1902 Encyclopedia > England > National Revenue and Expenditure. Taxation.

(Part 9)


Part 9. National Revenue and Expenditure. Taxation.

The finances of no European state are in a more admirable condition than those of the United Kingdom. Not only is the national revenue, requisite to meet the expenditure, raised with the utmost facility, but for many years the balance of them has been complete, an annual surplus being the rule, and a deficit the exception, in most financial periods. In the half century intervening between the years 1827-28 and 1876-77, both the expenditure and revenue rose to but a comparatively small degree, far below all proportion with the vastly increased wealth of the nation during the same period. In the financial year 1827-28 the total public revenue amounted to £54,932,518, and the expenditure to £53,800,291; while in the financial year 1840-41 the total revenue was £47,433,399, and the total expenditure £49,285,396. Thus, in the course of thirteen years, the fiscal burthens laid upon the population, augmented by nearly two millions in the meantime, instead of being increased, had been greatly lessened. Subsequently, from 1841 to 1877, a gradually increasing expenditure took place, together with a rising public revenue; but the upward movement was slight, and much below the growth of the population in numbers, and, still more, in wealth. At the end of the next decennial period, in the financial year 1850-51, the total revenue had risen to £53,057,053, and the expenditure to £49,882,322; and at the end of another decennial period, in the financial year 1860-61, the revenue stood at £70,283,674, and the expenditure at £72,792,059. At the end of the next decennial period, in the financial year 1870-71, the total revenue had fallen to £69,945,220, and the expenditure to £69,548,539. During the whole of the thirty years from 1840-41 to 1870-71, there were but few annual periods without a surplus of revenue over expenditure.

The subjoined table shows the total revenue and the total expenditure of the government, together with the proportion of receipts per head of population of the United Kingdom, in every fifth financial year from 1841 to 1871, and each year thereafter to 1877. Up to 1854, the financial years ended April 5; but, commencing form 1855, the financial year ended March 31. Till the year ending March 31, 1856, the net revenue and expenditure were always given in the official returns; but, commencing with the year ending March 31, 1871, the accounts furnished, more correctly, the gross expenditure and revenue, the latter including charges for its collection:—


The largest surplus in the course of the thirty-six years form 1840-41 to 1876-77 occurred in the financial year 1869-70, when the excess of revenue over expenditure amounted to £6,569,500, and the next largest in the financial year 18440-45 when the excess of income over expenditure was £6,342,436. On the other hand, the greatest deficit showed itself in the financial year 1855-56, when unforeseen war expenses brought the revenue below when the expenditure to the extent of £22,723,854. The fifteen years from 1863 to 1877 showed all, with the exception of two, 1868 and 1869, a surplus of revenue over expenditure.

The following table gives the official account of the gross sources of revenue of the United Kingdom for the financial year ended March 31, 1877;—


The following table gives the official account of the gross expenditure of the United Kingdom for the financial year ended March 31, 1877:—


The surplus for the financial year 1876-77 amounted to £439,809, being less than in any of the preceding five years. In the budget estimates for 1877-78 the total revenue was calculated at £79,020,000, and the total expenditure at £78,794,044, leaving a surplus of £225,956.

About three-fourths of the total revenue of the United Kingdom are derived from three sources of income—excise, customs duties, and stamps. In the sixteen financial years from 1861-62 the revenue from the excise increased greatly and that from customs declined, while that from stamps increased moderately. The following table shows the receipts form these main sources of revenue for every third year from 1861-62 to 1876-77:—


Excise.—The vast increase in the receipts from the excise during the sixteen years from 1862 to 1877 was due solely to the corresponding increase in the consumption of spirituous liquors. The increase was greatest in the receipts from spirits, which rose from £9,618,291 in 1861-62 to £14,873,165 in 1876-77. The excise receipts from malt grew from £5,866,302 in 1861-62 to £8,040,378; and those form licenses to make and sell spirits and malt liquors from £1,500,613 in 1861-62 to £3,548,557 in 1876-77. In the latter financial year the receipts from the excise had come to represent already considerably more than one-third of the total revenue, and should the growth, very steady and regular from year to year, continue at the rate shown in the preceding table, it will not be long before one-half of the national income will be raised by the voluntary taxation of the consumers of alcoholic liquors.

Customs.—The decline in the receipts from customs during the period 1862 to 1877 was due entirely to a constant reduction of duties. Those on tea were reduced in 1862, causing a loss to the revenue of £1,641,541; and again in 1864, when the loss was £2,241,981. The duties on sugar were also greatly reduced in 1863, the loss of the customs being £1,741,272; and again in 1872, with a loss of £1,612,882; while the small remnant of the old duties in corn was repealed in 1868, at a loss of £855,581; and the example was followed in the case of the sugar duties, the last of which was abolished in 1875. Thus the sugar duties, producing £6,383,289 in 1861-62, brought nothing in 1876-77, while the tea duties fell from £5,516,584 to £3,723,147. Alone of all the customs duties, those on foreign spirits and wine increased during the period, notwithstanding the latter article also underwent a reduction of duties. Together, the foreign wine and spirits duties produced £3,753,785 in the financial year 1840-41, and £7,507,807 in 1876-77. Adding this sum to the excise receipts, the total revenue derived from spirituous liquors in the financial year 1876-77 was no less than £35,243,807, or nearly three-sevenths of the national revenue.

The subjoined table exhibits the changes effected in the national revenue by either the repeal or reduction of taxes and the imposition or re-imposition of old and new ones, during the period from 1861-62 to 1876-77:—


Income Tax.—The basis and principle of the system of levying the national revenue is indirect taxation, or, as it may very properly be called, voluntary taxation, since at present no impost lies upon any article of prime necessity. To this system the only exception is the income tax, which, however, has many opponents, and is barely considered by the legislature a permanent tax, as it has to undergo constant changes, all tending to its repeal at a favourable opportunity. Originally granted by parliament, against great opposition, in 1798, as "an aid for the prosecution of the war" against France, the old income tax was repealed in 1816. But it was re-imposed, under modified forms, in 1842, nominally for only three years, the amount being fixed at 7d. in the pound. Subsequently parliament consented to new prolongations, alternately of three years, of one year, and of seven years; and in the course of the Crimean war, the impost was raised, first to 14d., and then to 16d., in the pound. In 1857 the income tax was again reduced to 7d., and in 1858 to 8d., in the pound. In the following year it was once more raised to 9d., and to 10d. in 1860; but was again reduced to 9d. in the pound in 1861, to 7d. in 1863, to 6d. in 1864, and to 4d. in 1865. In 1867 the tax was again raised to 5d., and in 1868 to 6d., but in the following year once more lowered to 5d., and in 1870 to 4d., in the pound. The tax was again brought up to 6d. in 1871, but lowered to 4d. in 1872, to 3d. in 1873, and to 2d. in 1874. Finally, in 1876 it was once more raised to 3d. in the pound, but at the same time restricted to incomes of over £150 per annum, with a deduction of £120 for all incomes between £150 and £400, thus affecting mainly the so-called "upper" and "upper middle" classes of the population. The total receipts of the income tax amounted to £10,365,000 in the financial year 1861-62, and had sunk to £5,280,000, or little more than one-half, in the year 1876-77.

An indication of the proportions of the revenue derived from taxation in England, Scotland, and Ireland respectively is given in the following table. The figures, which are for the year ending March 31, 1877, do not include the post-office returns, and in the case of the income tax are exclusive of the returns from the incomes of Government officials.


Expenditure.—As the main sources of national revenue are but few, so are the principal branches of expenditure. They may be reduced to three, namely,—first, the interest and management of the national debt; secondary, the charges for the army and navy; and thirdly, the cost of the general government, entered in the financial accounts under the headings of "Civil List," "Miscellaneous Civil Services," and other charges placed to the Consolidated Fund. The following table exhibits the annual disbursement under each of these three principal branches of national expenditure, during every third financial year form 1861-62 to 1876-77:—


National Debt.—It will be seen that, leaving alone the cost of the army and navy—of which more in the next chapter—the charges for the interest and management of the debt form by far the most important branch of national expenditure. The foundation of this debt, larger than that of any other country in the world, and the burthen of which could be safely borne only by the wealthiest of nations, was laid at the time of Revolution, in 1689, and its growth since that time, both as regards capital and interest, is shown in the following table:—


The following table exhibits the amounts of capital of the debt, distinguishing funded and unfunded, during each of the sixteen years from 1861-62 to 1876-77:—


The amount of terminable annuities, included in the total capital of the debt, by computation in 3 per cent stock, varied considerably in different years, through additions being made to them, as in 1864, when £5,0005,000 of the funded debt were converted into terminable annuities, and again in 1875, when £4,000,000 of Suez canal bonds were added. The total computed capital of them amounted to £49,308,558 on the 31st of March 1877. By the provisions of an Act of parliament passed in the session of 1875, the national debt will be gradually reduced by the establishment of a new permanent sinking fund, maintained by annual grants. The grants, by the same Act, were fixed at £27,400,000 for the financial year 1875-76, at 27,700,000 for the year 1876-77, and at £28,000,000 for every subsequent year after 1877.

There is a somewhat remarkable harmony between the chief sources of revenue and the principal branches of expenditure. Thus in the financial year 1876-77 the first source of revenue, excise, productive of £27,736,000, almost exactly covered the first branch of expenditure, interest and management of debt, amounting to£27,992,834. Again, in the same financial year, the receipts from customs and stamps paid, with a surplus left, for the cost of the army and navy; while the produce of the taxes, including income tax, together with the post-office, discharged the expenses of the general government.

Local Taxation.—Besides the national or so-called imperial taxation, a sum considerably surpassing the total receipts from the excise is raised annually by local taxation. In the financial year ended March 31, 1874—the last for which returns were published at the end of 1877—the total amount raised by taxes, and from other sources of income, for the purposes of local government, in each of the three divisions of the United Kingdom, was as follows:—


In addition to the sums here specified, the local authorities raised in the financial year 1873-74 the amount of £1,552,555 from sales and rents of property, £2,404,675 from Government contributions, £8,480,486 by loans, and £3,848,504 from miscellaneous sources. The total local receipts, including taxes, amounted in the year to £45,533,815,—of which £37,731,193 was contributed by England and Wales, £3,202,714 by Scotland, and £4,599,908 by Ireland.
From a parliamentary paper, comparing imperial and local taxation in the United Kingdom, issued in the session of 1876, it appears that the burthen of local taxation is much higher in England and Wales than either in Scotland or in Ireland. If spread evenly over the three divisions of the United Kingdom, it amounted in 1873-4 to £2, 18s. 11d. per head of the total population.

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