Saturday, 10 October 2015

A new governor with old problems

In May 1854, La Trobe left Victoria for England and his replacement, Sir Charles Hotham arrived in Melbourne on 21 June. [1] Born in 1806, Hotham had largely been at sea since the age of twelve. His defeat of Argentinean rebels in 1845, naval command on the west coast of Africa the following year and a diplomatic triumph with a commercial treaty with Paraguay in 1852 had given him a reputation as an individual who would rule Victoria. He was also expected to deal with the financial crisis that La Trobe had failed to resolve and with the license problem. Hotham was enthusiastically greeted in Melbourne and his speech, after the formal reception and swearing-in ceremony was well received. [2] Under the constitutional structure established in 1851, both the colonists and the British Government expected Hotham to initiate reform. The Argus summed up colonial expectations:

There is nothing which the colony more urgently requires, or which, from past experience, it is more ready to appreciate, than to find the administration of the government in the hands of an ‘honest’ man…As soon as he shares his responsibility with the people and their representatives, he will have less to account for…if he sets about [the business of government] in a sincere and resolute spirit, he will soon have cause to be astonished at the results of his own exertions[3]

Three groups with largely incompatible goals hoped to gain his support but in each case it proved difficult for Hotham to meet their expectations. Squatters wanted to maintain their political dominance by gaining protection for their lands against the inroads of newcomers and from successful diggers who sought land for its social and political status. [4] Merchants and shopkeepers hoped Hotham would expand colonial infrastructures by giving them new docks and warehouses and improving roads to help them sustain and expand their business. [5] This was something that the perilous state of colonial finances precluded. Diggers sought relief from the gold license, access to land so they could invest their wealth and a say in the government of the colony. The gold license has been problematic for three years but, in the absence of an agreed alternative and with the need to increase revenue from taxation to plug the growing gulf in expenditure, colonial government needed to raise more not less revenue from its collection.

La Trobe had met with his Executive Council regularly and was strongly influenced by its views but Hotham’s relationship with the Council was very different. During the early months of his administration, Hotham practically ignored it because he had decided soon after his arrival that the colony’s problems were largely caused by the incompetence of senior administrators. As a result, he attempted to act alone alienating the able men who would have provided him with valuable advice and assistance. His relationship with John Foster, the Colonial Secretary was particularly fraught and an intense antipathy sprang up between the two men. [6] Hotham was convinced that the civil service was inefficient and in need of reform but his inexperience in civil administration meant that instead of gaining its support for unpopular reform measures he alienated it.

Hotham found that the colony owed £400,000 to four banks, had an accumulated deficit of £3 million and a gap of over £1 million between the estimated revenue published in October 1853 and government expenditure. The Argus did not understate the problem when it stated that ‘the finances of the country have been wretchedly mismanaged’. Land revenue had fallen off as speculation declined bringing in only £304,000, some £600,000 below the estimates; customs revenues, estimated at £1.3 million, were only £414,000 and returns from the goldfields had fallen following La Trobe’s reduction of the license fee. Between 30 September 1853 and 30 June 1854, revenue from gold licenses fell from over £147,000 to nearly £78,000. [7] The government was paying inflated prices for goods and services and the collection of goldfield revenues was uneconomic with nearly half of the diggers evading the tax. For instance, at Ballarat in 1854, license revenue was almost all spent on the cost of the Government Camp and this was not an isolated situation.

For Hotham, this was intolerable and he made restoring public finances to solvency a major priority and in August, established a committee to assist him in this task. [8] Hotham’s investigation into the effectiveness of colonial government had some support as letters to the Argus demonstrates:

What a grand opportunity is now presented to a fair-dealing and enterprising man, to mark out for himself a course of conduct fitting a young and enterprising colony like Victoria… [9]

Its twelve reports between September 1854 and May 1855 formed the basis of a programme of financial reform Hotham began to introduce before the end of 1854. [10] The first report confirmed Hotham’s view of incompetence and mismanagement. The imprest system, introduced by Hugh Childers, who was now Collector of Customs and a member of the Executive Council was severely criticised. Under this system, departments were free to spend within defined limits without any safeguards against waste or mismanagement and were automatically reimbursed for their expenditure.[11] Hotham had little choice but to introduce reforms that were going to be unpopular. New taxes were necessary to raise revenue and some departments had their staffing cut. The timing of these reforms coincided with a short period of depression; wages had been declining for several months and unemployment gradually increasing. Hotham not only enforced the digger’s license more energetically than La Trobe but he also threw scores of people out of work.

[1] Knox, B. A., ‘Sir Charles Hotham (1806-1855)’, ADB, Vol. 4, pp. 429-430, and ibid, Roberts, Shirley, Charles Hotham, provide useful biographical details. Ibid, MacFarlane, Ian, Eureka from the Official Records, pp. 24-32, examines his administration.

[2] ‘The Reception’, Argus, 22 June 1854, p. 4, ‘The Arrival of Sir Charles Hotham’, Geelong Advertiser and Intelligencer, 22 June 1854, p. 4.

[3] ‘The New Governor’, Argus, 24 June 1854, pp. 4-5.

[4] ‘The Squatters’ Meeting’, Argus, 29 September 1854, p. 5, indicates the concerns of squatters.

[5] ‘Chamber of Commerce’, Argus, 6 July 1854, p. 4, clearly established the interests of the Melbourne economic elite.

[6] Ibid, Roberts, Shirley, Charles Hotham, pp. 108-110, examines the reasons for the rift. See also, ‘Glimmerings of Reform’, Argus, 19 September 1854, p. 4, for a recondite analysis of Hotham and Foster.

[7] See, Government Gazette, 4 July 1854 and comments in ‘The Revenue’, Argus, 5 July 1854, p. 4.

[8] ‘Banking and Finance’, Argus, 8 September 1854, p. 5, indicates the breadth of Hotham’s ambitions.

[9] See, for instance, ‘Turning a New Leaf’, Argus 19 July 1854, p. 5, and ‘Official Patronage’, Argus, 19 September 1854, p. 5.

[10] Serle, pp. 159-161, explores this problem.

[11] ‘The Legislative Council’, Argus, 27 September 1854, p. 4.

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