Sir, I have now endeavoured to put before the House the grounds upon which two months ago I ventured publicly to attack that statement which the right honourable gentleman declared no man could shake. My speeches on the matter have, I know, been brought to the notice of the right honourable gentleman, but elsewhere he has not condescended to any answer, except the statement that he believes his figures may be relied upon, and that I do not at all comprehend the system on which the finances of the country are conducted.

I hope the House will not think I have made an undue claim upon its attention, in desiring to bring this controversy to issue where alone the question between the right honourable gentleman and myself can be fully examined by those who are most familiar with the subject.

I should not, of course, have assailed the right honourable gentleman's statements without a thorough and careful examination of authoritative public accounts, and I now with very great confidence leave the entire question to the impartial consideration of this House.

10 Downing Street, Whitehall: November 21, 1884.

'My dear Sir,-Seeing you in the House on the evening when my figures used at Edinburgh were attacked and defended, I observed that you did not enter into the debate. But I, having done so once, am not inclined to do it again in case you should raise the question this evening. The question of comparative expenditure is one for Mr. Childers to deal with, but as to my own statements they have in the main been dealt with already; and I now inclose to you a paper which deals with other points, and, so far as I am concerned, contains all that I think it needful to say. You are, of course, at liberty to make such use of it as you may think fit.

Believe me, yours faithfully,

'W. E. GLADSTONE."

Paper dealing with the points raised by Mr. E. Clarke, M.P. in his recent Letters.

I.

A. I find that according to the account in the Statistical Abstract. (page 7) the expenditure of the late Government in 1877-80 was 330 millions, and not 329 millions; and that the expenditure of the present Government in 1881-84 was 344 millions, and not 342 millions.

B. You take your figures from an account intended to show

whether there was a surplus or deficiency on the year, and necessarily based on actual payments; and by so doing you take no account of an alteration recently made in the system of accounts, whereby extra receipts collected by the War Office and the Admiralty are no longer paid into the Exchequer an alteration recommended by the Public Accounts Committee, of which Sir Henry Holland was chairman. I take my figures from the account at pp. 10 and 11, which places each year's account on the same footing, and is therefore the only account useful for comparison.

II.

A. I demur to the inclusion as expenditure of the outlay on Fortifications and Local Barracks which has been met by loan, and which, amounting in the last four years of the Conservative Government to 2,300,000l., happened to be very heavy.

B. I include it for more reasons than one :- 1. There is no difference between those works and other works which appear in the ordinary estimates.

2. Borrowed money spent is as much expenditure as spent

revenue.

3. To make this clear, the charge, certainly not large, has since 1880 been met out of revenue and treated like any other ordinary expenditure.

A. But the loan out of which the expenditure under this head in 1877-80 was defrayed, is being paid off by sums which appear in the national accounts. To debit the country with the sums applied out of the loan and the sums expended in repaying the loan, would be to charge them twice over.

B. This argument is untenable. I deduct from each side the amount of debt paid off. Therefore I do not debit the country with the sum subsequently expended in paying off the loan. Moreover, the late Government did not merely borrow what they required for Fortifications and pay off the loan at once; on the contrary, the present Government are now paying it off.

III.

A. I maintain that there is a fallacy in your contention that, whereas the Conservatives only paid off 11 millions of debt, the Liberals have paid off 25 millions, in four years. The Conservatives spent in interest, management, and reduction of debt 113 millions during their last four years of office; the Liberals have spent on this account in a similar period 118 millions.

B. You would leave it to be inferred that the difference between these sums is the difference between the two Governments; but you omit the fact that the Liberals have borrowed nothing, and that the Conservatives borrowed largely. Your contention apparently is that,

in stating the financial position of a country or of an individual, you may leave out of question any sums which may have been borrowed during the period in question. If you pay off 1,000l. of debt with one hand and borrow 800l. with the other, you cannot take credit for having diminished your debt by 1,000l. After this transaction, you owe 800l.; therefore you have only reduced your debt by 2001.

I showed on the fairest basis and latest approved mode of stating the liabilities of the Government, that in 1880 they showed a reduction on the four previous years of 11 millions, and in 1884 a reduction of 25 millions. If you want to dispute this fact you must dispute the figures, and until you have shown that they are wrong, the fact must remain; and while the fact remains unshaken, I am entitled to deduct the amounts by which the debt has been reduced from the unproductive expenditure of both Governments.

A. I still hold that to debit the country with the loan expenditure and also with the sum expended in repaying the loan would be to charge the amount twice over. I take my original illustration: If I borrow 100l. in March, and spend it in buying a boat, and then in October I repay the loan, my expenditure is 100l. and not 2007.

B. I think, as a matter of fact, you would in such a case find yourself debited in your pass-book with an additional expenditure of 200l., viz. 100l. for paying your boat-builder, and 100l. for repaying your bankers six months later. But that is of little moment. Where you are in error is, in supposing that what the Government borrowed for Fortifications in March it repaid in October. The Government only raise a loan for charges which their annual income will not meet. The Government are now paying off what the late Government borrowed for Fortifications. So the contention about a double charge is contrary to facts.

Downing Street: November 21, 1884.

The Editor of THE NINETEENTH CENTURY cannot undertake

to return unaccepted MSS.

INDEX TO VOL. XVI.

The titles of articles are printed in italics.