Canada and Australia did. What was the first thing for which India would demand protection? Clearly cotton. Therefore, the excise duty would have to be taken off the Indian production of cotton, and they would have to treat the English importation of cotton piece-goods, and yarns, in such a manner as to give the Indian producers an advantage over Lancashire. India was by far the largest purchaser of the cotton productions of Lancashire. She took 40 per cent. of the cotton piece-goods and 20 per cent. of the cotton yarns. If the Indian trade was destroyed, what would become of Lancashire? There would be more unemployed in that district than there were now in the whole country. But it would never come to that, for he absolutely declined to believe that when the voters of Lancashire saw the risk of preferential treatment in favour of Indian cotton mills, they would accept the policy for a single instant. Let those who favoured the proposals come forward with a precise scheme. He wanted to see a closely-reasoned argument, showing precisely how the tariff reformers proposed to deal with this apparently insuperable difficulty. A great many people were inclined to support the new policy on the ground that it would be a step towards absolute free trade within the British Empire. But it was, in fact, a step in an absolutely opposite direction. The present obstacle to free trade was the protective wall of Canada and Australia; and by the action which was taken in agreeing to the maintenance of that wall England not only perpetuated and strengthened its establishment in the colonies where it existed, but directly promoted the establishment of protective tariffs in colonies which now had free trade. That was called a step towards a general English Zollverein. No policy which was adopted by this country should be based upon a partial or sectional diagnosis, Let the whole matter be viewed in its entirety. Otherwise we might be landed in a policy of which the immediate effect in one direction might be good, but of which the ultimate effect, upon a larger scale, would be disastrous. A policy adopted without a full discussion of its bearings upon every single unit of the British Empire would lead to action which was not in harmony either with economic and commercial advantage or with political wisdom.

Sir CHARLES ELLIOTT, K.C.S.I., said that he addressed the audience with some diffidence, because Mr. Maclean had written in his paper that no proposals made on this subject, that he had seen, deserved the attention of reasonable men-so that he stood condemned already as devoid of reason. But he thought Mr. Maclean, with his long experience, ought to know that the first duty of a controversialist was to understand the views he opposed, and the failure to do that was often due to not having given them due attention and consideration. This apparently was Mr. Maclean's case, for his paper showed that he was equally at sea as to the facts of the case,

Sir

but

and as to the principles of his opponents. He thought that Mr. Maclean had altogether missed the line of argument which would be followed by those who were in favour of the treatment of India according to the proposed policy. The principle of the unofficial programme would be to examine every article of mutual commerce and see how an alteration of the tariffs would benefit either country. There were certain articles as to which an alteration of the tariff would seemingly do good both to India and to England. Mr. Maclean stated that England had already a commercial federation with India, but he denied there was anything of the kind. That country was treated with the most absolute indifference. Henry Fowler had spoken with great justice of the admirable policy of absolute free trade introduced by Sir John Strachey twenty years ago; there was no reciprocity on the part of England. England never thought of taking off the duty on tea and coffee because India had taken off the duty on all imports from this country. Each country acted independently of the other. Then, again, whenever he dealt with facts, Mr. Maclean was inaccurate. For instance, with regard to tea, Mr. Maclean had said that if the duty on Indian tea was reduced, and that on China tea kept up, China would turn round and stop the Indian opium. But the value of tea imports from China was now only about half a million, against eight millions from India and Ceylon. Would the loss of so small a quantity of trade agitate China much? Even if it did, Mr. Maclean knew that China had tried its level best to stop the opium trade and had absolutely failed to do so. Again, he said, there was a considerable trade with Russia in tea, and that Russia could stop this trade at once if her oil was penalised. But Russia had always done her utmost to stop the importation of Indian trade. Mr. Maclean could hardly have forgotten how, about 25 years ago, there suddenly sprang up a great trade in green tea through Afghanistan into Central Asia. All the planters in Kangra, Dehra Dun, and Kumaun thought the millennium had come, and turned their whole attention to making green tea, and for a couple of years they made great profits. Then Russia stepped in, imposed a heavy duty, and utterly crushed the trade. As to the considerable traffic by sea to Batoum," probably Mr. Maclean did not know that this traffic had amounted to £200,000 in 1897, but had fallen to £35,000 in 1901-2. And it is for fear of the stoppage of this insignificant trade that he warns us against irritating Russia! This is a typical instance of the arguments of the old school. They are always saying, Don't strike back, or the other country will kick you harder. They won't understand that the other countries are kicking us as hard as they can, without hurting themselves, already; and that the result of our striking back will be that they will kick us less hard, not harder. Similarly, with regard to wheat, he agreed entirely with the Chairman that Mr. Maclean had missed the real point. There was

a vast area in the Punjab which would come under irrigation when the schemes of the Irrigation Commission were carried out, and which could produce wheat, and that wheat would be almost safe from drought. The supply would be uncertain, and England could not rely on it, but it would be an enormous benefit to India to have that wheat as a reserve to fall back on in case of famine. It had been said, that if we taxed Russia's petroleum, Russia would pay us out somehow. But Russia was already paying us out to the best of its power. It taxed our exports 50 per cent., and we taxed nothing in return. If England had the £2,000,000 worth of petroleum to deal with, England would have an implement against Russia, which it had not now. He held that India had nothing whatever to do with retaliation, and the principle would not apply there, because no country is taxing Indian exports like they are taxing ours. He did not agree with Sir Edgar Vincent, that every country must be treated in reference to other countries. The whole system would, he believed, be simply one of bargaining, and each case would be treated on its own merits. There was a great deal that England could give India, and that India could give England. He entirely repudiated the doctrine that the arrangements which were being talked of now with regard to favouring the colonies would affect our relation to India. No claim to a new system of protection could arise in India. No doubt a good deal of protection would have been popular in India long ago, but it was marvellous that the cotton mills had so grown up without protection. There was an enormous wealth of minerals in India, but they made no steel or iron there. Those things would grow up much more quickly in India under protection, but the history of the cotton and jute mills showed that they could grow without it. He abandoned the suggestion he had made in the correspondence in The Times with the Chairman that the cotton duty in India could be removed and the countervailing excise duty kept up. He believed that from a revenue point of view it would be quite practicable to abolish both. He believed that the policy of the unofficial programme if carried out would be highly beneficial to India. Arrangements between India and England as to preferential rates might be beneficial to both countries.

Mr. MACLEAN, in reply, said that they had had a purely protectionist speech from Sir Charles Elliott, but he really did not know what line Sir Charles proposed to take. Did he or did he not propose to do away with the Indian duties on the manufactures of Lancashire? If that was his scheme what would he substitute for the revenue which the Indian Government now made upon cotton goods? Sir Charles Elliott had told the meeting that it would be a very good thing for India to put a tax on Russian petroleum oil. But would that be for the benefit of the Indian people? The people bought the Russian

petroleum in preference to their own cocoa-nut oil, on account of its cheapness, and Sir Charles Elliott would benefit the people by putting a duty upon it. That was a very good sample of the arguments in favour of protection. Sir Charles Elliott said that we were going to let India severely alone, though making arrangements with the rest of the Empire. That would be indeed treating her as the Cinderella of the Empire.

Sir CHARLES ELLIOTT said that what he said was not that India should be left alone, but that the arrangements made with India would be made separately and apart from the arrangements made with the colonies.

On the motion of the CHAIRMAN, a hearty vote of thanks was accorded to Mr. Maclean for his paper.

Sir FREDERICK YOUNG writes:-As I had not an opportunity of taking part in the discussion of the paper which was read by Mr. J. M. Maclean before the Indian Section of the Society of Arts, I crave your indulgence to make one or two comments upon it. The title of the paper on the invitation card, as sent to me, was as follows:-"India's Place in an Imperial Federation." As one who, for so many years, has taken a prominent part in advocating the principle of this great national question, I attended the meeting under the impression that it would be treated by the author on the basis of the formula, advocated by its supporters, of the kind of represensation which would be given to India, as forming so important a part of it, in an Imperial Senate, or Parliament, or Council of the Empire. I was, of course, surprised to find that this initial important ingredient of the political scheme which is recognised by the term Imperial Federation was not the real subject of the paper. It was, instead, an essay on the aspects of the present and the proposed fiscal policy as affecting the Indian Empire. From the author's very pronounced views on the subject, the paper was an interesting and able one. While disagreeing with many of his points, I listened to it with much pleasure. As one who has studied the subject of Imperial Federation, and given expression to my opinions upon it for many years past, I feel bound, however, to enter my protest against the title given by Mr. Maclean to his paper, which was most misleading and incorrect. I confess I anticipated that, considering the title of it, he would have propounded his views on the question of the representation of India on the proposed Imperial Assembly, and not on the aspects of the fiscal policy at present agitating the nation, on this occasion. On the actual paper itself, there was evidently a wide difference of opinion among the speakers who discussed it. Had I done so myself, I should certainly

have joined in differing from many of the points which the author urged would follow, most injuriously to India, from the adoption of any change in the present fiscal policy, and the substitution of a preferential tariff for every portion of the trade, India included, of the British Empire.

Sir RICHARD TEMPLE writes :-Time did not permit me to make the only observation I have upon Mr. Maclean's remarks. The whole discussion strikes me, from a practical point of view, to be premature. India, under a Government subordinate to Parliament, depends entirely upon Parliament for its Imperial policy. The Imperial policy of Parliament from time to time is the outcome of the elections, and, in my judgment, we may take it for granted that, at the elections, India will not be considered. Therefore, it is the result of the situation that the position of India is not of itself considered in such questions as free trade, protection, preferential tariffs, and retaliation, when these are before Parliament as matters of Imperial policy. The only practical question, then, that Indian statesmen and thinkers have to consider is, how to meet and act under the conditions resulting from any particular decision of Parliament in such matters as these. It is true that the effect on India of a general proposed policy may be considered in the preliminary discussions thereon, but such consideration must perforce be academical until the proposals take a definite turn. There is nothing before the Indian Government and the Indian people to practically consider until some concrete point of detail is actually before Parliament for decision. It may be taken for granted that any such point in such a question as fiscal reform will be before Parliament for a long while, and there will be plenty of time to make representations to Parliament if a proposal involved in it is likely to operate adversely to India. To consider the position of India as matters stand now is very like crying out before you are hurt, for no one knows at present exactly what is going to be done.

Sir WILLIAM WEDDERBURN writes: In the debate which followed Mr. Maclean's paper on "Imperial Federation" all the speakers were agreed on one point, viz., the injustice and absurdity of leaving India out of consideration in any wide scheme of fiscal change. How will the authorised and the unauthorised programmes affect India? And what are the feelings and wishes of the Indian people regarding them? It is certainly important that we should know, but unfortunately there exists no official machinery for obtaining, at first hand, a representative opinion on these points. The Secretary of State for India might, under the existing law, appoint one or more representative Indians upon his Council, but he has never done so, although a recommendation to that effect was made in the minority report of the Royal Commission on Indian Expenditure. The same report advised that there should always be an Indian member on the Viceroy's executive council, but this

recommendation also has not been adopted; and the consequence is, that the Indian Government, both at Westminster and Calcutta, are out of touch with Indian opinion, and at a serious disadvantage in dealing with questions affecting the economic and social welfare of the people. There remains the unofficial organisation of the Indian National Congress, which will shortly meet at Madras. If the Government would be pleased to ask the views of this representative body, such a reference would elicit a valuable expression of independent public opinion drawn from all the provinces of India.

Barzano, Carlo, 6, S. Andrea, Milan, Italy. Read, William, A.I.N.A., Camber Slip, Portsmouth.

White, Samuel, Dorset-house, Clifton, Bristol.

The following candidates were balloted for and duly elected members of the Society :Acker, Charles E., Acker Process Company, Niagara Falls, New York, U.S.A.

Baldwin, Harold O., 3, Blurton-road, Fenton, Staffordshire.

Furse, Captain A. D., F.R.G.S., Glenwood, Chelverton-road, Putney, S. W.

Gauntlett, Paul E., 6, Rood lane, E.C.
Green, George, J.P., Methven, Balshagray-avenue,
Partick, Glasgow.

Ham, Frederic George Sison, A.M.I.Mech. E., 13,
Grosvenor-road, Westminster, S.W.

Hills, David, Rosetta, Brackley-road, Beckenham,
and 2, Bayer-street, Golden-lane, E.C.
O'Neill, James Joseph, M.I.N.A., 19, Roxburgh-
street, Hillhead, Glasgow.

Wall, Frank, Globe Works, Grays, Essex.
Williams, Alfred, 13, Hillcroft-crescent, Ealing, W.

The paper read was

THE SCIENCE OF TAXATION AND BUSINESS.

BY SIR WILLIAM PREECE, K.C.B., F.R.S. In the address which I had the honour to deliver to the Society as Chairman of the Council on November 21st, 1902, I dealt with the causes which result in successful or disastrous financial undertakings, and I endeavoured to show that there was a true science in

business. By science I mean not only the systematised and organised conclusions of common sense, but the careful sifting and comparison of facts, and of the lessons of experience and observation. Laws have to be deduced from these facts and experiments, and when these laws are confirmed by verification and anticipated by prediction then it can be said that we have established a science.

Science is a term commonly applied to the discovery, development, and narration of the laws of nature, but here I use it to indicate the laws developed by the ordinary events of man's life, collected in numbers as a nation, to render living healthy, comfortable, lucrative, and secure. It, therefore, considers property, commerce, defence and government.

The science of business is based on statistics which when tabulated and graphically recorded as curves or charts indicate facts from which laws can be deduced. In my address of last year I dealt in this manner with the special industries of water, gas, railways, and telegraphs. I purpose now to deal with the business of government, but only with that part of it which deals with the provision of ways and means, which embraces what is called our fiscal system, and which is unfolded to the public every spring by the Chancellor of the Exchequer in the annual balancesheet submitted to Parliament, known as the Budget.

The chief aim of the ordinary business man is to raise an income to meet his just wants, but we all have a hankering after something else and that is the accumulation of wealth. The business manager of a great Empire has the same prime object before him without the additional incentive of creating a fortune and securing worldly luxury and retired ease by pursuing profession, commerce, industry, literature, or speculation. On the contrary his object is to reduce by every means in his power the incidence of taxation upon his masters-the public.

We have to deal with facts, and these facts must be exact and reliable. If any doubt is entertained as to their truth they must be discarded for verification, and no deduction is permissible on questionable facts. There are facts which are historical and facts which are statistical. The former I will confine to the period embraced by my own life, the latter to the elaborate returns that have been collected and published recently by the Board of Trade. The returns are:-"Report on Wholesale

and Retail Prices in the United Kingdom in 1902," issued August 6th, 1903: Memoranda, Statistical Tables and Charts bearing on British and Foreign Trade and Industrial Conditions," issued on August 20th, 1903: The Board of Trade Journal, which is issued monthly. These returns are authoritative and unquestionable. The deductions from these facts may be disputable.

The business of Government is purely a commercial matter. It should be outside polemical politics. It is a question of £ s. d., and ought to be entirely free from party bias and platform acrimony. I am not a politician myself. I spent thirty years in the Government service, and not one of my political chiefs could say that I belonged to one party or the other. I purpose therefore to endeavour to consider this question from a neutral point of view.

The neutral citizen has this immense advantage, that he is able to read dispassionately each side of a question, and to deduce from rival statements his own conclusions. He is sure to learn all that can be said in favour of a certain proposition, and all that can be said against it. The leaders on both sides summarise the pros and cons. The Press, as a rule, is very impartial in its publication of speeches, both in and out of Parliament. Thus every one can form his own opinion. It is quite certain that if the business principles involved comply with the scientific requirements of truth they will appeal favourably to the average intelligence of the country, and that will ensure their ultimate acceptance whichever party is in power. The fiscal system of the country appeals not only to the patriotism of every Briton, but to his reason and his business acumen. It is either right, or it is wrong. If right it will be maintained, if wrong it will be reformed. How far does it comply with the scientific principles of business?

DEFINITIONS.

Commodities imported into this country or exported from it are classified as :— 1. Raw material. 2. Food.

3. Partly manufactured articles.

4. Wholly manufactured articles.

These may be imported or exported Free or Taxed. They may be taxed for

I. Revenue.

2. Protection.

3. Prohibition.

Protection is the imposition of a tax not for the purpose of obtaining revenue solely but for restricting unfair foreign competition, for maintaining the activity of home manufactures and industries, and for defensive purposes.

Prohibition means the incidence of a tax so high as to exclude goods entirely from home markets.

The principles that determine the various incidences of taxation form the Fiscal Policy of the country.

This policy may be

1. Free Trade.

2. Restricted Trade.

Free Trade, the child of Adam Smith (1776) is a term very generally but improperly applied to free importation only, but it is more correctly applied to the free interchange of imported or exported commodities between different countries. It was in the former sense that it was used by Peel in 1842, and in the latter sense by Pitt in 1787, and by Cobden and his followers in 1846. It has never been adopted in the latter sense by any country, not even by the United Kingdom. It is, however, in existence between the various constituent States of the United States of America, and between the various units of the Empire of Germany. The policy adopted by the United Kingdom is that of free imports and these only partially applied.

The amount of taxation imposed upon different commodities is called a tariff, and this tariff is preferential when it is relaxed in favour of any particular country.. Peel recognised preference with our colonies in 1842. was abolished in 1846.

HISTORICAL FACTS.

It

Sir Robert Peel was the greatest Finance Minister that ever handled the fiscal system of this country. He was Prime Minister in the year I was born, 1834, but he was in office for only a few months. The political parties were then called Whigs and Tories. Peel led the Tories who were beginning to assume the title of Conservatives. He came into office again as Premier in 1841 and remained in power until 1846. The great excitement of the period was the Corn Laws. There was great depression of trade and much distress and even riot in the

• Although I have read the debates of 1842 and 1846 it is to the admirable study on "Peel" in "English Men of Letters," by Thursfield, that I am indebted for much that I say about that great statesman.

country. The potato disease appeared in Ireland with its terrible accompaniment— famine. The agriculturist was the dominant power-protected by prohibitive taxation. The manufacturer was beginning to assert himself. Steam and the steam engine multiplied the means of production. Railways expedited and economised transport. Raw materials and coal were more abundant and cheapened. The Penny Post faciliated correspondence and intercourse between supplier and consumer. The Bank system was placed on a permanent and unassailable position. The Telegraph was introduced in 1837 and became later a greater innovator in the transactions of commerce than even Rowland Hill's mails. The mode of conducting business was revolutionised. The battle was between agriculture and manufacture, and Peel, the son of a great and successful manufacturer, who had amassed immense wealth by the loom, decided the contest against the former. The , Corn Laws were repealed in 1846.

The command of the sea acquired in the great Napoleonic wars, and the sailor instincts of the nation placed the carrying trade of the world in British hands. The introduction of the screw propeller, and the marvellous improvements in the production of iron and steel have, since Peel's day, revolutionised the construction of ships-their size is immense, their speed prodigious. Watt, Arkwright, Stephenson, Faraday, Whitworth, Armstrong, and Bessemer were pioneers of our marvellous industrial productions, of the great trade of this country, and of its immense wealth. Bessemer reduced the cost of the production of steel from £50 a ton to £5! Gigantic steamers and high speeds have reduced the cost of freight of corn across the Atlantic from 7s. per quarter in 1873, to 10d. in 1901. What has the politician done compared with this in economical policy? The abolition of the Corn Laws in 1846 did not affect the price of bread. The price of corn was in 1842, 73s. per quarter, but in 1846 it was 54s. 8d., and in 1873, 58s. 8d.! It is now 25s. 10d. It is thus clear that the great reduction in price in this principal article of food has very little to do with fiscal policy, but everything to do with scientific application, inventive genius, and engineering skill. Prices are determined by the vicissitudes of trade and by the markets of the world, and not by legislation.

These great engineering operations, and not mere fiscal changes, have revolutionised the