Book II, Chapter 11: Local Cesses on Land

CHAPTER XI

LOCAL CESSES ON LAND

WE have in the last chapter dwelt upon the general increase of Public Debt and Taxation in India during the first nineteen years of the Queen’s Administration. It is necessary, however, to make a special reference to the Local Taxes which were multiplied in every Province of India within this period. The objects of these Local Taxes were twofold. Ostensibly they were imposed for the greater development and improvement of the country by the construction of roads and the extension of education. But an equally important object was to relieve the Imperial Revenues of those charges, and throw them more and more on the new Local Taxes. The objections to this scheme were also twofold. In the first place, they greatly added to the burdens on an overtaxed population. And secondly, as the new cesses were imposed on the soil, they violated the limits which the East India Company and Sir Charles Wood had fixed for the Land Revenue, both in permanently settled tracts, and in provinces where settlements were made for thirty years on the principle of demanding half the rental.

The Local Rates which were imposed by the Company’s Government on the soil were small and insignificant, and were generally based on ancient village customs. But within six months after the empire had passed to the Crown, the eyes of administrators were turned to this source of revenue. Lord Stanley, the first Secretary of State for India, called special attention to the expediency of imposing a special rate to repay the expense of schools for the rural population.¹ His successor, Sir Charles Wood, admitted the objections to the imposition of local cesses on land; but he thought that the obligations to keep up roads was a liability which everywhere attached to the proprietors of land; and in respect of education, he considered a special enactment necessary.² Local Rates on land, over and above the Land Revenue, were levied in the Punjab, Northern India, and the Central Provinces; and a special enactment, imposing such rates, was passed for Bombay.

Lord Lawrence, who was Viceroy of India from January 1864 to January 1869, was unwilling to empower Local Governments to impose fresh cesses on the people, and was generally against the principle of the Decentralisation Scheme which was adopted by his successor. Questioned by the Finance Committee on this subject after his retirement from India, he said: “The system which was subsequently introduced was put before me, and I carefully considered it, and I did not think it advisable to introduce it. I thought that what was wanted really in India was to keep the Local Governments in order; to make them be careful in preparing estimates and not in exceeding their estimates; in fact that what was wanted was a restriction over them in matters of large works.”³ Nevertheless, Lord Lawrence’s Government had in 1867 and 1868 recommended⁴ that a cess, voluntary or otherwise, should be imposed on land in Bengal for roads and rural education.

It was under Lord Mayo’s Government that the question came up for final consideration. The Bengal Government made a strong protest⁵ against the imposition of the proposed cess on the Zemindars with whom a Permanent Settlement had been made in 1793. The Government pointed out that the increased profits from extended cultivation did not benefit the Zemindars, but benefited a large class of sub-tenants and the cultivators themselves; that estates had changed hands, and new purchasers had paid their present values; that James Wilson, the Finance Minister, and Sir Barnes Peacock, Chief Justice of Bengal, had considered special cesses on the soil in Bengal to be a violation of the Permanent Settlement; that Bengal paid a higher proportion of her revenues to the Imperial Exchequer than any other province; that a special educational cess was therefore neither feasible nor proper; but that with regard to a cess for roads, “the Lieutenant-Governor hopes that a cess for this purpose would be far less unpopular than one for education.”

Neither Lord Mayo’s Government, nor the Duke of Argyll, who had succeeded Sir Stafford Northcote as Secretary of State for India, agreed with the Bengal Government’s views.⁶ The Duke of Argyll held that it was open to the Government to impose both a road cess and an education cess in Bengal, but recommended that “until the system, machinery, and incidence of local rating in Bengal has been satisfactorily established, so much only should, in the first instance, be raised as is required for roads.” And speaking generally of India, the Duke of Argyll betrayed his ignorance of its agricultural conditions and its land revenue history, when he denied that “in the Land Revenue raised from the agricultural classes, the Government of India took so much from the resources of the people as to leave them unable to bear any additional burdens.”

It is strange also to note that the author of the Reign of Law disregarded in this matter the opinions of his soundest advisers who tried to explain the law to him. In his Council, the Secretary of State had men like Sir Erskine Perry, who had been Chief Justice of Bombay; Henry Thoby Prinsep and Ross Mangles, who had unrivalled experience of Indian administration; Sir Henry Montgomery and Sir Frederick Halliday, who had ruled Provinces in India. And these men spoke in no uncertain voice. Sir Erskine Perry wrote:—

“I have come reluctantly to the conclusion, after many struggles and attempts to draw fine distinctions in support of a different view, that the language and acts of Lord Cornwallis, and of the members of Government of his day, were so distinct, solemn, and unambiguous, that it should be a direct violation of British faith to impose special taxes in the manner proposed.”

“In 1854, Lord Dalhousie, a man of no weak will, was most desirous to impose a local tax in Bengal for the maintenance of an improved police; but after reading Sir Barnes Peacock’s masterly exposition of the pledges which Government had entered into in 1791-93, the great pro-consul was compelled to accede to the soundness of the Chief Justice’s argument, and most reluctantly abandoned his projects.”

“Here, then, we have the plain language of Government, the contemporanea exposita of its framers, the unanimous conviction of the people, and the declared acquiescence of the State in the justice of the popular interpretation during a period of eighty years. What is the answer attempted to this state of facts?”

“The Government of India allege that the language of the Permanent Settlement itself, in section vii. of Lord Cornwallis’s Proclamation, is large enough to enable them to impose the taxes in question; but this argument, on close examination, proves so utterly unsound that the Secretary of State abandons it.”

“Two other arguments are brought forward; first, that the imposition of the income-tax proves that taxes, additional to what Zemindars pay as land assessment, may be imposed on them; second, that educational cesses have been imposed over most parts of India in addition to the land assessment.”

“As to the income-tax, it cannot be considered sound logic, when the meaning of particular pledges is in question, to argue that because a Despotic Government has on one occasion, without consulting the people, construed these pledges in its own sense, that act of the Government is a fair proof that their construction is right and just. But argument on this head may be withheld; because I understand that both the Bengal Government and the Zemindars acquiesce in the proposition that in any great emergency they are justly subject to all general taxation which is imposed on the rest of the community.”

“With respect to cesses additional to Land Revenue having been imposed in other parts of India, I am compelled to observe that, in my opinion, the Secretary of State has not interpreted the facts correctly, and that the exposition of the Lieutenant-Governor of Bengal is the true one.”

“I will content myself with saying that I believe the true explanation of Local Cesses for education [in the other Provinces of India] to be this: whenever they have been levied, they have been so either when settlements for terms of years were under discussion, and when the ‘higgling of the market’ between the Revenue Officer and the Landowner was going on, or if the settlement was already made, the cess was imposed with the acquiescence of the Landholder.”⁷

And Sir Erskine Perry paid a fine compliment to the Zemindars of Bengal who had protested against the proposed Education Cess in a public meeting held in Calcutta. The speeches, he said, “though delivered in a foreign language, would have done credit, both for good sense and good feeling, to any meeting of country gentlemen in England.”

Other dissents were not less emphatic. Mr. Macnaughten considered that “the tax, if levied at all, ought to be general in its application, and, irrespective of the amount of Land Revenue under the Permanent Settlement, should be imposed upon the holders of all property, real and personal, of whatever description.”⁸

Sir Frederic Currie admitted the unsatisfactory state of the Indian Finance; it was a cogent reason, he said, for retrenchment and economy; “but it cannot justify our laying a special tax exclusively on the Zemindars of Bengal, to do which, Sir Erskine Perry’s paper shows conclusively, would be a breach of faith and the violation of the positive statutory engagement made with these Zemindars at the Permanent Settlement.”⁹

Sir Henry Montgomery said: “A government should not, in my opinion, voluntarily place itself in a position laying it open to be charged with a breach of faith.”¹⁰

Henry Thoby Prinsep, with his vast knowledge and experience of Indian administration, wrote: “I have never felt so deeply grieved and disappointed at a decision given in opposition to my expressed opinions as when it was determined, by a casting vote, to approve and forward the Despatch referred to at the head of this paper, for I regard the principles laid down in that Despatch to be erroneous, and the avowal of them to be unwise; while the policy inaugurated and the measures sanctioned will, if attempted to be carried out, alienate the entire population of India from the Government, and shake the confidence hitherto felt universally in its honesty and good faith.”

“The Court of Directors, the Imperial Government, and Parliament, were all parties to the resolution to fix the Government demand upon the land of the Provinces then held by the East India Company in Bengal, in perpetuity.”

“The traditions of this period are now forgotten, and new ideas are about to be introduced into the financial administration of India, which, I should be sorry to think, are likely to be attributed to the change of Government which took place twelve years ago. The right of unlimited and uncontrolled taxation is always a dangerous one to assert, and who could have expected that this policy should be advocated, and such arbitrary powers claimed, by a Queen’s Government?”¹¹

Ross Mangles, who had been one of the strongest Directors of the East India Company, and was now one of the strongest members of the India Council, equally shrank from an act which looked like a breach of faith and a violation of truth.

“It appears to me to be very doubtful,” he wrote, “as to what length the Government of India may feel themselves justified in going, under the sanction of the Despatch just sent. They may, I fear, be encouraged to take steps which may lay them justly open to charges of a breach of solemn promises. Unguarded action may destroy in a moment the credit which the British Government has won by its honourable persistence, for a period little short of a century, in the unbroken observance of its pledges; such a price would be too dear to pay for even an object so laudable as the education of the masses. We have no standing ground in India, except brute force, if we ever forfeit our character for truth.”¹²

But the most authoritative Dissent on the proposed taxation in Bengal came from Sir Frederic Halliday, who had been Lieutenant-Governor of Bengal during and after the Mutiny, and knew that province better than any other Member of the India Council. He rightly insisted that education was spreading in Bengal through the voluntary exertions of her educated men, and it would be an unwise policy to stop this natural and gratifying result of the policy of Lord William Bentinck.

“Every educated man,” he wrote, “has proved a missionary of education in his neighbourhood and among his dependants; and every considerable landholder vies with his neighbour in establishing and fostering village schools; until, in 1869, one-half of the whole State expenditure for vernacular education was met by private subscriptions and contributions from a people who, only a few years back, could by no means have been made to comprehend the value of education to themselves, still less the obligation of extending it to others. Assuredly the fruits of the great measure of 1835 are already amply visible; the wisdom and foresight of its authors are strikingly vindicated; and the condition of national education in Bengal, though far indeed from perfection, is yet abundantly gratifying in the present, and full of safe and happy augury for the future.”

“Things being in this position, the Government of India suddenly declared that they were entirely dissatisfied with the system . . . they could no longer wait for the end, but must have education suddenly thrust upon the masses . . . And since the expense of this scheme must be enormous, and the public exchequer could give no kind of aid, they directed that the whole charge, amounting certainly to many millions sterling, should be thrown upon the Zemindars of Bengal by a rate of not less than 2 per cent, upon their gross rentals.”

“The Zemindars remonstrated strongly . . . they pleaded the distinct and solemn promises of the Permanent Settlement of 1792, when Lord Cornwallis had exhausted the resources of language to assure them that the rate then assessed on their lands was ‘irrevocably fixed for ever,’ and that they should in all future time enjoy the entire proceeds of their estates, without any deduction whatsoever, be free from ‘any further demand for rent, tribute, or any arbitrary exaction whatever.’ These great national pledges, they urged, had been scrupulously adhered to in many financial difficulties, and under all changes of Government, from Cornwallis to Canning, and could not now be broken without a deliberate abandonment of plighted national faith.”

“All the official persons of the Province who were consulted supported these remonstrances; and the Lieutenant-Governor of Bengal transmitted them to the Government of India, and enforced them with a powerful, and, as I think, unanswerable argument. But the Government of India was unmoved, and declared in reply, that it was resolved to persevere in its determination.”

“When the Income Tax was first imposed in 1860, the Zemindars of Bengal were disposed, not without plausible reasons, to object to it as an infringement; but they soon gave up the point, and accepted the advice and example of the greatest of their body. The Raja of Burdwan, in a remarkable letter to the Legislative Council, announced that he would set an example to his fellows of submission to the Income Tax, because it was levied after the great Mutiny of 1857 . . . and because it was levied equally on all classes. That this well-timed and patriotic declaration should not be turned against its author and his brother Zemindars as a reason for setting aside the plain terms of the Permanent Settlement, and imposing upon them a special tax, of which other classes not connected with the land are to bear no share, cannot prove otherwise than severely and undeservedly grating and painful to their feelings.”¹³

The remonstrance of the Zemindars and the Government of Bengal, and the strong dissents of some of the ablest Members of the India Council, were not uttered together in vain. An Education Cess was not imposed on land in Bengal. But a Road Cess of 3⅛ per cent. on the rental was imposed in 1871, and the new Lieutenant-Governor of Bengal, George Campbell, was principally instrumental in imposing it according to the views of the Duke of Argyll. It was said in Bengal, that a Campbell was required to carry into execution the arbitrary policy laid down by a Campbell.

Such Local Cesses had already been imposed in other parts of India where the Land Revenue had not been permanently settled. In Bombay, Sir Bartle Frere informed the Finance Committee, the cess of 6¼ per cent. on the Land Revenue, theoretically equal to 3⅛ per cent. on the nett rental, had been imposed for roads and schools.

It “was deferred in some parts from an idea that it would be considered by the people as a breach of the covenant with them during the thirty years’ settlement; and where nothing was said about it at the time of the introduction of these settlements, its introduction was postponed. But in all new settlements it is made a part of the original settlement, and has the same force as the Government assessment.”¹⁴

In the Punjab, as Sir Robert Montgomery deposed before the Finance Committee, the land settlements were made on the principle that one-half of the nett profits from cultivation belonged to the proprietors, and the other half was payable to the Government as Land Revenue. An education cess of 1 per cent. and a road cess of 1 per cent. had been added to the liabilities of the landed cesses. “If more than that were taken, I think they would consider it a grievance.”¹⁵

In the Central Provinces the addition of cesses for roads and for education to the land assessment was justified by Mr. Morris, “provided there was some direct and immediate benefit to the people.”¹⁶

In Oudh, the Act of 1871, increasing the previous rate of 1¼ per cent. to 2¼ per cent. from the landlords, over and above the land assessments, was passed with the “consent” of the landlords. But as Sir Charles Wingfield explained before the Finance Committee, “such consent is never voluntarily given. It is obtained through administrative influence, and it is given because they feel themselves helpless, and from fear of provoking worse measures by resisting a request put to them in that way by the Chief Commissioner. And I also think that it is not a dignified thing for one party to a contract, and that the stronger party, to ask the other and weaker party to agree to a modification of the terms of the contract to his disadvantage. . . . People who were fugitives during the Mutiny, like myself, often heard many things which in other times would not have reached their ears; and I did know that the practice which had grown up in the Upper Provinces after the settlement, of getting the people by what was called their voluntary consent to pay an Education Cess or some cess of that kind, which was not in their settlement engagements, was excessively unpopular, and was regarded as a breach of the contract entered into.”

Henry Fawcett.—The thirty years’ settlement, in fact, becomes a meaningless farce, if after you have made a thirty years’ settlement you can impose new cessos on the land simply at the free will of the Government?

Sir Charles Wingfield.—So it has always appeared to me.

Henry Fawcett.—And according to this action which the Government has taken, the proprietors in Oudh have no security whatever that if the exigencies of the Government increase, they may not find cess after cess to any amount imposed?

Sir Charles Wingfield.—Certainly none.

Henry Fawcett.—As I understand you, if it had not been for this action which the Government has taken, the proprietors in Oudh would have had some security, been for this Decentralisation Scheme, which naturally deprives the Local Government of £350,000, which before they had been accustomed to receive, a great part of the necessity of imposing this new cess in Oudh would not have existed, would it?

Sir Charles Wingfield.—No, I understand that the Decentralisation Scheme is made the plea; and it has reduced the grant on Oudh by £15,000. And in the Decentralisation Order you will find it is particularly mentioned that the deficit must be made good by Local Governments; and they refer to the Local Taxation that either has been or is now being introduced; and Oudh is mentioned as one of the Provinces in which it is being introduced to supply the deficit.

And Sir Charles Wingfield laid his finger on the real weakness of the Decentralisation Scheme when he said: “I disapprove of the Decentralisation Scheme because it puts the Local Governments more under a direct motive to screw as much as they can out of the people; and I know by experience what crotchets and fancies Local Governors have.”¹⁷

There could not be a stronger confirmation of the worst fears of Mr. Henry Fawcett and Sir Charles Wingfield than the action which was taken in the North-Western Provinces of India at the very time when the Finance Committee was making their inquiries in London. By the arrangements made under the Decentralisation Scheme, a deficit of £48,030 was left to be made up by Local Taxation in the North-Western Provinces. The Lieutenant-Governor was not satisfied with making up this deficit, but exercised the powers conferred upon him to gradually obtain an increase of £102,000 by Local Taxation. And he did this by imposing a cess of 10 per cent. on the Land Revenue at the revision of the settlements, in lieu of the old cesses which came to 5 per cent. only.¹⁸

The same thing happened in Madras. The deficit which was left to be made up by Local Taxation by the Decentralisation Order of 1870 was £55,428. The Madras Government passed an Act in the same year by which they imposed a cess of 6¼ per cent. on the rental, estimated to bring them £342,800, instead of £197,106 produced by the old cesses. Thus, while the Imperial Government left them to make up a deficit of £55,000, they exercised their powers to obtain an increase of £145,000 sterling.¹⁹

These new cesses on land, with the power to add to them indefinitely, destroyed that definitiveness in land assessments which had been secured by Lord Dalhousie in Northern India in 1855 and by Sir Charles Wood in Southern India in 1864. Generations of statesmen had grappled with the difficult Land Revenue problem in India, and, after many blunders, had limited the land assessment to one-half the actual rental or one-half the economic rent. The few local cesses which were imposed on land in addition to this Land Revenue were so insignificant up to 1864, and so often based on old local customs, that they did not count; and the people of India did not consider them a violation of the Half-Rental principle. It is painful to record that the limits fixed for the Land Revenue after more than half a century of administrative experience were now lightly swept aside; and powers were given to Local Governments to add indefinitely to the cesses on land. The new policy virtually took away with one hand the priceless security which had been given by the other. The State-demand had been limited to 50 per cent. of the nett profits from agriculture; other State-demands under other names were now added to it.

Footnotes