he included in the miscellaneous receipts of 1860, upwards of 1,000,000l. of money, repaid by Spain for advances made more than 20 years before? or Sir G. C. Lewis, when for two years after the Crimean war, he allowed these receipts to be swelled by the sale of old stores that had been paid for partly by loans during the war? Or again, was Mr. Wilson, after five years' experience as Secretary to the Treasury, ignorant of the A. B. C. of accounts, when he made a precisely similar deduction, in 1860?

A budget may be framed on two principles, either that of including all current payments and receipts of the year, or of taking the ordinary payments and receipts only, and bringing all extraordinary items into a supplementary budget. The latter principle is that adopted in France, but the former has been the universal practice in England; and it is the preferable one, as it leaves less scope for self-delusion in ignoring real expenses, because they are not in the ordinary budget.

revenue.

I cannot understand therefore on what principle extraordinary expenses are to be included as a charge, and extraordinary receipts excluded as a Of course, it would be wrong to repeal taxes on the faith of extraordinary receipts not likely to recur, and not balanced by extraordinary charges; as if Mr. Gladstone had reduced the income tax by 1d. in the pound on the faith of the Spanish million; but the true policy is to include both, and to look at both sides, in order to see whether the special charges which will not recur, are or are not covered by the special receipts. This is precisely what I did. I found on the side of expenditure two charges that are clearly special, of which the full amount will not, in all probability, be spent in 1862-63, and which, at any rate, will not recur.

The first of these is 230,000l. for a telegraph through Persia. Now, the line passes through one of the least known and most inhospitable districts of the world, which has not yet been surveyed: and the last phase of the negotiations with Persia was that she demanded conditions for allowing the passage of the line that were quite inadmissible. It is therefore very improbable that the money will really be spent this year; and even if it be so, on what principle is it to be treated as a charge against revenue to be met from the taxation of a single year, when the corresponding Red Sea line, for which it is a substitute, was treated, both by the English and Indian Governments, as a charge against capital, and provision only made for the interest?

The other charge is still more exceptional. I find an item of 220,000%. for the new Indian Office, and 39,000l. for new store warehouses. The estimate for the Foreign Office, which is to be built alongside of the new Indian Office, is shown to the House of Commons, as follows: An estimate of the entire cost is given, on which a vote is taken on account, and if not spent in the year, is carried forward, and a fresh vote taken for only so much as is really required to feed the account during the year. In this way the total sum voted when the work is finished equals the total expenditure; and it is seen at a glance what it has really cost, and if the estimate has been exceeded.

After showing that owing to the mode in which the accounts were kept, the real expenditure for the year did not appear, Mr. Laing continued: I cannot understand what is meant by stating that these China advances formed no part of the annual charges of the year in which they were made. They were actually paid, I apprehend, in hard rupees, out of the cash balances of the Indian treasury, just as the stores sold after the Crimean

war had been paid for out of the cash balances at the Bank of England; these balances being in either case furnished principally by taxes, and partially by loans. This much at any rate is quite certain, that if the Home Government wished these items to be stated in some other way, they ought not to have given them in a purely revenue statement, mixed up with other revenue receipts and charges, without a word of explanation. They knew that I had complained loudly in 1861, of being compelled to bring in a budget, without anything approaching to a proper estimate for the home expenditure, and had pressed for distinct estimates; firstly, of the current revenue and expenditure of the year in England; and, secondly, of the cash transactions, including receipts and payments from railways, and on other capital and deposit accounts.

The estimate (A.) of home charges in 1862-63, is a reply to the first of these requisitions. It is essentially a revenue statement, sent for the purpose of enabling me to make a budget for the year; and not a cash-balance statement, showing other receipts and payments that are not revenue, which, in fact, was not sent until a subsequent mail, and did not reach India until after the budget had been necessarily produced in anticipation of the new financial year. In this statement, which contains no single item of charge not intended to be a charge of the year, it is said, after adding together the charges, "deduct receipts," and the repayments in question are entered along with other receipts, which are now admitted by the Secretary of State himself, to be ordinary revenue receipts; although, until I corrected the error, he actually appears to have considered the interest on cash balances invested, as not a revenue receipt of the year.

Nay, to such an extent is this carried, that, while in the accounts for 1861-62, the entire expenses of Addiscombe College are set as a charge on revenue, the fees paid by cadets are, it would seem, not to be entered as a receipt per contra, but (if the Secretary of State really means what he says in his despatches) are to be treated as a refund, "which it is contrary to the first principles of finance to include as current revenue."

Mr. Laing then answered other charges made against the budget; and he afterwards passed to more general matters, as follows:

If the despatch had been confined to these two questions of account, I might now conclude my observations; but as the whole financial policy of the last year of Lord Canning's administration is, in effect, impugned, and he is unfortunately taken from the place where he could so well have defended himself, I feel it my duty to make some remarks on the general character of that policy. Our financial policy must not be taken alone, but judged as part of a great policy, the essential aim of which was to give tranquillity and restore confidence after the mutiny; to allay animosities of race and party; to create feelings of attachment among the native population to the British rule; and to carry all classes along with us in an endeavour to develope the great resources of India, and to improve the material and moral condition of its vast population.

If to this I add, that, while laying down the cardinal axiom that India was to be governed for the good of Indians, we held that one of the chief means of promoting this good was by encouraging the extension of independent European capital and enterprise, I shall have briefly summed up the principles which guided Lord Canning in every act of his administration, during the time I had the honour of serving under him.

The desired result has been in a great measure attained; but we have to

look back only a very short period to a very different state of things. When I first landed in India, in January, 1861, the aspect of affairs was full of gloom and danger. The urgency and long continuance of the financial crisis had not only created a general feeling of alarm and insecurity, but had, to a great extent, shaken confidence in the Government. Nearly all classes of the community were, for one reason or other, deeply dissatisfied, and animosities of race and party never ran higher; unless when merged, as in the case of the Mysore grant, in one common feeling of indignation at some act of the supreme authority.

The official classes had suffered to the extent of not less than twenty or twenty-five per cent. of their salaries by the excessive rise in rents, wages, and prices, and by the income-tax. Many of the military officers had suffered still more from the army reductions and amalgamations; and both civilians and military men were exasperated by what, whether rightly or wrongly, they considered the undue suspense in which they had been kept, and the want of consideration of the home authorities in dealing with their claims.

The non-official Europeans were engaged in a bitter feud with the local Bengal Government, and were loud in their complaints of systematic discouragement of independent capital and enterprise.

Among the native classes, although Lord Canning's wise policy of sanctioning the right of adoption had, to a great extent, conciliated the princes and nobles, a vast deal of smothered discontent existed among the smaller landowners, the trading classes, and the mass of the population, owing to the imposition of the income-tax, the threat of the license-tax, and the general fear of an indefinite succession of new and unpopular taxes-a fear which was made the most of by every agitator hostile to British rule.

The extent of this feeling has, I think, never been properly understood in England, where the income-tax and license-tax have been looked upon, from an English point of view, as equitable in theory, and open to no greater objections in practice than similar taxes would be in England. But there is no sort of analogy between the practical working of such taxes in England and in India. In India the attempt at classification is an infinitely greater evil than the direct incidence of the tax. The income-tax required 700,000 or 800,000, the license-tax would have required 5,000,000 or 6,000,000 taxpayers, to be assessed or arranged in classes, after more or less investigation into their means.

Such an inquiry could only be conducted by a large staff of subordinate native officials on low salaries. It is absolutely certain that it must call forth a vast amount of annoyance, chicanery, evasion, oppression, and extortion. Nor were these apprehensions chimerical; on the contrary, we were warned from all quarters by our most experienced officers, and most of all by influential natives whose fortunes were bound up with ours, and whose loyalty we could not doubt, that a great change was taking place in the feeling of large classes of the native population towards us, owing to the incidence, and still more to the apprehension, of new taxes. I shall never forget the emphatic observation of Lord Canning, at the first interview I had with him, that he deeply regretted the necessity which compelled him to impose the income-tax, and that, to use his own words, "danger for danger, he would rather risk governing India with 40,000 European troops without new taxes, than with 100,000 with them."

The risings in Assam, which were universally attributed by the local

officers to the income-tax, or rather to the use made by designing men of the terror inspired by the new English taxes, among an ignorant population, are a significant commentary on these words.

If an impression prevails here that the new taxes were a success, and the principal means of restoring the finances of India, it is important to contradict it. The deficit of 10,790,000l. in 1860, was converted into a surplus of 1,400,000l. in 1862, by reductions of more than 8,000,000l. in military and other expenditure in India, open to revision, and by the addition of upwards of 2,000,000l. to revenue from existing sources, such as land, excise, salt, and stamps, which were scarcely felt; whilst not above 1,500,000l. net was realised by the new direct taxes on the English model, which convulsed Indian society.

It was an object, therefore, of the first political importance to change the current of feeling produced by these unpopular measures, by proving to the native population that we were not, as they universally believed, insatiable of new taxes.

Accordingly, I always felt that I must not be satisfied with the mere financier's view of getting both ends of my budget to meet, no matter whether by reductions or by new taxes, but that I must press for such large reductions as would not only establish confidence in the energy and foresight of the supreme Government, but also so completely restore our finances as to enable us to arrest the progress of direct taxation, and alleviate its pressure. Thanks to the clear judgment and unwavering support of Lord Canning, to the valuable aid of Sir Bartle Frere, Mr. Beadon, and my colleagues in council, and to the truly Herculean labours of Colonel Balfour and the Military Finance Commission, the task was accomplished; and in less than four months after I landed, a deficit, estimated in the latest official document published by the Government of India while I was on my way out, at upwards of 6,000,000l., was extinguished. The effect in India was great. Confidence in the future and in the Government was almost instantaneously restored, and the chorus of grumbling which pervaded Indian society was changed at once into one of hopefulness and satisfaction.

The further measures of Lord Canning, in sanctioning the sale of waste lands in fee simple; in resolutely holding the balance even between the Bengal Government, the ryot, and the planter; in enforcing a reform of the Bengal police, and extending small cause courts and local judges; and, finally, in straining every nerve to push forward the construction of roads and communications, completed the satisfaction of the European community.

It remained to deal with the less obtrusive but more extensive and dangerous discontent of the native population, occasioned by the new taxes. In my first budget we suspended the license-tax, from a conviction that nothing but absolute necessity could justify us in imposing such a tax on 5,000,000 or 6,000,000 of artizans, mechanics, and petty traders, in order to realize such a paltry sum as 500,000l. or 600,000l.

Two taxes, so specially and urgently objectionable that nothing but absolute necessity could justify their continuance, still remained. The arguments against the extra 5 per cent. duty on imported manufactures are too well appreciated here, to make it necessary to recapitulate them.

It only remains to notice the injunction to withhold the extra grants, destined for public works and education.

As regards education, I will only observe, that if roads are the great material want, schools are the great moral want of India; that a thirst for education is rapidly extending among the native population; and that the extra 100,000l., which it is proposed to give, will elicit more than another 100,000l. in the way of voluntary contributions.

As regards roads, I can speak more specifically. The late able Secretary of Public Works, Colonel Yule, who left India with Lord Canning, recorded a minute in which he reviewed the whole state of public works in India. He showed conclusively that a large expenditure had been going on for many years in driblets, by which a number of most important roads and other works had been advanced considerably towards completion without any appreciable result, because they were not finished throughout, but left in isolated sections. Even on the grand trunk-road, within a short distance of Calcutta, several interruptions worse than breaks of gauge occur, from rivers and ravines being left unbridged. Colonel Yule pointed out that if, in addition to maintaining our present rate of expenditure, we could devote 500,000l. a year extra, for two or three years, to the completion of such works, a very great result would be attained.

There was no object nearer to Lord Canning's heart than this, and his only doubt was, whether, with such a large cash balance, we should confine ourselves to the 500,000l., which could be spared without incurring a deficit, or take a further sum avowedly from the surplus balances.

This is a grave question; and, with the certainty of the vast benefits which would infallibly accrue from the early completion of roads and works of irrigation, and in the present aspect of the cotton question, I believe nothing prevented Lord Canning from proposing the additional outlay of at least 1,000,000l. but the doubt whether, with an expenditure of 11,000,000l. a year already going on between railways and public works, more money could be spent with the existing machinery of the public works' department, without waste and extravagance.

I now conclude the last lines which I shall write in the capacity of financial member of the council of the Governor-General of India. Whether my health would have permitted of my return is doubtful, but, of course, this despatch decides the question. After sharing in what I believe to be the signal success of the concluding act of Lord Canning's Indian administration, I cannot serve under a minister who views a material part of that policy so differently, as to think that it calls for public censure and disavowal. It is now just eighteen months since I first landed in India, and, during this period, I have been absent six months from severe illness. I found India with a deficiency estimated by the Government at 6,000,000l. I leave it with a surplus.

I found it with an annual expenditure, open to revision, of 29,365,0661; I leave it with one of 23,454,0871. I found it with a cash balance below 12,000,000l.; I leave it with one of 17,783,9787.

I found it with gloom and despondency prevailing, great animosity of races and parties, and wide-spread disaffection and discontent; I leave it with one universal feeling of hopefulness and satisfaction, and amidst general expressions of loyalty and attachment from the natives of India to the British rule.