when he was Viceroy to be a public scandal. Among more than four thousand of these officers in the Bengal Presidency, the highest paid of all, and these were very few, received £180 a year. The great majority received from £12 to £24 a year, sums less than those earned in many parts of India by common bricklayers and carpenters. All these had to be put on a completely new footing."

" 1

While the needs for expenditure were thus growing, economy in expenditure became difficult of achievement. Comparatively easy at first, each successive measure of economy became directly, as well as relatively, more arduous than its predecessor. The growing needs of improvements, hitherto neglected, and the contracting scope for economy, combined to demand an ever-increasing scale of taxation. The dangers of increased taxation by an alien Government of a people not interested in obtaining the amenities of life, much less at the cost of a tax, were uppermost in the minds of the three great financiers who were sent out from England in succession to rehabilitate the finances of India on a sound and stable basis. They realized that unless bounds were set to these demands for improved administration and improved material and moral conditions, the immediate benefits of which were enjoyed more by the European than the native population, taxation howsoever high would be inadequate for financial solvency, besides being dangerous to the political stability of the Empire. Under the existing system of barren uniformity and pedantic centralization their object was thought to be impossible of achievement; for the Local Governments, on which alone the Central Government could depend for economy, rendered at best to that Government not only a cold and languid support in financial vigilance and reform, but too often exhibited a passive resistance, and even countenanced evasions of regulations intended to be conducive to economy. The only way to make Local Governments economical in their

1 The above is taken with some alterations of a purely literary character from the "Observations on some Questions of Indian Finance," by Sir John Strachey. House of Commons Return 326 of 1874.

ways was to give them the power and responsibility of managing their own affairs. As a matter of administrative experience the financiers had found that while some of the branches of revenue and expenditure were truly Imperial, there was a wide field of both of them which was properly local in character, and ought to have been entrusted to Local Governments. They were convinced that there could be no standard of economy until the requirements of the Local Government were made absolutely dependent upon known means, and nothing they thought would serve to make known to the Local Governments the means available for their outlay than to carve out from the Imperial purse a separate purse of definite magnitude for the use of Local Governments and to throw on them the responsibility of meeting their demands and maintaining an equilibrium in their finance.

Thus they were led to the same conclusion as the Federalists. However, to make the plan acceptable to the Imperialists, they made certain concessions without seriously compromising the working of the plan. The Federal plan required a change in the constitution of the system of government in India. It necessitated a legal partition of the revenues and charges of India between the Central and the several Provincial Governments. While all, including the Imperialists, recognized in the Federal plan a powerful measure for enforcing financial responsibility and economy, the chief objection to it arose from the fact that it sought legally and permanently to divest the Central Government of the resources of India. The financiers as practical politicians soon found out a way to obviate this defect in the Federal plan. By virtue of their experiences of the working of the British Parliament they found that there was no necessity to resort to a constitutional change. Convention was deemed to be as good as law and, once established, can seldom be altered without disturbance. Separation of charges and revenues between the Central and Provincial Governments was therefore proposed to be made a matter of convention which could be upheld so long as it was profitable for the parties concerned to do so.

This gave all the advantages of the Federal plan without legally divesting the Central Government of its control over the resources of India. In its nature it was a compromise between constitutional Imperialism and constitutional Federalism. It meant Imperial finance without Imperial management. Under the compromise the revenues and charges remained Imperial in their status, but their management was to be provincialized, so that each of the Provincial Governments was given to administer a part of the Imperial charges incurred in its territory within the limits of a part of the Imperial revenues collected within its territory. This was the essence of the new plan. It differed from the Federal plan in retaining to the Imperial Government the supreme controlling, councilling and regulating authority in all matters pertaining to Indian Finance, without its being actually engaged in the details of the administration of a part thereof.

In the essence of the plan as described above all the three finance ministers who were called upon to undertake the task of reconstruction had agreed. They differed, however, in the scale on which it was to be carried out. Whether Mr. Wilson had ever elaborated his own skeleton of the plan is doubtful; but that the idea of it had occurred to him seems pretty certain. The Income Tax Act XXXII of 1860, imposed by him

"was meant to consist of two parts-first, a variable tax, originally fixed at 3 per cent. on incomes, which percentage it was intended should be raised or lowered as the general exigencies of the Empire required, and which might if the state of the finance should ever permit, be entirely remitted; and secondly, a permanent tax of 1 per cent., which was to be at the disposal of the local administration, and to be expended on roads, canals, and other reproductive public works, within the area which paid the tax (vide sections 190-4 of the Act). This portion of the tax was never intended to be remitted. It was always to be kept up, not only to meet the charges to which it was applicable, but in order to maintain the machinery of the tax so that at any moment of exigency, after a temporary remission the other portion of the tax, applicable in aid of the general

finances, might be re-imposed without agitation, discussion, or trouble." 1

But, as Mr. Wilson did not live long enough to elaborate his ideas into a scheme, it is difficult to say to what extent he intended to work them out in practice.

Mr. Laing, the successor of Mr. Wilson, put it in a much more definite shape. His budget for 1861-2 was for a deficit caused chiefly by the pressing demands of the Local Governments for useful public works, and his sense of financial safety compelled him

"to curtail roads, canals and other useful works of this description, to the allotment on which they (had) been carried on or rather. . . starved, since the Mutiny."

But his anxiety to promote the useful public works, the urgency of which he fully recognized, led him to propose to the Provincial Governments a method of supplementing the scanty Imperial grants made to them. He said to them:

"Take what we are able to give you, and for the residue take certain powers of taxation and raise it yourself . . for there are certain subjects which can be dealt with far better by local than by Imperial taxation.

His object was to enact local budgets "not merely to meet a temporary difficulty but to inaugurate a permanent improvement," to the relief of the Imperial treasury and the benefit of the Provincial Governments. This scheme involving the management of the public works charges by the Local Government with an allotment from the Imperial revenues supplemented by the power to tax had secured a general approval. But at the time when the scheme was put forward the Local Government was without the requisite machinery for carrying into execution the powers of legislation necessary to impose the taxes proposed to be given to them. The execution of the scheme had therefore to be postponed pending the enactment of local legislative

1 Minute by Sir B. Frere dated November 25, 1866, para. 30. Papers, etc., on the extension of the Financial Powers of the Local Governments, p. 42.

councils then undertaken by Parliament. But, the ensuing years having been years of financial prosperity, the interest in the scheme relaxed and it was consequently dropped sine die.

This spell of prosperity, however, proved to be only a passing phase and the stress of returning adversity which beset Mr. Massey compelled him to revive the scheme in a much more enlarged form.1 He proposed that:

"In considering the ways and means by which the additional amount (of one million sterling) should be raised the most convenient mode of proceeding would be by a partial transfer of charges of a local character from Imperial to local account."

As the annual produce of local funds applicable to local purposes in India did not much exceed two million sterling, it was proposed to make the moderate addition to this amount of £1,200,000 in round numbers to be raised in rateable proportions in the several Presidencies and Local Governments, and applied in relief of a corresponding amount of charge for local services then borne by the Imperial revenues. The above-mentioned sum of £1,200,000 was arrived at by an assessment of 4 per cent. on the estimated revenues of the several Local Governments (except Burma) for the current year, after excluding customs duties and the income tax. The heads of charges to which the proceeds of the new funds were applicable were (1) education, (2) police, (3) district jails, (4) public works, (5) repairs and maintenance of roads. The list of taxes suggested to provide ways and means included (1) a license tax on trades and professions, (2) a house tax, (3) an octroi duty in towns, and (4) a succession duty on lands which did not pay revenue. The Local Governments were to be left free, subject to the approval of the Government of India in Council, to select the particular tax most suited for being levied in their respective territories so as to yield the full amount re

2

1 Demi-official letter dated February 25, 1866, to the Local Governments. Papers, etc., on the extension of Financial Powers of Local Governments, p. 67.

Ibid., para. 8.