§ On the motion of the Chancellor of the Exchequer, the house resolved itself into a committee, to consider of enabling holders of three per cent. stock, to purchase Life Annuities.
The Chancellor of the Exchequer
then rose, and addressed the chairman nearly as follows:—Sir, in consequence of the notice which I gave yesterday, I rise to propose to the committee certain Resolutions, for the purpose of enabling persons possessing stock in the 3 per cents. to transfer that stock to the commissioners for the reduction of the national debt, with the view of obtaining in its stead equivalent Annuities. Though the subject, sir, is of great importance, I do not think that at this moment the Resolutions will lead to any discussion, because I am not disposed to request that the house will form any opinion upon them this night. All that I intend is, after having briefly explained the nature of my proposition, to move the reading of the first Resolution pro formâ, and then to propose, sir, that you report progress. The whole of the Resolutions will be printed, and put into the hands of members as speedily as possible; and I shall defer any motion for resuming this committee until next week, in order that full time may be given for the due consideration of the subject.—Before I proceed in my statement, I think it extremely necessary to guard myself against any misapprehension that might otherwise arise, with respect to the tendency of the measure which I am about to propose in regard to the Sinking Fund. I declare to the committee, that I have no idea, directly or indirectly, of diverting the operation of the Sinking Fund from its natural and proper object, the Redemption of the National Debt. I trust, therefore, that no preconceived opinion on this subject, will be allowed to prejudice the minds of the committee.—I shall now, sir, state the nature of my proposition, and the reasons which induce me to recommend it to the adoption of the committee. I mean to propose, that liberty be given to any person possessing stock in either of the great 3 per cents, (the Consolidated or the Reduced) to transfer that stock into the hands of the commissioners for the reduction of the National Debt; and that on such transfer he be entitled to receive an Annuity for life, amounting to such a sum over and above the dividend on his stock, 262 as an accurate calculation of the value of the principal so transferred will prescribe; taking the stock at the current price of the day of transfer, and varying the calculation according to the age of the individual. On these last particulars, however, I must observe, that I would propose to limit the power of transfer to persons under 35 years of age, and the amount of the transfer to sums not less than 100l. each; the former, because many impositions might otherwise be practised; the latter, because the commutation of smaller sums would cause considerable trouble and inconvenience. The effect, sir, of this measure would, as I conceive, be not only to take out of the market all such stock as would become subject to such commutation, but also to secure to the nation the redemption of the funds so transferred, at the price at which they were when the transfer was made. The committee must be perfectly aware, that the operation of the Sinking Fund has recently very much increased the price of stocks. There is every reason to believe, that by the continuance of that operation, they will still further be increased in price. No one can doubt, sir, that if the measure were consistent with public faith, it would be extremely desirable to give to the nation an opportunity of redeeming the whole of the National Debt at the present price of the stocks, because that would preclude the effect which any future advance in the price of the stocks must have in retarding the operation of the Sinking Fund.—There are two objects which the Sinking Fund has in view; the one to provide for the final redemption of the National Debt, the other to keep up the price of stocks in the market, so as to enable government whenever the exigencies of the state may require it, to make an advantageous loan for the public. These objects, however, sir, are in some degree inconsistent. In some degree they counteract each other. Whatever measure raises the funds, and thus enables government to borrow on the best terms, prevents the commissioners for the reduction of the national debt, from reducing that debt on the best terms. Now, sir, the measure which I propose will combine both these objects; it will naturally tend to increase the price of stocks, and it will at the same time secure the redemption at a low price, of so much stock as may be transferred antecedent to the rise produced. All this, sir, must be obvious to the committee, without any de- 263 tailed statement, but, I wish to represent to them the manner in which the redemption of the debt will be affected by the purchase of annuities. Every person who transfers his stock to the commissioners, will be entitled to such an annuity as will be equivalent to the value of the stock, and of his life; the calculation proceeding on the principle that the sum which he would otherwise have received as interest, the additional sum granted as an annuity, and the compound interest on the whole, would redeem the sum originally transferred within the period to which the individual's life will be calculated as likely to extend. For instance, if a person were disposed to transfer to the commissioners 1000l. of 3 per cents. and upon the estimate of the probable duration of his life, and of the compound interest, it should be calculated that he was entitled for that transfer to receive twice the amount of his former interest, he would then have a right to an annuity for life of six per cent. or 60l. on the whole sum; the calculation proceeding on the principle, that the accumulation of the additional 30l. would, at the probable close of that person's life, be equivalent to the redemption of the stock originally transferred; and that at the price at which it was originally transferred. Now, if the stocks continued to rise, the redemption of that sum could not be effected without this measure. The whole merit, therefore, sir, of this plan rests on the accuracy of the expectation, that the stocks are likely to rise. I am ready to admit, that if the contrary should take place, the measure will have a tendency directly opposite to that which I expect. The subject which requires our most mature consideration is, whether, under the circumstances in which the country is placed, there is not good reason to believe, or rather to be certain, that a continuance in the application of the means which have hitherto been used to decrease the debt, will produce a continuance of the rise in the price of stocks. The committee will be surprised to learn, that since the negotiation for the last loan, there has been a rise in the funds of 6 per cent. on the stock, or between nine and ten per cent. on the capital. When the loan was concluded last year, the funds were at 62; they are now 68. If, therefore, the measure which I am now proposing had been adopted last year, then, of whatever quantity of stock which might have been converted into annuities since that period, the 264 redemption would have been secured at sixty-two. I certainly do not expect, sir, that such a rapid progress in the price of stocks is to be calculated upon for the future; but I do say, that there is every reason to believe, whether we look at a state of war or of peace, that the accumulation of the Sinking Fund must inevitably keep up the price. If the blessings of peace could be restored to the country, the price of stocks would unquestionably rise. Peace has uniformly been found to produce that effect; it tends directly and most particularly to that object; for when there is no necessity for a loan, the Sinking Fund is left to operate by itself, without counteraction or embarrassment. The effect of the peace which succeeded the Treaty of Amiens, was to raise the funds from 59 to 77. At that time the capital of the debt was 478 millions, the sinking fund 5,800,000l. being an 82nd part of the debt: now, the capital of the debt is 586 millions; the sinking fund above ten millions, being a 58th part of the debt. If therefore peace were restored, there can be no doubt that the operation of the Sinking Fund must inevitably keep up the price of stocks. But, even in the case of a continuance of war, there is every reason to believe from experience, that the operation of the Sinking Fund will be sufficiently powerful, notwithstanding the counteraction of other circumstances, to keep up the price of the funds. If, therefore, in either situation, of peace, or war, there is good ground to believe that stocks will increase in price, it is a strong argument in support of a plan by which a considerable portion of the public debt may be redeemed, at the price at which the stocks may be antecedent to that increase.—There is another circumstance, sir, which the committee must take into their consideration in estimating the merits of this plan; it is the probability or improbability of persons being disposed thus to transfer their stock to any considerable extent. How far that disposition may exist I cannot pretend to determine; but this I know, that as far as it may exist, it will be advantageous to the public. It is very probable, sir, that many individuals would be strongly inclined to dispose of their stock for the purchase of annuities under circumstances which secured to them the acquisition of an increased income, free from any risk to their property, and without the expence and inconvenience attending other modes of obtaining a similar object. Under this 265 plan, those individuals would enjoy more advantages, they would receive much better terms than in any negociation of a private nature, because the object of the plan is not to obtain for the public any profit from the sale of annuities, but as I have before stated, to secure the redemption of that part of the stock transferred, at the price which it may bear at the time of the transfer. Thus the full value would be given in the annuity, without any deduction whatever. It is my hope and confident expectation that in the present state of the finances of the country, I shall be able to procure loans in the 3 per cents. redeemable at 80, in which case, in the event of the funds rising above 80, I mean to propose that the stock so created shall not be transferable.—The right hon. gent. concluded with moving the first of the following Resolutions: viz. 1. "That it would tend to a more speedy and efficient reduction of the national debt, and would at the same time, be of material accommodation and convenience to the public, if every proprietor of three per cent. consolidated fund or reduced bank annuities were at liberty to exchange, with the commissioners for the reduction of the national debt, such bank annuities for a life annuity during the continuance of a single life, to be named by such proprietor; or for a life annuity during the continuance of the lives of two persons, to be named by such proprietor, and of the life of the longer liver of such two nominees. 2. That, in order to give effect to the aforegoing resolution, every proprietor of three per cent. consolidated or reduced bank annuities, who shall be desirous of exchanging any such bank annuities for a life annuity on the continuance of a single life, shall, on transferring to the commissioners for the reduction of the national debt any such batik annuities, be entitled, during the continuance of his or her life, or of the life of some other person to be named by him or her, to receive (under such regulations as parliament may deem it expedient to adopt) for every 100l. of such bank annuities, and so in proportion for any greater sum than 100l. of such annuities, transferred to the said commissioners, a life annuity of such annual amount, according to the age of the nominee, and the average price of such bank annuities on the nearest open day preceding the day of the transfer thereof, as is specified in the following table. (This table is printing.) 3. "That, 266 in order to give further effect to the aforegoing resolution, every proprietor of 3l. per cent. consolidated or reduced bank annuities, who shall be desirous of exchanging any such bank annuities for a life annuity in the continuance of the lives of two persons, to be named by such proprietor (of whom such proprietor may be one), and the life of the longer liver of them, shall on transferring to the commissioners for the reduction of the national debt any such bank annuities, be entitled, during the continuance of such two lives, and of the life of the longer liver of them, to receive (under such regulations as parliament may deem it expedient to adopt) for every 100l. of such bank annuities, and so in proportion for any greater sum than 100l. of such annuities tranferred to the said commissioners, a life annuity of such annual amount, according to the respective ages of such two nominees and the average price of such bank annuities on the nearest open day preceding the day of the transfer thereof, as is specified in the following tables. (These tables are printing.) 4. That no person shall be admitted to be a nominee, either for the grant of an annuity for the continuance of a single life, or for the grant of an annuity for the continuance of two lives and of the longer liver of them, who shall be under the age of thirty-five years. 5. That the dividends payable in respect of the bank annuities, which shall be transferred to the commissioners for the reduction of the national debt, in exchange for life annuities, shall be received by the said commissioners, and shall constitute a part of the funds applicable to the reduction of the national debt; and that out of the said funds applicable to the reduction of the national debt, the said commissioners shall pay the respective life annuities granted in exchange for such bank annuities, during the continuance of the respective lives for which the same shall be payable; and that the said respective life annuities shall be payable half-yearly at the bank of England, on the same days on which the dividends on the stock transferred for the purchase thereof, may be payable in every year; that the first payment of every annuity shall commence on the same day on which the first dividend on the bank annuities so transferred shall be payable to the said commissioners; and that upon the death of any single nominee, or of the surviver of any two joint nominees, a sum equal to one- 267 fourth part of the annuity dependant upon his or her life shall he paid to the person entitled to such annuity, or his or her executors or administrators, as the case may be, provided the same shall be claimed within two years after the death of such single or surviving nominee; and that the annual sum payable for every such life annuity so ceasing as aforesaid, shall thenceforth revert to and constitute part of the funds applicable to the reduction of the national debt. 6. That for the purpose of ascertaining the effect of the measure proposed in the aforegoing resolutions, with reference to the redemption of the public debt, a separate account shall be kept half-yearly, by the commissioners for the reduction of the national debt, of all bank annuities which shall have been transferred to them for the purchase of any life annuities, and of the dividends receivable by them in respect thereof, up to the period of such account; distinguishing therein so much of the said bank annuities as shall have been transferred in the course of the next immediately preceding half-year:—Also a half-yearly account of the amount of all the life annuities granted by them up to the period of such account, distinguishing therein the amount of the life annuities which shall have been granted in the course of the next immediately preceding half-year; and also of the amount of all the annual sums which up to the period of the said account, shall by reason of the deaths of nominees have reverted to the funds applicable to the reduction of the national debt, distinguishing therein the amount of such annual sum as shall have so reverted in the course of the next immediately preceding half-year, together with an account of the amount of life annuities then payable; and that in every such account shall be specified the excess in the whole amount of all the life annuities then before granted, above the amount of the dividends receivable in respect of all the bank annuities then before transferred for the purchase of life annuities; and also the excess (if any) in the amount of the life annuities then payable above the amount of such dividends.—And that a separate account shall also be kept half-yearly of the capita] stock, which, up to the period of such account, shall have been redeemed by the application of the annual sums which shall, from time to time, have so reverted to the said funds, by reason of the deaths of nominees, and by the application of the ac- 268 cumulated dividends of the capital stock redeemed thereby:—Also, an account of the whole amount of 3l. per cent. capital stock, which up the period of such account, would have been redeemed by the excesses in the amount of the life annuities from time to time payable by the said commissioners, above the amount of the dividends from time to time receivable by them, in respect of the bank annuities, transferred for the purchase of such life-annuities, in case such excesses had been intermediately applied in the redemption of 3l. per cent. stock, in the manner prescribed by the laws now in force for the reduction of the National Debt."
§ Mr. Windham
would not in the present early stage go into any detailed observations on the plan submitted to the committee by the right hon. gent., but merely rose to observe, that there was this obvious and fundamental objection to the Plan, that it did, in a greater or less degree, tend to vitiate the morals of the lower orders of the people. He was afraid that too many parents would be found, who would be very willing to sacrifice the future interests of their children to their own immediate gratification. The system of annuities was too generally attended with such consequences, and he saw nothing in the Plan of the right hon. gent. calculated to obviate such effects in the present instance.
§ Mr. Brand
supposed a case in which five millions were transferred when the stocks were at 60; he then supposed, that by the natural progress of the price from the operation of the Sinking Fund, the stocks Would reach 65, but that by the accelerated progress, in consequence of removing so much from the market, they would rise to 70: in that case he contended, that no advantage would be derived from the measure, but rather that it would be injurious.
§ Mr. Tierney
deprecated the facility which the Plan proposed to afford to persons in the lower walks of life to do that which would be highly injurious to their families. At the same time, he did not believe that there was in this country any considerable body of people who would be disposed to avail themselves of the Plan. Persons of high rank could with case obtain annuities at the present moment, on landed security. Mr. Pitt had tried a similar Plan in 1783, which intirely failed. Every thing led him to believe that capital and increase of capital 269 were the objects of the day, and was it probable that a person who had hitherto preferred capital to interest, should all at once change his plan, and prefer interest to capital; and that, too, precisely at the moment when the chancellor of the exchequer was assuring him that capital would rise in value? It appeared to him also (although he only stated it without meaning to infer that such a step, under some circumstances, might not he adviseable), that the Plan would be a violation of the act of parliament, respecting the reduction of the debt, and consequent infraction of faith with the public creditor. It was well known, that the stocks were kept up by the periodical presence in the market of the commissioners for the reduction of the debt, who were bound to make certain purchases on certain days, whatever might be the state of that market. If, however, these annuities were granted to a considerable extent, that part of them which exceeded the interest, must diminish the disposable sum in the hands of the commissioners for the reduction of the debt. The consequence would be, that the effect now produced, and which he had just described, would be materially lessened; and the person who bought stock last week on the faith of the act of parliament, by which he expected that his property would soon be very much increased in value, would thus find himself deceived. The right hon. gent. had stated his expectations, that he should be able to make loans in the three per cent. stock redeemable at 80. What advantage would be derived from this he was at a loss to comprehend. In proportion to the sum at which it was to be redeemable by the contractor, would the contractor raise his original terms. He did not mean to derogate from the merits of the right hon. gent., but he could assure him, that he never yet knew any chancellor of the exchequer who was a match for the gentlemen in the city, where their interest was concerned.
contended that the plan of his right hon. friend would be beneficial to the individuals who should transfer their stock for annuities, in as much as it would secure their annuities without any of the difficulties of recovery attending annuities charged upon lands. The public funds would therefore be preferred; and that the practice of purchasing under this plan would not be injurious to the public, was apparent from the circumstance that the short annuities had lately afforded an op- 270 portunity of making such purchases. He did not believe that any instance had occurred in which a parent had deprived a child of its inheritance in order to increase present income by sinking capital in such purchases. The general advantages of the Plan would greatly outweigh every evil that could possibly result from its operation. The Tontine Plan of 1783 was not in point, because there, present means were to be given up for future advantage; whereas, here the reverse was the case. This Plan might not be within the strict letter of the act, but he was persuaded it was within its spirit. When the Resolutions proposed by his right hon. friend should be inspected, as they would before the house would be called upon for any decision, he was convinced, that they would be considered as calculated ultimately to accelerate the redemption of the debt.
§ Lord H. Petty
allowed that, though in peace, capital might be withdrawn from the funds to be employed in commerce, yet the funds would rise, as no loans would then be wanted. However, looking, as they ought, to the general principle in such discussions, their measures should be framed, so as to meet any sudden shock, which might, by possibility, occur to depress the price of the funds. The plan of the right hon. gent. would hold out greater inducements to persons having lower capitals to purchase, than were to be met with in the course of fair trade. The effect would be, that a bonus would thus be given by government upon the transaction, and that the lower and middle classes would thus avail themselves of the profit held out by government. It was well known that where annuities had been encouraged by government to any extent, they produced a direct effect upon the morals of the country. The rentes viagères were a proof of that. In that instance, Neckar granted the annuities on the terms of the fair trade, but here an advantage beyond that was to be given. He thought it, too, somewhat extraordinary, that this advantage should be held out at a time when an additional tax was to be laid upon Life Insurances. The latter were dictated by every principle of prudence, providence, and foresight, whilst the purchases under the right hon. gent's plan would be the very reverse. But the effect of this plan and of the tax upon Life Insurances would be detrimental to the interests of the country. He was not prepared to say whether 271 the plan would interfere with the spirit of the act, but undoubtedly there might be occasions upon which it would be proper to make modifications which might trench upon the letter of it. The Sinking Fund did not produce all the advantages that flowed from its operation by the quantity of the debt it redeemed, but the manner in which it was redeemed, by the proceeds of that fund brought into the market weekly or monthly.
§ Mr. Huskisson
defended the Plan of his right hon. friend. It gave no bonus to; persons for investing their capitals, to the prejudice of their families. The scale was calculated upon the usual principles of the probabilities of life; and as to the effect it might have upon the morals of the public, it should be recollected, that the short annuities, which had lately fallen in, to the amount of 4 or 500,000l. per annum, had been in the market, and had been in the market without producing any such effect, though upon the principle of the gentlemen opposite, they were much more dangerous, as they required a larger proportion of capital to be sunk. There were numberless cases, in which it would be desirable for parties to purchase annuities for lives other than their own, and there were every day to be met many ruinous modes of accomplishing that object. In the present state of this country, there were many cases of persons, who, without injury to the interests of others, would purchase annuities, and the plan of his right hon. friend would enable them to do that at the fair money value of the funds at the time. His right hon. friend had stated only, that considering all circumstances of peace or war, there was a greater probability that the price of stocks would rise than fall, and as the average price of the redemption of the funds would be nearer to 80 than the present price, all the rise above the present price would be so much gain to the public.
§ Mr. Davies Giddy
spoke shortly, as nearly as we could collect from the low tone of voice in which he delivered his sentiments, rather in terms of approbation of the plan.
§ Sir John Newport
observed, that this plan certainly held out superior advantages to such as should be disposed to take advantage of it; and deprecated the holding out any inducements to the lower classes to speculate in annuities. The finances of France had been in an embarrassed State at the time of resorting to the rentes 272 viagères, but that was not the case in this country at present, and it was dangerous for the state to speculate in such transactions. If there were vices in a country, government ought not to partake of them. In France there had been many instances of persons who sacrificed the interests of their posterity for their own immediate gratification. That was not consonant to the feelings of the people of this country, and he should therefore deprecate any measure that would have the effect of assimilating the habits and morals of this country with those of France.
§ Mr. A. Baring
considered the statement of the chancellor of the exchequer perfectly clear but upon one point, the mode of calculating the value of lives. If the calculation was founded upon the tables of life, it would be a bad calculation for the public, because these tables were formed upon the ordinary probabilities of life, and the lives insured would be picked lives. He did not think the plan would succeed-to any extent, and he trusted it would not. A great part of the rise of the funds which had taken place since the last loan, had been produced by the stagnation of trade. The return of peace would, by giving other employment for capital, keep down the rise of the funds that would be produced by other causes. But, he apprehended that the funds would fall in consequence of a defalcation of revenue arising from the stagnation of trade. The plan upon which loans had hitherto been made in this country, was to procure them at a low rate of interest, and to give the individual the chance of the rise. Thus the burthen was laid upon posterity to relieve the present generation. The plan of the chancellor of the exchequer was the reverse, borrowing at five per cent. whereby we should have more interest to pay, and posterity less capital to redeem. He had not so sanguine a view of the state of the finances of the country as to think this change desirable.
§ Mr. W. Smith
could not abstain from bearing his testimony to the immoral tendency of this plan. In all cases where government profited by the vices of the country, it connived at them. Thus it was that it was easier to procure licences for all the ale-houses in the country than to suppress one; and to the profit government derived from the stamp duty upon them, it was owing that the country was so deluged with quack medicines. The same principle applied to all the mounte- 273 bank exhibitions which saluted the eyes of the public in every street of this city. When government profited by the vices of the country, it was not so zealous in suppressing them. He looked upon these annuities as a moral poison which should not be circulated.
The Chancellor of the Exchequer
thanked the hon. gentlemen opposite for the candid manner in which they had shewn their attention to the plan he had proposed. Gentlemen had talked of the immoral tendency of his plan, and of the effect it would have in changing the character of the country. They considered the purchase of annuities as a vice that ought to be put down. If parents purchased annuities for their own lives to the prejudice of their children, that, be admitted, would be wrong, and ought to be discountenanced. But would it not be proper for a parent to purchase an annuity for his child or for his widow, if the circumstances of his property would not admit of any other provision? It would be idle to provide small annuities, suppose for servants, or for a widow, on the security of land, when the expences of settlement, and perhaps of recovery, would lender the provision of no avail. No lure was to be held out to any description of persons; the calculations were founded upon the common principle, and there were every day much greater temptations held out without any security. Instead of having an immoral effect, the plan would afford an opportunity of acting upon the principles of humanity and good nature, in making a provision for friends. He should not be partial to the measure, if it would tend to alter the national character. But upon every consideration he could give it, he found the balance of good greatly preponderate over any evil that might be likely to arise from its operation. He had omitted to state, that one of the Resolutions contained the principle of the calculations, and the scale of purchases, and that they had been framed, not only upon the table of lives, but upon communication with those most intimate with such subjects. It had been said, that the plan would interfere with the operation of the Sinking Fund, but that must have been a mistake; because, if its operation were to amount to a million of annuity, the whole sum transferred for that would go to the commissioners, and add to the amount of the redeemed stock, whilst the amount of the Sinking Fund would be affected only to the small extent of the additional an- 274 nuity created. The plan might, perhaps, interfere with the letter of the act, but, was certainly within its spirit, and this was one of the cases in which the hon. gentlemen had admitted that the letter might be departed from.—The first Resolution was then agreed to, and the chairman having reported progress, the committee was ordered to sit again on Thursday.