in answer to Mr. Disraeli's denunciation of moral power, he asked what was moral power? It was the power of persuasion. He agreed that the keystone of our policy should be the alliance with France; but if we wished to be on terms of perfect friendship with a Power of great military and naval resources, and to preserve our independence, it could only be done by being thoroughly prepared, not for aggression, but for defence against attack. Our relations with France were as cordial as those of any two countries could be, and he was at a loss to discover from what source Mr. Disraeli had obtained his information as to the supposed bickerings and differences. The foreign policy of the Government was simple and plain; this country cultivated friendship with every foreign Power that was disposed to be friendly with us, and there was no Power in Europe with which we were not on the most friendly terms.

Mr. Lindsay said he believed the foreign policy of the Government to be very dangerous, both in regard to Italy and America, and that it would be likely to involve us in much trouble. After some further discussion, in which Lord Palmerston's foreign policy underwent criticism, the Bill was read a second time.

A similar general discussion upon the financial circumstances of the country, as affected by Mr. Gladstone's measures of this and the preceding years, took place upon the third reading of the Inland Revenue Bill on the 19th of May, when Mr. Disraeli entered upon an elaborate and rather severe criticism of the financial VOL. CIV.

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policy for which the present Government was responsible. It was argued, he observed, that the safety of our shores and the maintenance of our empire were to be secured at all cost. Care, however, should be taken that the expenditure was not carried beyond what was required for those objects. What was our present position? There was no surplus revenue, but a continued deficit; all our extraordinary aids were exhausted, and our ordinary revenue rested in a great degree upon our financial reserves. the Government, notwithstanding this alarming state of things, took no steps to bring the finances back to a healthy condition. He wanted to call the attention of the House particularly to a great branch of the public expenditure incurred by our military and naval forces. In order to show what had been the increase in this branch, he would compare two periods when the conditions were not only similar, but nearly identical. In 1858 the army and navy expenditure was 22,297,000l., in 1859 it was 26,308,000%. an increase of 4,000,000l. In 1860 it rose to 29,218,000l., and in 1861 to 29,443,000l. In 1862 the expenditure, after making every deduction, amounted to 5,000,0001. more than in 1858, and 1,674,000l. beyond that of 1859. This was a subject for grave consideration, and the House should inquire what was the cause of this large increase. They had been told by Lord Palmerston that the cause of this great expenditure was that France had long been endeavouring to equal the naval power of England, and in the same breath that there was no

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ground for objecting to France pursuing this policy. He, however, joined issue with the First Minister upon this point. If France was really pursuing this policy, a policy calculated to create distrust and inquietude in this country, and causing great expense, he (Mr. Disraeli) was against an alliance with France. If France was acting thus, she was not only giving cause for distrust and jealousy, but would even justify England in going to war with her. If France was not pursuing this policy, where was the necessity for our extraordinary armaments? Now, was she pursuing this policy? So far as he could form an opinion she had not yet reached the programme put before the Government in 1858, and he insisted that there was nothing to justify extraordinary armaments on our part at present more than in 1858. In conclusion, Mr. Disraeli diverged into a variety of other topics.

Lord Palmerston, after replying to the remarks of Mr. Disraeli upon the subjects referred to in the latter part of his speech, observed that the comparison he had made between 1858 and 1862 showed an increase of only 1,600,000l., and there were circumstances, such as the war in China and in New Zealand, and the despatch of troops to Canada, which had involved an extraordinary outlay. The Government had reduced our army and navy expenditure, and would continue to do so whenever opportunities offered, The amount of our military force was justified by the testimony of General Peel, who had actually objected to the insufficiency of the money vote;

and as to the navy, Sir J. Pakington had urged its increase by representing the naval preparations of the French. Mr. Disraeli had misapprehended what he said with reference to those preparations. He (Lord Palmerston) had said that we had no right to make an international objection to the amount of naval force which France might think proper to maintain ; but it did not follow, because we were upon good terms with France, that we were to allow her to acquire a stronger naval force than ourselves. It was a matter of necessity, looking to the extent of our commerce and of our possessions abroad, that our navy should be not only equal, but superior to, that of France, We did not expect France to be our enemy; at the same time, the French were but men, and it was not in human nature to forbear taking advantage of superior force. It was because he wished to remain at peace with France that he did not desire to tempt her, by allowing her to acquire a superiority by sea, to become our enemy. Considering the immense mili tary force of France, it was absolutely necessary for the interests and safety of this country that we should have a strong naval force, equal, or superior, to that of France, and this could not be done without considerable expense. The French Government had now 11 iron-clad vessels more than ourselves, and, according to Mr. Disraeli, they had not yet carried out their programme of 1858.

Mr. Lindsay disputed the correctness of the estimate of the iron-clad navy of France, the

Government of which, he believed, continued to desire the maintenance of friendly relations with this country.

Sir H. Willoughby objected to the form of the Bill, by which various taxes were dealt with in one measure, so as to prevent a separate discussion of each tax, After some further discussion the Bill passed the third reading.

The financial policy, of which Mr. Gladstone was the author, once more underwent a severe ordeal of hostile criticism in the House of Lords, upon the Bill which embodied the provisions of the Budget coming on for a second reading in that Assembly on the 30th of May. Several noble lords who usually supported the measures of the Government, among whom Lord Overstone was conspicuous, on this occasion pronounced an unfavourable opinion of the Chancellor of the Exchequer's policy. They did not, however, venture to offer a direct opposition to the Bill. Earl Granville, in the speech in which he introduced the motion, defended by anticipation the financial measures which he asked the House to sanction, though he admitted that it would have been desirable to have had a larger surplus. It was not possible, however, to apply that rule in the present case, owing to the abnormal circumstances in which we were placed by the necessity of providing for the national defences, the suspension of our imports into America, and the recent wars in China and New Zealand. Looking, however, to the resources of the country and the elasticity of the revenue, he saw no just ground for appre

hension as to our financial prospects. He felt no hesitation in declaring that the Government were fully alive to the necessity and possibility of diminishing the present expenditure, and had the greatest confidence in being soon able to do so. He felt convinced that the House would own that the Government had acted wisely in their dealing with the finances, and would join with him in expressing his thankful anticipation that the country would pass well and quietly through the present serious crisis.

Lord Carnarvon thought Lord Granville's view of our financial policy one-sided, and objected that the present Bill was the largest money Bill ever presented to the House, dealing as it did with a sum of no less than 20,000,0001, The form of the Bill was novel and dangerous, and, although there was no intention of opposing the Bill, it was scarcely wise of the Chancellor of the Exchequer to excite recollections in connection with the Paper Duty Bill, or, by pursuing an unusual course, to rouse the House to the assertion of their privilege of rejecting, should they think fit, money Bills in toto. Passing to the consideration of the Bill, he declared that all the energies of peace were now engaged in providing for a war, and urged that, after a full and unequivocal preparation had been made for every emergency, it was the duty of the Government to have attended seriously to retrenchment and economy. The confidence of the country in the financial policy of the Government had been destroyed by the numerous miscalculations of Mr. Gladstone,

whose fundamental error was that, as he never estimated for a surplus, he was obliged to have recourse to supplementary Budgets. He concluded a very long attack on Mr. Gladstone's financial career by declaring, that with all his admiration of the ability of the Chancellor of the Exchequer, he could not allow himself to be blinded to the dangerous tendencies of his finance.

The Duke of Newcastle, having censured Lord Carnarvon's personal attacks on Mr. Gladstone, declared that the mode of proceeding adopted by the present Bill was neither novel nor unconstitutional, but strictly according to precedent, previous to the year 1846. The financial policy of Mr. Gladstone, which had been approved by the House of Commons, so far from being dangerous in its tendencies, had been, he contended, highly beneficial to the commercial interests of the country, and had been most unfairly attacked in the inaccurate statement of Lord Carnarvon. So far from Mr. Gladstone always having underrated the expenditure and overrated the revenue, as stated, Mr. Gladstone must be judged by the results, and those results fully justified the sound wisdom which had influenced his operations. He denied that there was any tendency in Mr. Gladstone's policy to destroy public morality, and said that the gist of the whole case against the Government was, that there was no surplus. Allowing the desirableness of having a surplus, it was not possible to regulate expenditure in extraordinary times by ordinary rules, and it was most unfair

to Mr. Gladstone, who had displayed great resources in critical times, to test his policy by such means.

Lord Overstone thought that the financial policy of the last two years had been neither safe nor satisfactory. The ingenious and deceptive arguments of Mr. Gladstone had induced the other House of Parliament to sanction his Budgets without searching examination, and the result was that quarter after quarter statements were published, showing a deficiency of revenue and excess of expenditure. He condemned the practice of applying repayments and advances to the expenditure of the year, and contended that it was necessary to have such balances in the Exchequer, as to avoid applications to the Bank; urged the propriety of having such a surplus, that the expenditure should no longer exceed the revenue; and insisted on the necessity, from respect to public credit, that the debts incurred by the war should be paid forthwith. He concluded by warning the House against the danger of following the financial policy adopted by the Government.

Lord Grey agreed with Lord Overstone that the finances of the country were in an unsatisfactory state, and denied that the circumstances of the time afforded any justification for departing from those principles which should regulate our finances. The policy of the Government was like that of the boy who killed the goose for her golden eggs, and the stimulation of the revenue to a greater extent than it would bear had involved the country in serious

difficulties. The deficiency of the past year was due to the short-sighted policy of consider ing all things in our favour, and losing sight of any contingency which might be adverse to us. In regard to the enormous expenses of the country, he believed it was absolutely necessary to keep our army and navy in a state of efficiency, but he thought that under a strict economy, those expenses might be reduced. If, however, it was found necessary to maintain the present high rate of expenditure, it was the duty of Parliament to meet that expenditure by increased taxation, without postponing to a future time the pressure which, sooner or later, must result from such a spendthrift policy.

The Duke of Argyll entered into an elaborate defence of the financial policy of the Govern ment, in the course of which he admitted that the calculations of the Government during the last three years had not been always correct. But, considering the circumstances which had arisen to falsify these calculations, it was impossible to have so arranged the Estimates as to have provided against a deficiency. The deficit of last year was due to the suspension of our commerce with America, and preparations for a probable war on account of the affair of the Trent -contingencies which, he asserted, no one could have foreseen. He denied that the Government had dealt in a spendthrift manner with the resources of the country, and, in reply to Lord Overstone, explained that Exchequer Bonds were looked on as securities which might, at the option of the

Government, be either paid or renewed, according to convenience. He defended the course Mr. Gladstone had pursued in appropriating the terminable annuities for the repeal of the paper duties, and pointed out the results which had followed the adoption of Mr. Gladstone's views in regard to the French Treaty, and the benefits which had thence accrued to the country. He replied in detail to the various objections which had been raised, and entered into various figures to support his views.

Lord Derby said the object of this discussion was not retrospective, but entirely prospective, in order to bring before the country the fact that the House of Commons had not sufficiently considered the means of meeting its engagements. He vindicated Lord Carnarvon from the charge of personality to Mr. Gladstone, and asked how the financial policy of the Government could be discussed without examining the actions and speeches of the Chancellor of the Exchequer; and he corroborated by fresh proofs the charges of Lord Carnarvon, that the Chancellor of the Exchequer, by his erroneous calculations, had done much in a commercial country to forfeit confidence. In respect to the assertion that it was impossible to foresee the causes which led to the deficit of last year, he considered, that, even from the commencement, that year ought, from the aspect of affairs, to have been looked on and provided for as an extraordinary one, and that Mr. Gladstone had failed to do so. In reply to the attacks of the Duke of Argyll, he defended the