§ Mr. Grenfell
, in rising to call the attention of the House to the motion he was about to submit, said, he did not regret that from various causes it had been postponed from day to day; because the delay which had taken place had permitted him to acquire far- 348 ther information on the subject, and to make such alteration in the form of his motion as he originally intended it should stand, as had removed the objections of some of his hon. friends, who were at first not entirely satisfied with it. The subject of that motion was one upon which he had addressed the House at some length in 1814—five years back. The object he had now in view was to convince that House of the expediency, and to urge to the right hon. the chancellor of the exchequer, and to those at the head of the financial department of this country, not merely the expediency, but, looking to the state she was now in, the absolute necessity of applying that state fund which was generally termed the sinking fund, in diminution of the loan about to be raised for the service of the current year; which application, he would, observe, was provided for in the act which; was read from their table on the preceding day, by a particular clause, called Mr. Fox's clause; it having been suggested to Mr. Pitt in the year 1786, by that great and ever-to-be-lamented statesman. Before, however, he proceeded to state the general grounds of his motion, and feeling anxious to guard against the possibility of misunderstanding, as to any opinions he might be supposed to entertain in relation to that measure of finance called the Sinking fund, of which, unfortunately, little more than the name now remained, he would beg leave to state what were the principles of its formation. The principles upon which it was founded by Mr. Pitt, in 1786, were soon afterwards affected by a material change in the state of the country—a transition from peace to war. They were, indeed, principles of which no gentleman who now heard him, was a more warm admirer than himself; he having always considered the sinking fund, as established by Mr. Pitt between 17856 and 1792, the most splendid feature in that statesman's financial character. By the act of 1786, the existing excess of our income beyond our expenditure, to the amount of 1,000,000l., was applied and secured (so far as a transaction of this nature could be said or considered to be secured) to the gradual extinction, on the principle of compound interest, of a debt of 238,000,000l. But in 1792, it became necessary to alter, in some degree, the provisions of the act of 1786; inasmuch as the expenses incurred by one or two years of war were sufficient to 349 swallow up all the savings accumulated in the six years before. Accordingly, then, the act of 1792 provided, that every new or future loan should be accompanied by such an increase of the revenue arising from taxation (which in a country like this was the only legitimate source of that increase) as should be equivalent, not only to pay the interest of such loan, but to provide also a fund of one per cent, or in short a sinking fund, which should in time extinguish the original debt itself. It was then calculated that the period of effecting such extinction could in no instance exceed the term of 45 years. The act of 1786 implied an existing excess of income; that of 1792, provided for the extinction of every new debt incurred on every new loan, by making the loan carry with it the means of its own annihilation. In all these instances, the excess of income beyond expenditure was made the vital principle of the extinction of debt. And it would be found, that such excess of income was the only principle, after all the reasoning and research which had been exhausted upon the subject—upon which the reduction of debt, either of a public or private nature, ever was, ever could, or ever would be effected. These principles, then, adopted by Mr. Pitt on the two acts of 1786 and 1792, in creating the sinking fund, were pursued and acted upon from 1786 to 1817, a period of 27 years. Such was the sinking fund. What is it now? In the year 1814 came the plan of the right hon. gentleman opposite—a plan immediately adopted by parliament, and one to which he (Mr. Grenfell) gave his most zealous and unqualified support; and the opinion he then expressed of its merits was one which nothing since had, in the slightest degree, shaken or altered. In the state of exhaustion in which the country then found herself, after twenty years of war and difficulties, the distressing nature of which was only to be rivalled by the firmness, endurance, and unshrinking fortitude with which they were borne, he did not then think, nor was he now of opinion, that in such a state of things, it would have been wise or expedient to add to the weight which the nation was already sinking under, by additional taxation. He thought it better to give the country a little breathing time, before her burthens were increased. Whether this view of the subject was a right or wrong one, he would not now inquire. One thing was very 350 clear; that, united to former embarrassments, there had been of late years great profusion in our public expenditure. The effects of those two causes combined, had been almost to sap the principles upon which Mr. Pitt had legislated, and to leave no sinking fund at all. In the last year the excess of our expenditure beyond our income was somewhere about 18,500,000l taking and considering a sum of about 15,000,000l. as part of our expenditure under the head of the sinking fund. So that with a nominal fund, for that was the fact, of 15,000,000l. we had last year, in reality, a sinking fund of not more than 1,600,000l. Certainty, he was not at any time one of those who were inclined to take a gloomy view of the state of the country; but nothing was more dangerous, in contemplating a subject of this nature, than self-deception. It would undoubtedly give him great satisfaction if he could flatter himself that the revenue of the present year would equal that of the last. It was also to be remembered, that provision was to be made this year for the loan which the chancellor of the exchequer was contemplating. In taking that into view, was it not probable that the whole of the sinking fund would be required for the charges likely to accrue from it? And if so, there would not be one single shilling reserved for the reduction of the national debt. True it was, that 100,000,000l. stock stood in the names of the commissioners for the redemption of that debt, which the right hon. gentleman, who never failed to advert to the circumstance, called a treasure; and well he might, for it was such a treasure as no nation ever possessed before! [A laugh]. Though those commissioners were sent four times a week into the city to purchase stock, let it be remembered, they bought with borrowed money—the money borrowed from the loan-contractors. For their money they got stock; with their new stock they bought old stock. This was creating a new debt for no other purpose than to destroy an old one: selling new stock cheap, in order to buy old stock dear; buying at a very high rate of interest to pay off a debt contracted at a very low one. Yet this was what his majesty's ministers were doing. It was mere delusion; an attempt to impose their system on the country for a new sinking fund, when it was the very reverse of one. This was the course of operations prosecuted by means of a fund which was re- 351 presented to the country as applicable to the extinction of 800,000,000l. of debt. The whole machinery, so wisely constructed in the year 1786, was now erect and in full play without any useful effect. He might indeed say, that it was worse than useless, and productive of no profit except to a class of individuals who contributed nothing to the service of the state. It was true, that loan-contractors, and speculators in the public funds, might be, and. were in numerous instances, very respectable and conscientious men; but they were not persons to whose care the interests of the country should be intrusted. The question therefore now was, whether the House would sanction the continuance of a system of intricacy and delusion that could produce no beneficial consequences; or whether it would, by the vote of this night, put an end to it? He was prepared to contend, that it would have been highly advantageous if the sinking fund had been applied to, in aid of all the loans contracted since the year 1793, under the power given by Mr. Fox's clause in the act of 1786. According to a calculation which he had made, the saving which would have been thus effected, from the period he had mentioned up to the year 1813, did not amount to less than 20,000,000l. He held in his hand a paper showing the amount of saving to the public that might have been derived upon the loan of 1815, if the commissioners for the redemption of the national debt had been allowed to invest the sinking fund in the new stock created by that loan. The capital sum which might have been so saved was upwards of 2,000,000l,. and the annual interest 77,000l. An hon. friend of his had moved for some other returns, which were not yet presented, respecting the loans of 1813 and 1814; but from his recollection of the premium which they bore, he was satisfied that a similar profit to the extent of several millions would have accrued to the public, had the sinking fund been resorted to in those cases. The only ground on which his principle was opposed was, that the effect of the system acted upon since 1797 was to keep up the price of the funds. He did not deny that in time of war, and so long as we were a borrowing country, the high price of the funds was a great advantage, as we obtained loans on easier terms; but that advantage became very doubtful when we entered, as he hoped we one day should, on the work of redemption. 352 The facility of redemption must be increased in proportion to the lowness of their price. But whatever might be said on this subject, he denied altogether the foundation of the argument, and contended, that the system had no such effect as that of raising the price. At the end of this year we should probably have a sinking fund of 15,000,000l.; which, invested in stock at 70l., would amount to about 21,000,000l. It was his opinion, strengthened and confirmed by all he bad heard or seen, that whether the sinking fund was thus invested or applied to the service of the year, the price of stock would remain the same. Its price did not depend on any of those mysterious causes to which it was often attributed, but permanently, like the prices in all markets, on the proportion on which the demand bore to the supply. He was aware, that many respectable persons differed from him in this opinion, and that some of them were not under any bias from self-interest. Others, however, who were considered as great authority on this question, were under that bias; or, if they were not, they were not composed of the same materials as other men. Now, loan-contractors were not in his judgment exactly that description of persons by whose advice in these matters a chancellor of the exchequer ought to be governed. In 1814, the right hon. gentleman had stated in his place, that, having conferred with a number of gentlemen contracting for the loan with regard to the propriety of acting on his (Mr. Grenfell's) suggestion, they all, with one exception only, signified their disapprobation of it, and recommended a loan of 24,000,000l. instead of 12,000,000l. The exception to which he alluded was that of his honourable friend (Mr. Ricardo), who, greatly to his credit, observed to the chancellor of the exchequer, that if he considered his own interest merely, he must agree with his brother contractors; but if he were to consult the advantage of the country, he should advise the application of the sinking fund, and a loan of 12,000,000l. only. Perhaps, at a time when large loans were regularly raised, such a proceeding might have been inexpedient; but now that they were comparatively small, and of less frequent occurrence, he could not believe that the right hon. gentleman was so infatuated as to adhere to the present useless and unprofitable system. Reserving, however, 353 all further observations on this subject till he should have heard what were the right hon. gentleman's views, and the opinions of other hon. members who might take a part in the discussion, he should conclude by moving, "That this House will resolve itself into a committee of the whole House, to consider of the act of the 26th of the king, c. 31."
The Chancellor of the Exchequer
observed, that so far from coinciding in the views taken by the hon. gentleman with respect to the most proper application of the sinking fund, he considered them highly objectionable, and the more so, from the manner in which they had been brought forward and embodied into the present motion. The effect of it would be to fetter the discretion of government in providing for the financial exigencies of the country, and impose upon them certain terms without reference to the circumstances of our situation. The first motion which the hon. member had had in contemplation at least comprised a distinct and definite object. The present, involving the same principles and arguments, was altogether uncertain and indefinite, and could be productive of no possible advantage. By the act of 1786, a power already existed of taking the course which the hon. gentleman had recommended; and the commissioners were authorized, if it should appear expedient, to apply the sinking fund in aid of the service of the year. It would not, however, in his opinion, be wise to make it compulsory on them to apply it in this manner. He knew that it was a question on which much diversity of sentiment existed; but as to the case of the loan in 1815, and the saving of 2,000,000l., which it was alleged might have been effected, the hon. gentleman had overlooked the circumstances attending it, and the causes which had produced that state of things on which he formed his calculations. It was true, that a great profit had been made upon the loan alluded to, but it was contracted for previous to the battle of Waterloo, and the profit was derived from conquest, and the successful termination of hostilities. If these results could have been foreseen, this proceeding, or some other measure of equal benefit, might have been adopted. Had the battle of Waterloo been lost instead of won, the subscribers to that loan would probably have experienced a considerable loss. This alternative always 354 existed, and the chances must be submitted to. He admitted that, in the year 1814, in conformity with established practice, he had referred to the parties contracting for the loan of that year, to learn whether they would accede to more favourable terms, if a part of the loan was supplied from the sinking fund. They gave an opinion adverse to the proposition; but if it had been otherwise, he did not know that it would have been well in the Treasury to have acted upon it. With regard to the supposed saving of 20,000,000l. upon all the loans contracted for during the war, if the system of applying to the sinking fund had been adopted, it must be recollected, that nearly 900,000,000l. had been borrowed in that period, and that the saving therefore did not exceed two per cent. Instead of a profit, however, a loss had been sometimes incurred, which would probably have balanced the amount of the saving. The contractors, too, would have objected, and offered less favourable terms. If they had been sincere in their declarations, the Treasury had, notwithstanding all the calculations of the hon. gentleman, taken the safest and most prudent course. One great advantage attending the present system was, that it produced a general steadiness of prices, which was extremely favourable to the operations of the money market; and the chancellor of the exchequer, as well as the loan contractors, participated in this advantage. Were it not for the regular purchases made by the commissioners, there would be few real buyers, and persons under the necessity of selling would be at the mercy of stock-jobbers. This at least was the view entertained by many, and was supported by reasoning too plausible, and he believed valid, to be hastily rejected. When the effect of agreeing to the present motion would be to adopt a system which might be attended with such dangerous consequences, the House was bound to act with the utmost caution. As the law now stood, a discretion was vested in the commissioners which might under some circumstances be usefully exercised, but which it must be inexpedient to fetter at any time. It would be most inexpedient to fetter it at a moment of so much expectation and uncertainty with respect to the financial operations of the year. Upon that subject he agreed with much of the hon. gentleman's reasoning; but it would not only be premature, but a breach 355 of his duty, were he now to enter into the discussion of it.
§ Lord Althorp
said, that the House would remember, that when, five years ago, a similar proposition to the present one was brought forward, the chancellor of the exchequer was not so much disinclined to it as he was at present. He allowed that it was difficult to argue, a priori, what the effects were of buying stock with one hand, while we were borrowing money with the other; but when it was said, that this system produced steadiness in the price of the funds, they all knew, that up to the beginning of the war in 1793, the prices of the funds were just as steady as they had been since. It might be objected, that at that time the transactions in the funds were not of their present magnitude. But this argument would tell another way: for individuals had undoubtedly a greater power to command a small market than a large one. The question was not, whether the sinking fund should be abolished, but whether it should be applied according to Mr. Fox's clause? And it could not be said, that the existence of the fund was involved, when it was only to be considered, whether it should be applied to the reduction of the debt of 1819, or of any other period.
said, he had felt somewhat startled at the hon. mover's proposition, conceiving that the system which he recommended would be productive of many fluctuations and false alarms in the money market. If the present plan should be departed from, no one would know what to look forward to in the following year. A dangerous precedent would have been established, and a future chancellor of the exchequer might be tempted to continue providing for the public service in the same way. In the present financial 6tate of the country, we ought to look our difficulties in the face. The regular application of the sinking fund might be convenient, but it would endanger the revenue, and render the necessity of retrenchment less obvious. If such a proceeding, however, were modified, and limited to a particular exigency, he should not oppose it. There was one difficulty under which we laboured, as he believed that all were agreed in the propriety of the recommendation contained in the report of the Bank committee: he alluded to the necessity of putting the Bank into possession of its own means, with a view 356 of enabling it to resume cash-payments. It appeared to him, that 10,000,000l. would be too large a sum to pay to the Bank out of any loan, and that 5,000,000l. might therefore, on this occasion, be advantageously taken from the sinking fund.
§ Mr. Ricardo
said, that he understood the hon. mover to have argued, not that the commissioners, if subscribers for the loans, would have procured for the public the profit which arose from the events of war or peace; but that they would have retained for the public that regular premium which the contractors obtained independently of the events of peace or war—which they were entitled to for undertaking the risk of such extensive undertakings, but which of course, under the present plan, was lost to the public. In that opinion he heartily concurred, as he could not conceive the advantage which could arise from giving the commissioners sums to lay out in the purchase of stock, while sellers were sent by the government to supply them with the stock which they were to buy. The contractors for the loan brought their stock to market just in the same degrees as the commissioners purchased it: they did not dispose of it in the mass, but brought it weekly and daily to market to provide for their instalments. Any gentleman who supposed that if process did not go on, it would be in the power of the jobbers to make hard terms with the sellers of stock, must have been perfectly ignorant of the stock market [Hear! hear!], for competition was no where carried to such an extent, and no where operated with more benefit to the public. His hon. friend had alluded to the opinion which he (Mr. Ricardo) had given before the chancellor of the exchequer in 1814. He had certainly then given the opinion which he had long entertained. He should have shrunk into the earth before those who had long known his sentiments if he had given any other; but he knew that those gentlemen who gave a contrary opinion, had given it just as conscientiously; for great and sincere differences of judgment on this subject existed in the city. To him it certainly appeared, that if the process of the sinking fund had an effect on the stock market, a similar process must produce an effect on all other markets in the country, and that, for instance, it must be contended that the chancellor of the exchequer could produce an effect 357 on the corn-market, by sending a commissioner to buy a quarter of wheat, while he sent a contractor to sell the same quantity.
§ Mr. Huskisson
said, he did not mean to occupy the attention of the House (more than a few minutes in giving his opinion on this question. The hon. member called upon them to go into a committee on the sinking fund act, but he had not stated what course of proceeding they were to adopt; he had not even given an opinion on that point. By the act, as it now stood, the commissioners were empowered to subscribe to any loan for the public service, if they thought proper. There certainly existed a great difference of opinion as to the propriety of the commissioners so subscribing to any loan; many thought that it would be right, and others that it would be wrong of them to do so. But surely the House was not prepared to go into a committee to make it imperative on the commissioners to dispose of the sinking fund in this manner. And if so, to what purpose was a committee proposed? Much had been said of the loss sustained by the country, from not having so applied the sinking fund, but it was impossible to come to any decision on such a complicated question as this was, by arguing on abstract grounds; any such arguments must always lead to fallacious conclusions. He hoped the House would perceive the necessity of leaving the commissioners of the sinking fund free and unfettered, to apply it as may conduce most to the public interest. On these grounds, and on the ground that nothing definitive had been proposed by the hon. member who made the motion, and that acceding to it would fetter the chancellor of the exchequer in his measure of finance for the year, he felt it his duty to oppose it.
§ Mr. J. P. Grant
said, that his hon. friend had added one to the many obligations he had already conferred on the country, by bringing forward this question. It was objected that the motion had no definitive object, and at the same time it was said, that it would be improper to decide upon it at present, as it would fetter the chancellor of the exchequer in his financial plans for the year. He thought the House had heard enough to show that this subject was one which called for their most mature consideration. It puzzled him exceedingly, to understand how any benefit could be derived from borrowing money,§358 when the borrower had a sum in his pocket equal to what he borrowed. It only served to explain, that there was some mystical operation performed by buying and selling in the funds, which by a second operation of the same kind, enabled the borrower to get money on better terms than if he had not previously sold to an equal amount. Every market must be in some measure kept up by buying and selling, and he thought the sinking fund tended to keep up the prices of the funds, as any person having stock to sell, was sure of a purchaser in the broker of the commissioners, when he could find no other. But where could be the benefit arising from this, if an equal number of buyers and sellers be sent into the market at the same time? He could conceive a benefit arising from it, if the sellers were to make large sales at stated periods, while the commissioners went on buying regularly, but in small quantities; but this was not the case. He was anxious to have this subject fully investigated, as he was strongly impressed with the idea that the country suffered severely from the present system of finance. It could not be imagined that the contractors would lend money without a profit. If an individual were to go on annually borrowing 15,000l. on the one hand, for the purpose of paying annually a similar sum on the other, could it be supposed that by so doing he would not add to his debt, or that such a system would not finally end in his ruin? But this was precisely the nature of our present financial system; the debt of the country was annually augmented by the amount of the profits made by the different loans. The right hon. the chancellor of the exchequer had objected that the commissioners, by subscribing to a loan, would be liable to the risk of loss attendant on such speculations. But this was foreseen when the clause, empowering them to subscribe, was made in the sinking fund act, and it was left to them, as to all other speculators, so to contract as best to avoid a loss. He could not conceive the advantage of taking from the people a part of their surplus earnings to be applied in this way, without any benefit to the country, which, if left to them, would be augmented in the same proportion as their other capital. He could not perceive any objection to his hon. friend's motion; on the contrary, he thought it would have a beneficial effect.
§ Mr. Callaghan
said, that whatever might be the opinion of gentlemen on the proposition now before the House, all who heard the discussion this night must, he thought, be convinced of this—that in the fourth year of peace, with a debt of 800,000,000l. we ought to have a real and effective sinking fund, not a nominal one. The case of a country was the same as that of an individual: no man would say he had established a fund for liquidating his debts, if he could not show an excess of ordinary income over his ordinary expenditure. To establish a sinking fund of this sort, we must either reduce the expenditure, or raise the income. Out of an outgoing of 51,000,000l. which the estimates of the year amounted to, (39,000,000l. whereof were fixed and not reducible), he doubted the practicability of effecting any material diminution of expense; but when he considered the resources of the country, he thought it perfectly possible to raise the income; and if he were asked how he would remove the present distress, he would answer, "Raise your income, and establish an effective sinking fund." Our income was once at 70 or 80 millions, and he thought that by prudently taxing commodities which would admit of it, it might, without adding to the national pressure, be brought nearer that sum than it was at present. He could not assent to the motion, as the sinking fund was the foundation of public credit.
§ Mr. Ellice
thought there would be a difficulty in going into a committee, until the chancellor of the exchequer made known his plan of finance. This difficulty was increased by the manner in which the motion had been brought forward, If the question was for appropriating the sinking fund of the year to any loan which might be necessary for the public service, he would agree to it, as he did not think the chancellor of the exchequer had answered the expectations of the country, who thought that after four years of peace they would be relieved from the great pressure which they had borne during the war. But if the hon. member opposite meant, by increasing the income of the country, that any new tax was to be introduced, he would oppose such a measure to the utmost of his power.
§ Mr. Grenfell
rose to reply. He had heard a good deal said of the effect which the purchases by the commissioners of the sinking fund had in keeping the price 360 of stock from fluctuating. Now, he held in his hand an account of the different prices of the three per cents, from which it appeared, that in 1816, they were at 61; since that period they had been at 83, and to-day the price was 72. So much for the steadiness of the funds! The next objection was, that this was an improper time to bring forward his motion. But when could he do it; if not at the eve of a loan? If he waited for ten days, or a fortnight to come, it would be of no use to bring the question forward; the loan would be contracted for; the mischief would be done. It had been said by an hon. member, that the appropriating the sinking fund to the loan, might be used as a precedent by a future chancellor of the exchequer. He did not mean to do away with the sinking fund: he wished to keep its machinery as it now was; but his object was, to save to the country the profit, which the contractors for the loan would have, as they have had for the last 27 years, by applying the sinking fund of the year, as far as it went, to lessen any loan to be made this year. It was objected to him, that his motion was not of a definite nature. His object was now the same as It was five years since, that some measure should be adopted, either by resolution or otherwise, to make it imperative on the commissioners to apply the sinking fund in this way. The only effect of the present system was, to depress the stocks for a short time, and cause a rise after the loan was contracted. The contractors were anxious that there should be a loan, as they derived profit from it; but this was his reason for objecting to it. He considered the question of such importance, that he should certainly take the sense of the House upon it.
§ The House divided: Ayes, 39; Noes, 117.
|List of the Minority.|
|Crawley, S.||Latouche, J.|
|Calvert, N||Lamb, George|
|Clifton, lord||Milton, lord|
|Clifford, A. W. J.||M'Leod, R.|
|De Crespigny, sir W. C.||Monck, sir C.|
|Davies, T. H.||Marston, J.|
|Folkestone, lord||Mackintosh, sir J.|
|Grant, J. P.||Newport, sir John|
|Harcourt, J.||Palmer, F.|
|Harvey, D W.||Price, R.|
|Hume, J.||Ricardo, D.|
|Kennedy, T. F.||Robarts, A. W.|
|Latouche, R.||Rumbold, C. E.|
|Robertson, A.||Wilkins, W.|
|Sebright, sir J.||Wood, M.|
|Thorp, J. T.||Williams, Owen|
|Tremayne, J. H.||White, Luke|
|Wynn, C. W.||TELLERS.|
|Webb, E.||Grenfell, Pascoe.|
|Wilson, sir R.||Althorp, lord|