§ Mr. Humerose to move, pursuant to notice, a series of resolutions on the subject of the late loan of 15,000,000l. contracted for by the Chancellor of the Exchequer. The hon. Member, after refering to the manner in which former loans had been raised by former Finance Ministers, and contending that they had been made on erroneous principles, went on to say that it was quite idle for the House to occupy itself, for weeks and weeks together, in the endeavour to save 10,000l. or 50,000l., if the country was to lose millions by one financial operation. Nothing could be more absurd than the funding of Exchequer-bills, instead of paying off the debt as soon as any surplus revenue accrued. Although it was not in his power to make any alteration in the terms of the loan last contracted, still it was his duty to place on record what his calculation proved to be the sound principle on which a loan should be raised, and to point out the erroneous foundation of the system on which this last loan had been contracted. If it had been made in terminable annuities, or in stock, as near as possible to par, a much more advantageous bargain might have been made for the public. The point which he wished to put upon record was this, that the Chancellor of the Exchequer, by his mode of raising a loan of 15,000,000l., would cause a loss to the public of 1,030,341l. 12s., and a further loss of 1,570,563l., as he should show by the resolutions he should submit to the House. He was quite sure, from the best authority, that if the loan had been offered in the city on the terms which he proposed, the list would have been filled up in a day. The hon. Member concluded by moving the following Resolutions:—
1st That the loan of 15,000,000l. has been bor- 1382 rowed by the Chancellor of the Exchequer at the rate of 86l. 9s. 5d. money, for every 100l. in Consols, as follows, viz:—He has given £75 Stock Consols, and 25 Reduced,=£100 of 3 per Cent. Stock for every £100 money.
£ s. d. Also 13s. 7d. of Long Annuities, terminable in 1860, equal in cash to 16l. 14s.3d. for 1l. 11 7 1 And three month's interest on Reduced—viz.,from the 5th of April to the 5th of July on 25l. 0 3 9 Add a discount for prompt payment of the 90l. remaining instalments 1 19 9 =13 10 7 £86 9 5 After payment of the deposits, leaving in money, as the price of every l00l of Consols, which is equal to a rate of interest of 31. 9s. 5d. per cent, or 3l. 9s. 4 67–100d.2d. Which appears by the following statement of the amount of stock, and the price of such stock, given for every 100l. cash, viz:—
For 75l. Consols, at 86l. 9s. 5d. £64 17 0¾ For 25l. Reduced, at 87l. 4s. 5d. 21 16 1¼ For 13s.7d. of Long Annuity, at 16l. 14s. 4d. per 1l. 11 7 1 And discount for prompt payment 1 19 9 £100 0 0 3d. That the following charges on the Consolidated Fund have been incurred for the said loan of 15 millions of money, as will appear on the books of the Bank of England, viz:—
£ For 11,250,000l. of Consols, payable from the 5th of April, at 3 per cent. 337,500 For 3,750,000l. of Reduced, payable from the 5th of July, at ditto 112,500 Making a perpetual charge of 450,000 And 101,875l. of Long Annuities, payable from the 5th of April, 1835, to January, 1860 101,875 yearly. 4th. That if the whole of the loan had been raised in one stock, and that stock had been Three per Cent. Consols, at the price above stated, of 86l. 9s. 5d., the gross amount of three per cent. capital stock added to the debt of the country would be 17,346,890l., and a perpetual annual charge for the same of 520,406l. 14s. payable from the 5th of July, 1835.5th. That if the whole had been raised in Reduced Three per Cents, at the price of 87l. 4s. 5d. being the difference of 15s. of interest added to the price of Consols, the amount of Three per Cent, reduced capital stock added to the debt of the country would be 17,197,726l., and a perpetual annuity of 515,931l. 15l., payable from the 5th of April, 1835.6th. That if the whole loan had been contracted in Long Annuities, payable from the 5th of April, 1835, and terminating in January, 1860, the annuity during that period would have been 897,308l.7th. That if the loan of 15,000,000l. had been raised in the New Three-and-a-half per Cent. 1383 stock, at the price of 97l. in money for every l00l stock, and that the same discount had been allowed on prompt payment as on the present loan, this would have given a net price, after deducting discount of 95l. 1s. 7d. in money for every 100l. stock; and, thereby, the capital added to the debt of the country would have been 15,776,327l., and the perpetual annuity 552,171l. 9s. payable from the 5th of July, 1835; being at the rate of 3l. 13s 8d. per cent, for money, or 3l 13s. 7 47–100d.8th. That the capital stock, created by the present loan, of 15,000,000l. of money, when estimated in Consols, being equal to 17,346,890l., and the capital if raised in a Three-and-a-half per Cent stock being only 15,776,327l., the increase in the capital of the debt by the present loan, as compared with a loan in the New Three-and-a-half per Cent stock, is l,570,563l.9th. That if the loan had been contracted in the New Three-and-a-half per Cent. stock, at the price of 97l with a guarantee against the reduction o interest for 15 years; and that at the end of that term the Three-and-a-half per cent, stock were reduced to a three per Cent stock, the comparison with the present contract would be as follows:—
£ s d To borrow in a Three-and-a-half per cent, stock at the price of 97l., reduced by discount to 95l. 1s. 7d., is to pay interest at the rate of 3 13 8 The present Loan is contracted for at the rate of interest of 3 9 5 Showing a greater rate of interest of 0 4 3 paid on the 3½ per Cent. Loan, which difference of 4s. 3d. in the rate of interest is an annuity, and an annuity of 4s. 3d. interest, being reckoned at 3½ per cent., will increase in 15 years to a sum of 41. 2s.; which sum again, interest being reckoned at 3 per cent., is equivalent to a perpetual annuity of 2s. 5½.; and therefore supposing the 3½ per Cents, to be reduced to 3 per Cents, after 15 years, the amount will stand thus:—
The rate of interest at which the present loan is contracted for is £3 9 5 The rate of interest on a 3½ per cent. Stock, reduced to a 3 per cent Stock, is, at the end of 15 years, £3 0 0 Add the perpetual annuity arising from the loss of 4l. 2s., being the accumulation of the excess of interest of 4s. 3d. paid during 15 years 0 2 5½ 3 2 5½ Showing a difference of £0 6 11½ per cent, payable, for ever alter, on the whole 15,000,000l., as at present contracted for, more than would have been payable if the loan had been raised as a 3½ per cent. Loan, as stated in resolution 7.10th. That the difference of 6s. 11½d. per cent, upon 15,000,000l. constitutes a permanent annuity of 52,187l. 10s.; but this annuity, though permanent, after it has once begun, is a reversion, the payment of which commences at the end of 15 years, and the present value, of which, interest being reckoned at Three-and-a-half per Cent, during 15 years, and at Three per Cent, for ever after, is 1,038,341l. 12s.138411th. That, besides the above loss to the public of 1,038,341l. 12s. arising from the difference of charge for the annuity, there will he an additional loss to the public of 1,570,563l. by the increase of capital of the national debt, as shown in the 8th resolution.12th. From these facts it appears, that if the Chancellor of the Exchequer had raised the 15,000,000l. in a three-and-a-half per cent stock at 97l., reducible in 15 years to a three per cent, stock, this would have been equivalent to a net price of 92l. 9s. 1d. for 100l. consols, instead of the net price of 86l. 9s. 5d. which he receives by the present contract; being a loss of 5l. 19s. 8d. per cent, commencing from the present time; and exclusive also of the increased amount of the capital of the debt.On the first Resolution being read,
The Chancellor of the Exchequerdid not complain of this subject having been brought under the consideration of the House; on the contrary, he admitted, that if his hon. Friend had a shadow of pretext for imagining that in a transaction of this magnitude one tittle contained in his figures or statements was true, it was his bounden duty to bring the question forward. It was to be remembered, that this was the first loan which had been contracted under circumstances similar to the present, and if there was anything wrong in it, not only ought it to be brought under the deliberation, but under the censure of the House. He complained of these resolutions only in one respect—namely, because they did not conclude with that resolution which ought to have been their legitimate consequence; and if they were true, he would invite the hon. Gentleman and those who might be found to agree with him to follow them up with a resolution, that an Address be presented to his Majesty, praying his Majesty to remove his present Chancellor of the Exchequer from the office he filled. But as to the calculations of his hon. Friend, which were the most singular he had ever seen, be would demonstrate that they were founded in a tissue of fallacies, that they, signally exhibited the most profound ignorance of the principles which ought to prevail in such a transaction, and were not worth the paper on which they were printed. He would deny that he ought to have followed the course prescribed by the hon. Gentleman. The hon. Gentleman had said he would have made a much better bargain in the 3½ per cent. stock than by the arrangement he had entered into. He would admit, for the sake of the argument, that he might; but then the hon. Gentleman ought to recollect that he was precluded from entering into such a bargain, because the very Act of 1385 Parliament to which his hon. Friend had adverted prohibited him from entering into any transaction which would have had the effect of creating any new or distinct species of stock whatever. But then his hon. Friend had said, if the Chancellor of the Exchequer had gone to Parliament, it would gladly have given him the power of effecting such an arrangement. Why, he would ask, what would have been the effect of his having come to Parliament, stating that he was desirous of borrowing in the 3½ per cent stock, and asking for leave to do so? The very notice which such a proceeding would have given, that he was likely to contract for such a loan, would have caused persons in the city to direct their entire operations on the 3½ per cent, stock, and in that way, pending the passing of the Bill he might have got, he should have lost more in the interval than even the sum which his hon. Friend had by his strange fallacies alleged had been lost by the negotiation which had been effected. Such a proceeding would not only have been unusual, but subversive of every principle that ought to regulate a Government loan. It was a matter of the greatest importance to complete a loan as soon after the enunciation of the intention to contract it as possible, because every effort was likely to be made in the interim to run down the stock. His hon. Friend had talked of prophets, but he was quite sure that no man who did not consider himself gifted with prophecy would vote for the Resolutions of the hon. Gentleman. No Chancellor of the Exchequer could countenance the unfounded principle of his hon. Friend, and no gentleman acquainted with money matters could believe his statements to be correct. Even if the hon. Gentleman's statements were correct, his conclusions were erroneous; and his statements being erroneous, his conclusions were necessarily erroneous. His hon. Friend had said, that the 3½ per cents might be reduced at the end of 15 years. It was not that the 3½ per cents would come up to 100l.; but supposing they rose in the 14th year to 100l., still unless he could make out that they would come up to that at the close of the period, the whole of the argument must fail, because his hon. Friend had gone on to say, that if at the end of the 15th year they came up to 100l., then he would admit of reducing. That was so fallacious a principle, that no man in his senses would reason on such a statement. It was in vain to talk, as his hon. Friend had done, of 1386 being able to reduce even within 18 months If he contemplated such a thing, it would require all his hon. Friend's eloquence, and more than all the ability he had shown in making out his figures, to persuade any individual to advance even half-a-crown, because the slightest alteration of terms, even in a date, produced an effect. He would not consent to be an experimentalist at the public expense, when he was quite sure in the outset that the experiment must be to the prejudice of the public. If he were to go into the city with a novelty, the cry would be raised against him far and wide that it was a novelty, and the experiment could not fail to be made at the expense of the country. He did not give his hon. Friend credit for these Resolutions.
§ Mr. Humecould assure his right hon. Friend they were his own, that he wrote them with his own hand, but that the calculations were made by another person.
The Chancellor of the Exchequercould then only say, that he had employed Mr. Finlayson to test every one of the hon. Member's calculations; that therefore he had as good authority as he could possibly require, and from which he could assert that his hon. Friend's propositions were altogether inaccurate. The effect of a loan in the 3½ per cents, would be as follows:
If the loan had been contracted in the New 3½ per Cents. without bonus, stock would have been £15,541,857 Annual charge 543,963 Present charge 507,022 Saving £36,941 or 446,157l. stock. If, without any bonus, the loan had been raised in Consols, at the average price of the last six years, the charge for l4,701,875l.money would be,—
or about 1,000,000l. So that there would have been an excess annually of 36,941l., or nearly so, upon 1,000,000l., and that was the economy which his hon. Friend wished him to have adopted; and his only set-off against that was his anticipation that at the end of fifteen years the 3½ per Cents, might be reduced. He was as anxious as his hon. Friend to reduce them, but he should consider it an odd way of going to work with a view to effect that, to increase them. If the loan had been in one stock, and that Consols, the capital would have been £17,346,890 0 Charge 520,406 14 Present Charge 507,022 0 Saving 13,384 14 1387 Even upon that proposition, which he would take upon himself to say showed an amount of more than any man could have expected to realise, so far from its having been more advantageous to the public than the arrangement he had concluded, it would have actually been less favourable. By the arangement he had made, he had for the first time, paid less than the sum that had been paid in the course of the six preceding years during an uninterrupted peace, and not allowing one farthing of bonus to the contracting party. He would ask, therefore, whether there ought to be a resolution put on the Journals of that House as a reproach to him for having by his blunders cost the public millions, upon the bare hypothesis of his hon. Friend. He had shown the House his paper was not to be sustained upon the facts, but it was directly at variance with the facts. He could show that the hon. Gentleman's very figures were wrong. He did not calculate the annuity accurately; there was a mistake even in that sum; therefore he would refuse to affirm these resolutions, but more particularly so, as he could point out an error of a million of money on both sides of his hon. Friend's account. The House ought not to place on its Journals the condemnation of a proceeding like this upon such loose statements as those made by his hon. Friend. Except from his hon. Friend, he had not heard from any living soul any observation tending to shew that this loan had not been contracted on terms eminently beneficial to the public. It was not a pleasant thing to have a series of charges brought forward against him in his official character; at all events, the hon. Gentleman ought to substantiate his facts. He would willingly put the hon. Gentleman's paper into Mr. Finlayson's hands, because then he should have to wish his hon. Friend joy of the result. Whether he was on the Opposition side of the House, or in the Government, he should act in this instance exactly as he now felt disposed to act. It was not because these resolutions sought to affect him that he opposed them; in whatever character he stood in that House, he should say such propositions as the present ought not to be assented to merely upon the slight attention that had been given to them by the hon. Gentleman. He did not impute blame to his hon. Friend, but he would entreat him to take Mr. Finlayson's calculations, and carefully examine them, for then he would be let into possession of information which at pre- 1388 sent he seemed to be wholly deficient in. He should like to call the attention of the House to the actual results of this loan. The House must be aware, that by Act of Parliament he could only give 5s. per cent. interest more upon a loan than any public security at the time of contracting the loan bore. The loan might have been contracted at a difference of interest, equal to a capital in stock amounting to 405,535l.—according to his authority, more than it was contracted for at; and it was contracted for at a sum of 149,233l. less than the contractor's (Mr. Rothschild) original proposal, which he had refused. Having done his utmost to make this an advantageous loan to the public, he felt also bound to hope that it might turn out to be a desirable one to Mr. Rothschild. Upon this evidence, then, could any man believe that a million had been lost by his mode of contracting this loan? On the contrary, he thought it must be very evident, that the transaction had been any thing but a careless or a disadvantageous one. He could not have made the loan upon the principle pointed out by his hon. Friend, except upon terms highly disadvantageous. He wished now to show the comparative credit in which the British public security stood with that of the public credit of any other country on earth. When he contracted this loan, he had to contend with a higher rate of interest than usual on foreign securities, which had deprived Great Britain of benefits she otherwise might have had. The hon. Member for Bridport had asked the other night, what was the rate of interest in perpetuity during the last six years, and he was now in a condition to give that information:—
Stock £16,989,910 Dividend 509,697 Present charge 507,022 Saving 2,675 This showed the comparison between the interest on foreign and British stock, and from the whole it would be found the loan had been contracted on more favourable terms than had been paid on consols on the average of the last six years of peace; that being so, he would ask the House, and ask his hon. Friend, what they could have expected, or what they could have had more? But he had not altogether abandoned the principle of redemption. In fact, the an- 1389 nuity was one-fifth of the whole charge, and that would give, in 1860, a positive reduction of 150,000l, a-year. He was satisfied with his own statement, and he would have no hesitation to have the whole referred to Mr. Finlayson. He could not consent to take his hon. Friend's authority on these matters; he had been so much engaged, that it was impossible, unless he had been not only more than man, but more than angel, he could have given all the attention and labour to this subject which it required, so as to have enabled himself to have arrived at right data thereon. But this was not the first time the hon. Gentleman had been wrong in his calculations. In 1833, he had had a discussion with the hon. Gentleman with respect to a reduction of taxation. On that occasion he stated, there had been a reduction of 6,000,000l. within a given time; the hon. Gentleman said no, and he produced his statement of account to show that that was not so. What sort of a statement did his hon. Friend produce? He compared the gross amount at one period with the nett amount at another; and he included a sum of 3,000,000l. in the one account, but excluded it from the other, so that he made an error in that statement of no less than 3,000,000l. His hon. Friend afterwards admitted to the House that he had made that mistake. On another occasion, his hon. Friend omitted sums amounting to no less than 36,000,000l. He omitted a sum of 19,000,000l., consisting of Navy Bills, and other securities—a sum of 4,600,000l. 3,630,000l., and 9,000,000l. making, altogether, about 36,000,000l. After all these examples, he could not take the hon. Gentleman's calculations, but must rely on those of Mr. Finlayson. His hon. Friend seemed to think it was a light matter to put upon the Journals of the House, a charge against a person in the discharge of his public duties, that he had caused the public to sustain a loss of a million of money. His hon. Friend, he had no doubt, wished him well, and had wished well to the Government, but he had certainly adopted, on this occasion, an extremely rough way of showing his attachment. Upon all these grounds, he affirmed that he had made an advantageous loan for the public; if the bargain had been of that grossly improvident character described by the hon. Member for Middlesex, there were plenty of individuals in the city of London, whose talents, habits, and interests, would have led them to ex- 1390 pose it before this time, and the public indignation would most justly have been called down upon the blundering financier who could have been guilty of it. But no such thing had occurred; the impression was altogether in favour of the course he had adopted, and the allegations in those resolutions were wholly unsubstantiated by fact. He hoped he had succeeded in rendering a satisfactory statement to the House upon this subject; and he trusted the public would weigh it carefully and accurately; but he would go further—he would send this paper to be reported on by Mr. Finlayson, and if it bore out the statement of the hon. Member, let him move a vote of censure, and he for one would not complain. He should now, however, move, by way of Amendment, "That the terms on which the loan of 15,000,000l. for payment of the compensation to the West Indian proprietors has been contracted, are such as to afford the most satisfactory proof of the public credit of the kingdom."
£. s. d. 3½ per Cents., payable in April and October 3 14 0¼ 3 per Cent. Reduced 3 9 11¾ New 3½ per Cents. 3 14 0 Consols 3 9 4 French 3 per Cents. 4 3 7¼ French 5 per Cents. 5 1 0 Prussian 5 per Cents. 5 0 4¼ Russian 5 per Cents. 5 0 1
§ The Amendment being put,
§ Sir John Rae Reidsaid he had listened with the greatest attention to every thing which had been stated by the Chancellor of the Exchequer, and he must say, that connected as he had been with different transactions of this nature, he never in his life heard a clearer statement, or one which would prove more satisfactory to the public. The right hon. Gentleman had completely and entirely answered the extraordinary and most delusive calculations and predictions of the hon. Member for Middlesex. With respect to the loan itself, speaking his own convictions, and knowing, as he did, the sentiments of those who well understood the subject in the city, he was bound to declare that it was an excellent bargain for the public; and he did hope that the exposure of his absurdities on the present occasion, administered by the Chancellor of the Exchequer, would render the hon. Member for Middlesex more cautious and accurate in his calculations for the future.
§ Mr. Warburtonrecommended his hon. Friend to withdraw his Resolutions for the present, on the understanding that the counter-calculations of Mr. Finlayson should also be submitted to public inspection. Granting the principle of borrowing in stock of a low denomination, the Chancellor of the Exchequer had made very good terms; but he very much questioned the propriety of such a procedure. In spite of all that had been said against the old principle of negotiating loans of this nature, 5–6ths had 1391 been contracted on the exploded system, and only 1–6th on a good principle. He also objected to so much stock having been created before it was known what precise sum would be required owing to the probability of litigated claims.
The Chancellor of the Exchequerwas perfectly ready to submit the whole of the documents to Mr. Finlayson, and afterwards to lay them and the results on the Table of the House. Having had to provide for all that might fairly be required in the way of compensation, he had not felt himself at liberty to diminish the amount of the loan. The surplus was directed by the Act to be invested in the 3 per cents, in the name of the Accountant-General of the Court of Chancery, to await the result of contested claims.
§ Mr. P. M. Stewartsaid, that but for the explicit statement of the hon. Member for Middlesex, that the Resolutions had been drawn up by himself personally, he should have been inclined to attribute them to some of the professional parties, who, from the result, were naturally disappointed in the circumstances attending this loan. All he could say was, when he submitted the printed Resolutions to some gentlemen in the city, they stated at once that they knew of their existence, and the object of them, at least a month ago. The Resolutions themselves were full of the most egregious blunders, assuming a price (97l.) at the present day which never could have been given, and contemplating a state of things fifteen years hence, which no Chancellor of the Exchequer had a right to calculate upon. In his view, the loan had been contracted most advantageously for the public.
§ Mr. Humedenid altogether the statement of the hon. Member for Lancaster, respecting the alleged communication of his plan to various persons in the city, in the course of the last month; so far from there being the least foundation for any such statement, he could positively declare, that until two days after he had given notice, he never mentioned the subject in any quarter. The hon. Member defended the accuracy of his own calculations, and contended that the right hon. Gentleman, the Chancellor of the Exchequer, had met his statements and reasonings on general, and not on particular grounds, of which he thought he had some reason to complain.
§ Amendment agreed to.