop but to prevent the natural processes under which money distributes itself more equally. By high taxes on such commodities of universal use as sugar, tea, coffee, cocoa, and tobacco, we raise the prices of those commodities. But to raise the prices of commodities which all poor men use is in effect to reduce wages. Under a system of high taxes wages go less far than they would otherwise go. Sovereigns and shillings are, after all, only tickets for tea, tobacco, sugar, and so forth, and therefore to raise prices by page 102 taxation is to dock those tickets of a part of their value—i.e. of a part of their purchasing power. A similar effect is produced by undue direct taxation, It is all very well to talk about taxing the millionaire and the rich man, and of so graduating your direct taxation that it shall fall only on the well-to-do. In truth, when you are apparently only hitting the well-to-do hard, you are really hitting the poor man still harder. The greater part of the money which you take from the rich man in Income-tax would, did you not take it, be spent in the employment of labour or in the accumulation of capital which would also go in the employment of labour. The capitalist employers whose incomes are reduced by high taxation are by so much the less able to compete against each other for the hiring of labour. Therefore in the most practical way high direct taxation of the rich tends to injure the poor. No doubt all taxation, high and low, is open to these objections; but that is not a reason for ignoring the fact, but for using taxation as sparingly as possible.

Money raised on commodities, as I have said, reduces the purchasing power of wages, and thereby reduces wages, while high direct taxation limits that competition of the wage-payers which is the wage-earners' opportunity. All taxation hits the poor in the end. No doubt I shall be told that there is a fallacy in my argument, and that money raised for social reform, if taken from the rich in page 103 direct taxation, or from the poor in the taxation of commodities, is returned to them by feeding their children, by giving them old-age pensions, or by such social reform schemes as the endowment of motherhood and the giving of a living wage to all unemployed persons. To that I reply that, even granted this return, there is an enormous amount of pure waste—i.e. unproductive labour—involved in the process, and also that the return is constantly made to the wrong people. In other words, there is a very large class who are not in the possession of so-called superfluous wealth, and yet to whom no return is made. Under a system of high State expenditure and huge taxation the very poor and the very rich may for a time, and till the sources of wealth are finally dried up, manage to do well enough—one through their doles, the other through cheap labour and the lowering of wages which is always the result of such systems. But upon the intermediate class, including, of course, all the skilled artisans, an intolerable burden is laid. For them there is no give, but only plenty of take, until the burden of taxation has driven them into the ranks of the unemployed.

If working men would keep the two questions which form the title of this Letter in their minds they would find them extremely useful as tests by which to try proposals supposed to be made in their interests. They would very often find that the page 104 answer to the first question, "What will it cost?" if honestly made, would show that the expense was out of all proportion to the benefits supposed to be conferred. The answer to the second question, "Where is the money to come from?" would, on the other hand, if pressed home, generally end in the answer, "Out of the working man's own pocket."

Finally, I would ask the working men to remember that taxation is an evil, though a necessary evil no doubt. But though we cannot unfortunately do without necessary evils altogether, the sensible thing is to have as little of them as possible and not as much.—Yours sincerely,