Cabinet at three. Goulburn read a new statement showing the surplus this year, if we reduced beer and leather, and next year too. The surplus this year is about 2 millions. Next year about 1,500,000£. The income tax reaches the funds, and the Irish, and the parsimonious, and the rich--so far it is good, but it likewise reaches the man of 100£ a year. It tends to diminution of establishments, to diminished demand for labour. To create an alteration in demand generally. It was proposed to exempt professions and trades. This was unjust, and it would have led to an entire separation and hostility between the landed proprietors and the united body of labourers and manufacturers. These last would have joined on all occasions in urging a further and still a further increase of income tax, and would never have consented to a tax on consumption. The income tax would finally absorb all other taxes. Another great objection to the income tax now is that it would have the effect of perilling the reduction of the 3 per cents. The Duke, Rosslyn, and I were decidedly against income tax. Lord Bathurst and Lord Melville, as well as the Chancellor, less decidedly so, but still in favour of abiding by the reduction of the beer and leather tax. Aberdeen said nothing, neither did Sir G. Murray, so they were understood to go with the majority. Goulburn acknowledged the discussion had to a great extent changed his opinion, and that he was not then prepared to propose the tax. Herries seemed much in its favour; but more, as it seemed to me, because he wished to maintain a large surplus according to the decision of the Finance Committee than for any good reason. Peel was decidedly for a property tax. He wished to reach such men as Baring, his father, Rothschild, and others, as well as absentees and Ireland. He thought too it was expedient to reconcile the lower with the higher classes, and to diminish the burthen of taxation on the poor man. I accede to the principle; but I doubt whether taxes on consumption do really press more heavily on the poor man than an income tax. What he has to look to is not the actual price of the article he wants, but the proportion which his wages bear to that price. It matters little to him what the price of candles may be, if he has not money wherewith to purchase them. That system of taxation is best for the poor man which most tends to increase the funds for the employment of labour; and every disturbance in the system, every alteration of demand, does intrinsic mischief. After this matter was decided, Peel behaving most fairly, and declaring he would support the decision of the Cabinet whatever it might be, and that in this case the decision of the Treasury was to be principally looked to, we talked of Queen Donna Maria, in whose name Don Pedro has established a Regency in Terceira.