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Import Duties

Volume 237: debated on Monday 24 March 1930

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asked the Secretary of State for India whether any fiscal autonomy convention is in force disabling His Majesty's Government from vetoing measures to increase import duties which are passed by the Viceroy's Council in India; if so, whether it is public or secret; if public, where its precise terms can he found; if secret, what its precise terms are; and when and by whom it was concluded?

In the past inquirers have been furnished with a memorandum explaining the nature of this "convention." Appended is a copy of this.The Fiscal Autonomy "Convention."The fiscal autonomy of India has its origin in the following recommendation

of the Joint Select Committee on the Government of India. Bill (1919):

"The Committee have given most careful consideration to the relations of the Secretary of State with the Government of India, and through it with the Provisional Governments. In the relations of the Secretary of State with the Governor-General in Council, the Committee are not of opinion that any statutory change can be made so long as the Governor-General remains responsible to Parliament; but, in practice, the conventions which now govern these relations may wisely be modified to meet fresh circumstances caused by the creation of a Legislative Assembly with a large elected majority. In the exercise of his responsibility to Parliament, which he cannot delegate to anyone else, the Secretary of State may reasonably consider that only in exceptional circumstances should he be called upon to intervene in matters of purely Indian interest where the Government and the Legislature of India are in agreement. This examination of the general proposition leads inevitably to the consideration of one special case of non-intervention. Nothing is more likely to endanger the good relations between India and Great Britain than a belief that India's fiscal policy is dictated from Whitehall in the interests of the trade of Great Britain. That such a belief exists at the moment there can be no doubt. That there ought to be no room for it in the future is equally clear. India's position in the Imperial Conference opened the door to negotiations between India and the rest of the Empire, but negotiation without power to legislate is likely to remain ineffective. A satis- factory solution of the question can only be guaranteed by the grant of liberty to the Government of India to devise those tariff arrangements which seem best fitted to India's needs as an integral portion of the British Empire, It cannot be guaranteed by Statute without limiting the ultimate power of Parliament to control the administration of India, and without limiting the power of veto which rests in the Crown; and neither of these limitations finds a place in any of the Statutes in the British Empire. It can only therefore be assured by an acknowledgment of a convention. Whatever be the right fiscal policy for India, for the needs of her consumers as well as for her manufacturers, it is quite clear that she should have the same liberty to consider her interests as Great Britain, Australia New Zealand, Canada and South Africa. In the opinion of the Committee, therefore, the Secretary of State should, as far as possible avoid interference on this subject when the Government of India and its Legislature are in agreement, and they think that his intervention, when it does take place, should be limited to safeguarding the international obligations of the Empire or any fiscal arrangements within the Empire to which His Majesty's Government is a party."

2. In justifying the tariff changes of 1921 to a deputation from Lancashire, Mr. Montague quoted the above passage from the Report of the Joint Select Committee and added:

"These are very strong words, which, except for some timely warning by my hon. Friend the Member for Oldham, almost passed unchallenged in the House of Commons; but when the Bill came for the Third Reading to the House of Lords, Lard Curzon, speaking on behalf of His Majesty's Government* pointed out the great change which had been instituted in these matters by what amounted to the grant of fiscal autonomy to India. I will read you his words if you like, but I am sure they must be familiar to most of you, and I do not want to waste your time. I can paraphrase them in the words of one of the speakers this afternoon. The people of India are plain, humble people and they regard a promise as a promise and after that Report by an authoritative Committee of both Houses and Lord Curzon's promise in the House of Lords, it was absolutely impossible for me to interfere with the right, which I believe was wisely given and which I am determined to maintain, to give to the Government of India the right to consider the interests of India first, just as we, without any complaint from any other parts of the Empire, and the other parts of the Empire without any complaint from us, have always
* He said, among other things, "A responsible and representative British Committee charged with shaping a Government for India have conceded to India almost absolute freedom of fiscal policy," and described this as "a starting point to a future career in the growth of self-governing institutions in India, the importance of which cannot be exaggerated." chosen the tariff arrangements which they think best fitted for their needs, thinking of their own citizens first."

Mr. Montague further declared, in a despatch to the Government of India, dated 30th June, 1921, which was subsequently published in India, that in replying to the Lancashire deputation he had accepted on behalf of His Majesty's Government the principle recommended by the Joint Select Committee with regard to the fiscal freedom of India. On the 29th September, 1921, a resolution was moved in the Council of State recommending a declaration by the Government of India that they proposed to take advantage of the fiscal freedom conceded to them. After a short debate the mover withdrew his resolution on obtaining from the Government spokesman a declaration

"that the Government of India have every intention of exercising, in concert with the Indian Legislature and in what it believes to be the best interests of the country, the fiscal powers which have been conferred on it under the recent constitutional reforms."

Since then other pronouncements have been made in the Legislative Assembly and elsewhere to the effect that India has been granted fiscal autonomy, including a statement by Mr. Baldwin during his first tenure of the Premiership that "India. … has been given economic liberty." The Labour Government of 1924 also recognised Indian fiscal autonomy, though its members made no public statement on the subject. The net result is that India has been promised by Secretaries of State of all three parties in this country that no interference by His Majesty's Government will take place in India's fiscal arrangements, with certain specific exceptions not relevant to the question of the cotton duties. This does not mean that the Government of India can act without reference to the Secretary of State, but it means that the Secretary of State is under an obligation not to overrule them when, after full consideration and consultation with him, they have, in agreement with their Legislature, reached a conclusion not in harmony with the views of His Majesty's Government.