No. 492.
Mr. Fish to Mr. Evarts .

No. 50.]

Sir: The adjourned session of the Federal Assembly closed on the 22d ultimo. Its transactions present but little worthy of mention. A member of the Federal Council remarked to me that it had been the most barren in results of any session which he had known. The principal subject which engaged its attention was the discussion of measures for the re-establishment of the financial equilibrium.

Switzerland, like every other country, has been greatly affected by the stagnation in business and prostration of her commercial industries and, in addition thereto, has had, for the past three years, an annual deficit in the budget. Her financial position is, however, such as to cause no grave apprehensions, and her government took measures at an early day for the purpose of relieving the financial embarrassments of her treasury.

In July, 1876, the Federal Assembly requested the Federal Council to present with the budget for 1877 a report on the financial position of the Confederation, and to submit, besides, propositions as to the measures to be taken to balance the expenses and revenues, while seeking principally to introduce economies which can be made without injury to the requirements of a good administration.

The message of the Federal Council was not, however, transmitted to the assembly until the session of last summer.

The deficit in the budget of 1875, which appears to have given rise to the call for the report, amounted to 827,666.82 francs; the deficit for 1876 to 1,185,484.35 francs; while that for 1877 is given at 3,226,000 francs and for 1878 at 2,376,000 francs, according to the budget.

The Federal Council attributes the large increase in expenditure almost entirely to the provisions of the constitution of 1874, and estimates the increase of expenditure which those provisions entail at 10,815,000 francs per annum while the corresponding increase of the [Page 830] federal revenue amounts to only 3,642,000 francs per annum; thus entailing an annual cost of 7,173,000 francs to the confederation.

The increase in expenditure for the military establishment alone is estimated at about 9,500,000 francs per annum.

The report of the Federal Council discusses at considerable length the various departments in which a reduction of expenditure could be effected or an increase of revenue obtained. For the purpose of showing the progress that had been made at the time of my arrival and after Mr. Rublee’s departure, I inclose, in addition to the report itself, a translation of the third section, as giving a sketch of the measures of financial reform in contemplation at that time.

When we consider that the debt of the confederation is about 34,500,000 francs, and that the total annual expenditures do not exceed 43,000,000 of francs, the problem does not appear to be a difficult one to solve. There are but few in America who would not at once say, cut down the army. It is, however, owing to the sudden calls that have been made in times of emergency that Switzerland is now burdened with 25,000,000, or about 70 per cent. of her debt. It is not, therefore, unnatural that in the present unsettled condition of Europe she should prefer to maintain her army without any extended reduction, rather than to incur the risk of having to organize in a hurry and at great expense, should occasion arise for the protection of her frontiers.

It has been the endeavor of the government to maintain the military system established by the law of November 13, 1874, and to give the working of that law a fair trial, while curtailing the expenditures in certain details, which were either unnecessary at the commencement, or have proved to be so as the organization became more fully developed. The measures of economy recommended by the Federal Council affecting the military department, amounted to an estimated increase of revenue of 1,168,000 francs per annum, and those affecting the department of post and telegraphs amounted to 1,248,000 francs per annum. Among the latter was a proposed change in the tariff for telegrams which went into effect last October, and from which an increase of 230,000 francs was anticipated. This anticipation has not, however, been realized, as the change has occasioned, during the first four months of its operation, a loss instead of a gain to the revenue.

The other savings in the postal department recommended by the Federal Council consisted principally in increased charges for the transmission of postal matter, the suppression of certain franking privileges accorded to officials, an increased charge for stamped envelopes (in effect since August, 1877), and the suppression of non-remunerative postal routes.

The Federal Council advocated the repayment of the loans of 1866 and 1871 as previously decreed, and were of opinion that it was impossible to convert these loans at a lower rate of interest. “Moreover, a conversion, even a partial one, would create an expense, inasmuch as from the experience of others, loans at 4½ per cent., even of the most solid character, could not be placed at that time at par. Finally, the political horizon is not sufficiently cloudless to allow us to compromise our credit in the future.”

They estimated the annual deficit which will have to be met until the requisite measures for the re-establishment of the financial equilibrium can be carried into effect at approximately 4,000,000 francs, including 2,000,000 for the payment of the loans, and deducting 630,000 francs as the amount to be realized by the alteration in telegraphic charges, suppression of franking, and increase of postal charges oh newspapers.

[Page 831]

They recommended that the remedy should be sought in the increase of the revenue arising from a revision of the customs tariff.

The matter coming before the chambers of the Federal Assembly, was in each case referred to a commission for examination and report. These reports were presented at the winter session. The National Council warmly approved the views of the Federal Council as to the prompt repayment of the loans, and, in general, favored the measure suggested by the latter. They considered that the increased tariff of customs should be made to yield between 3,000,000 and 4,000,000 francs more than at present; and they recommended the increase of the present duties by two-tenths of their present rate until the revision of the tariff can be affected, or that certain articles should be made to pay a still higher rate of duty.

The Council of States were opposed to promiscuous increase of duties, and recommended instead:

1st.
Tax on spirits and other alcoholic liquors, excepting such as are made from the refuse of wine or cider or with stone-fruits or berries.
2d.
Tax on bank-notes, at the rate of one-half of one per cent, on the circulation.
3d.
Tax on tobacco (in addition to the customs duties).

They estimated the first of these measures as likely to yield 5,000,000 francs, of which they suggested that one-fifth should be accorded to the cantons, leaving an annual increase of 4,000,000 francs to the federal revenue. The second was estimated as likely to yield 350,000, and the third 1,000,000 francs per annum.

They, however, agreed in most of the measures suggested by the Federal Council.

I inclose a copy of the federal decree of the 21st February, which was not, however, published until the last edition of the Feuille Fédérale, which shows the conclusion arrived at by the assembly.

The payment of the loans is to be carried out as decreed, reserving, however, the right to pay off the loan of 1871 more rapidly.

The floating debt, as soon as the amount thereof shall have been fixed, taking into consideration the indispensable requirements of the administration, shall be consolidated by a fixed loan with prescribed redemption.

The indemnities or pensions of those removed or retired from office are to be revised for the purpose of reduction.

Various measures in the postal and telegraphic departments, as well as that of the military, are decreed, which will diminish the expenditure while increasing the receipts of these two departments.

In regard to customs they have decreed “when the increase of receipts and diminution of expenditures in the various branches of administration shall have been determined, the remaining deficit shall be considered in the revision of the customs tariff.” This decree is to be considered in the preparation of the budget of 1879.

At the same time the Federal Council were invited by the assembly to consider a series of eight propositions adopted by the assembly, of which I inclose a copy and translation. Of these the second and eighth alone appear to have an interest for us.

Proposition No. 2 invites the Federal Council to revise the law regulating the fees of the chancery, and to introduce in that law a tax (“taxe de chancellerie”), or fee, for the authorization to acquire Swiss nationality. This would be equivalent with us to placing a tax on certificates of naturalization, were we to adopt similar legislation.

Proposition No. 8 invites the Federal Council to examine whether it [Page 832] would not be expedient, in case of an increase of expenses of the federal administration, to establish taxes upon the issue of bank-notes, upon alcoholic liquors and on tobacco, one-half of the product of these taxes to be accorded to the cantons and one-half to the confederation.

They appear, therefore, to have adopted the proposals contained in the report of the committee of the Council of States as to the three principal suggestions contained in their report, with a modification as to the amount to be accorded to the cantons. Should this proposal be carried out, and the estimated increase of revenue be thus obtained, the benefit accruing to the confederation would be 3,175,000 francs per annum, and a like sum to be distributed among the cantons.

You will find the discussion of the liquor and tobacco tax set forth in the report of the committee of the Council of States. I gather from the language of the report, and also from the conclusion arrived at by the assembly, that, while holding firmly to the doctrine of free trade, the financial situation compels them to resort to higher rates of duty for the purpose of revenue, but that such increase of duties will be imposed solely for that purpose and not for the protection of any particular industry.

I have, & c.,

NICHOLAS FISH.
[Inclosure 1 in No. 50.—Translation.]

Section III of the report of the Federal Council of June 2, 1877.

III.

If we recapitulate the financial hearings of the measures of economy proposed by us, already decreed or pending before the councils, in considering only the points on which an approximative evaluation is at present possible, we have the folio wing figures:

a.—department of post and telegraphs.

Receipts increased or expense diminished:
Francs.
1. Supplementary tax on stamped envelopes (in execution since August 1, 1876) 200,000
2. Modification of the system of telegraph tax (prices of messages) pending before the councils. 230,000
3. Suppression charge on unpaid parcels 300,000
4. Increased charge on transmission of newspapers 160,000
5. Increased charge on transmission of newspapers 100,000
6. Reduction of postal routes 258,000
Total 1,248,000
Economics not estimated:
7. Regulations of the tax on passengers, within the limits of the present law on postal charges.
8. Eventual restriction of the franking privilege of the official papers of the cantons.
9. Indemnities for the Sunday holidays of postal officials.

b.—military department.

Receipts increased or expenses diminished:
Francs.
10. Increase in the price of munition (being done) 200,000
11. Clothing at mustering place 60,000
12. Reduction of the purchase of arms 238,000
13. Simplification of recruitment 20,000
14. Reduction of 1,000 in total number of recruits 350,000
15. Reduction of the distribution of recruits to special arms and other economies 150,000
16. Suppression of the double indemnity (for clothing) 150,000
17. Reduction of pay, not estimated
Total 1,168,000
[Page 833]

To these propositions, which will have the effect of augmenting the receipts or diminishing the expenses, the two following are connected with the military department as suppressing two expenditures:

Francs.
18. Suppression or diminution of the sinking-fund for cavalry horses 100,000
19. Abolition of the obligation of renewing of officers’ equipment 170,000

Of all these measures, numbering from 1 to 19, some are attainable without modifying the existing laws; the others can only be effected by changing the law. In the first category are those numbered as follows:

1.
Stamped envelopes (modification already decreed).
4.
Increased charge on unprepaid parcels.
6.
Reduction of postal routes (in course of execution).
7.
Regulation of the tax on passengers within the limits of the existing law on postal routes.
8.
Eventual restriction of the franking privilege of the official papers of the cantons.
9.
Indemnities for the Sunday holidays of postal officials.
10.
Increase in the price of munition (in execution).
12.
Reduction “in the purchase of arms.
13.
Diminution of recruitment.
14.
Reduction in total number of recruits.
15.
Reduction of the distribution of recruits to special arms.
16.
Suppression of the double indemnity (for clothing, & c.).

The following of these measures have already been put in execution:

  • No. 1. Stamped envelopes will go into force from August 1, 1877. It is impossible to calculate the increased revenue that will result for the present, because the supply of stamped envelopes in the hands of the public will exercise an influence after August 1 that it is impossible now to calculate exactly.
  • No. 6. Courses post ales.—The routes already abolished during this year constitute an annual economy of 150,000 francs already, but the exact amount cannot at the present be ascertained.
  • No. 10. Increase of the price of munition.—Put into execution by the decree of 28th January, 1877, this measure was considered in the revised budget of the current year.
  • No. 12. Reduction of the purchase of arms.—This serves as the basis for the proposition that we present to the Federal Assembly on the subject of the acquisition of war material for 1878, but it is only in the next annual account that it will bear its effects.
  • No. 13. Simplification of recruitment.—The method to be followed, in the future has already been, regulated by the circular addressed to the cantons by the Federal Council under date of 30th May, 1876; it will be applied next autumn at the time of recruiting.

Unless the Federal Assembly, at the time of the debates upon the present message, should give us contrary instructions, we will take for granted that it approves the measures already taken, and we will consider ourselves authorized to decree others on the following points and to make them figure in the next budget:

  • No. 4. Increased charge on unprepaid parcels.
  • No. 6. Further reduction of postal routes.
  • No. 7. Regulating the fares of passengers.
  • No. 8. Ultimate abolition of franking privilege of cantonal papers.
  • No. 9. Indemnities for Sunday holidays of postal officials.
  • No. 12. Reduction in the purchase of arms, about 3,000 muskets.
  • No. 14. Reduction of the total number of recruits, 500 for 1878 and l,000 for the following years.
  • No. 15. Reduction of the distribution of recruits to special arms.
  • No. 16. Abolition of the double indemnity for clothing, & c.

On the contrary as to the following points:

  • No. 11. Clothing of recruits at the mustering places.
  • No. 17. Reduction of the pay of officers.
  • No. 18. Abolition or reduction of the sinking fund for cavalry horses.
  • No. 19. Abolition of the obligation to renew the equipment of officers.

We consider that, as they affect the law of November 13, 1874, on the military organization, the present political circumstances of Europe do not permit us at present to propose changes in that law, and much less, as numbers 18 and 19 would only affect considerable economies at the expiration of a certain number of years.

As regards the other economies, which imply a modification of existing laws, our propositions concerning No. 2 (modification of the system of telegraphic rates) are already in the hands of the Federal Assembly, whose decision we await.

We reserve to ourselves two other points, in regard to which, at the right time and place, we will make certain suggestions, namely:

  • No. 3. Abolition of the official franking privilege.
  • No. 5. Increase the tax on newspapers.

[Page 834]
[Inclosure 2 in No. 50.—Translation.]

Propositions adopted by the Federal Assembly upon the occasion of the debates on the financial equilibrium of February 21, 1878.

1.
The Federal Council is invited to seek to diminish the cost of printing in all branches of the government.
2.
The Federal Council is invited to proceed to the revision of the law of 19th July, 1850 (I, 35), concerning the emoluments of the chancery, and to introduce in that law a fee (“taxe de chancelleries”) for the authorization to acquire Swiss nationality.
3.
The Federal Council is invited to examine whether it would not he proper to raise the charge on passengers’ luggage and to diminish the amount of free luggage, and to present a report on the subject.
4.
The Federal Council is invited to examine whether it would not be possible to charge the postal department with the making of commercial protests.
5.
The Federal Council is invited to present at convenient time a report on the question whether the printing of stamps (and other papers of value) should not he again taken in charge by the Confederation.
6.
The Federal Council is invited to examine whether for the clothing of the recruits choice could not he made of material which, while being less expensive, would be quite as durable.
7.
The Federal Council is invited to present, at the time of the deliberations on the budget for 1879, a report on a suitable organization of the exercises of target-practice contemplated by the next to the last paragraph of article 104 and the first paragraph of article 139 of the law on the military organization. The Federal Council is invited to examine whether, in case of an increase in the cost of the federal administration, it would not be expedient to establish taxes on the issue of bank notes, on alcoholic liquors, and on tobacco, the half of the proceeds being accorded to the cantons and half to the Confederation.

Thus decreed by the Council of States.


The Vice-President,
A. VESSAZ
.
The Secretary,
J. L. LÜTSCHER
.

Thus decreed by the National Council.


The President,
MARTI
.
The Secretary,
SCHIESS
.

The Federal Council decrees:

The foregoing propositions shall be inserted in the official collection of laws of the Swiss Confederation.

In the name of the Swiss Federal Council.

  • The President of the Confederation,
    SCHENK.
  • The Chancellor of the Confederation,
    SCHIESS.