GLADSTONE (WILLIAM, 1809-1898, statesman, Prime Minister and and author) TWENTY- THREE PAGE AUTOGRAPH LETTER SIGNED, WRITTEN AS CHANCELLOR OF THE EXCHEQUER, TO A DISGRUNTLED TAX-PAYER, THREE DAYS AFTER DELIVERING HIS FIRST BUDGET, to J. Lloyd Phelps, answering in immense detail, because of his 'reasonable tone', even though his own 'time is very much occupied,' the complaint Phelps had made that by the extension of income tax from incomes of £150 downwards to those of £100 proposed by Gladstone in the Budget, he would be paying £2 1s. 8d. per annum extra, for which he would receive nothing in return, 23 pages, octavo, somewhat worn and slightly discoloured, particularly the first and last outer pages, doubtless because much exhibited by the recipient, recently professionally restored, cleaned and repaired, last page with some light stains and pencil jottings, a few small tears and paper losses in lower and fore- edge margins, tied with tape in the upper left-hand corner, in sound condition, Downing Street, 21 April 1853

A REMARKABLE AND TITANTIC RESPONSE BY THE CHANCELLOR, JUSTIFYING HIS BUDGET TO A NO DOUBT ASTONISHED TAX-PAYER, remarkable even for Gladstone who prided himself on his prodigious capacity for work; but perhaps it was par for the course in him, flushed as he was with the success three days earlier of his five-hour Budget Speech, 'one of the most brilliant of Gladstone's achievements in the House of Commons...[and]...one of the most wonderful passages of persuasive reasoning in the records of Parliament.' (F.W. Hirst, Gladstone as Financier and Economist, 1931, pp. 149-152).

Gladstone first points out that that his proposals would entail half yearly payments of £1. 0. 10. for seven years only unless Parliament prolongs the tax, because otherwise it will cease altogether. 'Is this a hardship?', he asks. If Phelps and his family are not a strange exception to the rule, they will since 1842 have been deriving 'great additional command over articles of life and subsistence' from the changes that have been brought about in the fiscal system, which he estimates at about £5 a year. The advantages from the system of tax on incomes over £150 have been greater for those with incomes below £150 than for those above that sum, he posits as a premise. If income tax is to be imposed for a further seven years on those with incomes over £150, 'with a view to another great scheme of revisions of indirect taxation for the benefit of the entire community', especially for those with incomes below £150, is it fair on those with incomes above £150, that those below that level should gain great pecuniary advantage at no cost to themselves, but again at the cost of those with incomes above £150?

'Put yourself in my position...suppose that I had now been replying to some person with £150 per annum...do you think I should have had as good an answer to make to him as I can now make to you?' 'But let me look more closely at your case...you will realise savings from the changes we have proposed to Parliament greater than the cost at which we invite you to buy them.' Over eight years the cost of the new tax to Phelps 'will be £14. 11...What is it proposed you should gain on articles of common consumption in return...?' Gladstone proceeds with the example of a clerk in a country town and shows that he will gain from the proposed changes in the price of tea and soap £1. 16. 6., and, by arguing that 'this annuity is perpetual: it is for himself, & for his children after him,' he concludes: 'Do you think he could buy a perpetual annuity of £1. 16. 6. for £11 or £12 down? No, nor for double that money.' And this, he says, is without him claiming credit for the savings from reductions in duty on butter, cheese and other commodities. Gladstone then demonstrates how 'these reductions operate in many ways not at first sight perceptible'.

'Again you say Education is not cheapened. I beg your pardon...You say medical attendance is not cheapened...medical men...have been called upon, without any increase of their fees, to pay Income Tax, in order to reduce the price of articles, of which persons of £100 a year are, relatively to income, larger consumers than they themselves who have paid the tax.' He does not propose, he says, to enter into the example of 'the labouring classes'.

Gladstone ends the letter by reassuring himself that had Phelps been his constituent and an election were pending 'I never should have presented myself to you with greater confidence to render an account of my trust, and to ask for its renewal.'

But Gladstone did not leave it there. One year later, on 23 March 1854, he wrote an eight-page letter (this time on quarto paper, but with the text in the hand of a secretary) to Phelps, pointing out, having just seen a letter of his in the press, in effect that the projections he had made when writing personally the year before, in a period of prosperity, could not necessarily be maintained during the then current recession. This second letter, rather disfigured from repairs with adhesive tape, now removed and restored as far as possible, is also present, making 31 pages in all.

Throughout his life, Gladstone considered that the renewal of income tax, 'this colossal engine of finance,' in 1853 as one of the four greatest demonstrations of his 'credentials providentially conferred authorising political prerogatives on a grand scale,' especially because he linked it with the extinction of income tax altogether in 1860 -- 'Now I have the downward road before me and the plains of Italy are in my view.' (Richard Shannon, Gladstone, i. 1982, pp. 270-271). In 1859 he raised income tax to 9d. in the pound. Nonetheless, Gladstone is considered to have been one of the greatest Chancellors of the Exchequer -- Francis Hirst's, Gladstone as Financier and Economist, was written to demonstrate that Gladstone's principles and solutions were highly relevant in the 1930s.

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