§ The House having resolved itself into a committee of Ways and Means,
The Chancellor of the Exchequerstated, that he should not have occasion to trespass long on the attention of the committee, it having been generally understood, in consequence of a former arrangement, that he should defer any specific explanation of the finances of the present year until Friday next, when, on submitting to the House certain resolutions respecting the sinking fund and the loan, the supply, and the Ways and Means he would enter fully into the subject. All he had now to-do was, to state the terms of the loan that had been contracted for on the present day. In recommending its confirmation to parliament, he must observe that it was one of the most advantageous bargains ever concluded between the Treasury and the contractors. The price of stocks had this day coincided precisely with what it was when the loan was contracted for last year; and though last year there was an extraordinary degree of competition, the competition was still greater on the present occasion. The contract, in this instance, was a half per cent more favourable to the public than it was in the former year, although the price of the funds was in each case the same. The 3 per cent reduced annuities were now, as they were last year, at 69. The last price, before that stock was shut, was 70½ from which if they deducted the July dividend of 1½ per cent, it reduced it to 69, which was the present price—the same price even to a fraction, which the 3 per cent annuities bore last year. The contract for the loan of last year amounted to 1023 18s. per cent: in the present year, the contract was concluded at 142l. 4s. per cent being 14s. in stock, or 10s. in money, more favourable than the preceding contract. Considering it by the ordinary calculation of the price of stock, the contractors had taken the loan at nearly 2 per cent above the current price of stock, which was highly beneficial to the public. At the same time that the bargain was so favourable to the public, he thought it was one that would produce a fair profit to the contractor. Looking to the small amount of the loan, the bargain was almost as favourable a one as had ever been concluded by the Treasury. Under these circumstances, he considered it unnecessary for him to take up the time of the House and should therefore move, "That it is the opinion of this committee, that, towards the supply to be granted to his majesty, the sum of 5,000,000l. be raised by annuities."
Mr. Grenfellexpressed his approbation of the loan, which was undoubtedly very Favourable to the public. It was always an evidence of a beneficial contract when the premium was moderate. The right hon. gentleman was however mistaken when he said, that this was the most favourable loan that had ever been concluded. Other loans had been more favourable, with reference to the existing prices of the funds when they were contracted for.
The Chancellor of the Exchequerdid not mean to refer to the present loan as the most favourable that had ever been concluded; but undoubtedly he considered it to be one of the most favourable. He had no recollection of a higher relative price of the funds except in one former year.
§ Mr. Ricardoobserved, that the present loan was made on very satisfactory terms. It was impossible, he thought, that it could be obtained at a more favour-ablerate. He however traced those favourable terms to the recommendation of an bon. friend (Mr. Grenfell) who, some years ago, had advised that the commissioners of the national debt should be allowed to subscribe for the loan to the amount of the balances in their hands. This advice was followed on the present occasion; but if the old course had been adopted, and the loan had been for 17,000,000l., the result would have been very different. Another cause which tended to procure terms so favour- 1024 able was the smallness of the loan. It was within the power of a great number of persons to bid for a loan of 5,000,000l. and therefore the competition for the present loan was much more extensive than usual, and far greater than if it had been for 17,000,000l. In consequence of these circumstances, the right hon. gentleman had certainly obtained such terms as must be highly satisfactory to the country. He conceived that no fairer mode could be devised in forming contracts for the public than by open competition. That system, he hoped, would be generally acted on. An hon. gentleman had, been a former night, asked some questions relative to a large amount of exchequer bills, which had been issued by government at par, when they were at a discount in the market. From the explanation of the right hon. gentleman it seemed that they were given in consequence of a contract for a quantity of silver. Now, it was quite evident that the 7s. or 8s. received by government from the persons with whom the contract was made would be reimbursed by a profit in the price of the silver; they would undoubtedly raise the price to the amount which they were likely to lose. He thought, in this instance too, that the system of competition should have been acted on, and that they should have been purchased in that way. He wished for some explanation with respect to the quantity of exchequer bills relative to which information had been demanded a few evenings ago. A statement had then been made, which his hon. friend, and other gentlemen, declared they did not understand. It appeared to him to be a very mysterious transaction, and he could not make it out. It seemed that a provision had been made for appropriating the growing amount of the consolidated fund. His hon. friend had noticed this, and had observed that the growing amount might be made productive and useful to the public. In consequence of his representation a bill had been brought in some time ago, to enable the public to make use of its growing amount, by which it was provided, however, that they should not borrow more than 6,000,000l. from it. But it so happened that this growing consolidated fund was not equal to the discharge of the advances that had been made on it in the preceding quarter. He would thus explain himself;—Sup- 1025 posing this was the beginning of the quarter, that the public accounts were made up, and that there was a deficiency of 3,000,000l; the Bank, in the first instance, made this good; and out of the amount of the consolidated fund in the commencing quarter the Bank was repaid those 3,000,000l. Supposing, over and above this sum of 3,000,000l., an equal sum accrued, the public, under the act, would., he understood, have the advantage of those 3,000,000l., since, by its provisions, a sum of 6,000,000l. might be borrowed for the public service. This was the system; but how, he asked, was it possible that the public could have the advantage of any part of this growing fund, when in fact it was in debt? It was exceedingly difficult for him to comprehend this. In April, 1819, there was a sum of 2,027,000l. so issued for the use of the public; and it was stated that from that period to April 1820, the public had the benefit of that money. But how could they have the use or benefit of it out of a growing consolidated fund, on which there was no surplus whatever, but which, on the contrary, was in debt, and that debt amounting to more than the 6,000,000l. which "they were by the act of parliament empowered to borrow? As he could not understand this, he would be obliged to the right hon. gentleman to inform the House whether the public had really derived advantage from this 2,027,000l. from April, 1819, to April, 1820.
The Chancellor of the Exchequersaid, that, in the first place, he entirely con curred with the hon. member in applying the principle of competition to all con tracts for the public, wherever it could be safely introduced. There might, how ever, be cases where it would not be practicable to adopt the system. As a general principle it was a good one, and in a variety of instances it was adopted by government. With respect to the hon. member's remark relative to the advances made from the consolidated fund to the public service, the hon. member would understand the matter better by a reference to the 59th of Geo. 3rd, cap. 93, than from any explanation which he could give. He would, however, briefly answer the hon. member's observation. It had been a frequent complaint of different Members, in that House, that a great pro fit was made by the Bank, by holding in 1026 their hands the growing produce of the consolidated fund, without any corresponding advantage being derived by the public; and various plans had been devised to enable the public to make use of their own money during each current quarter. In 1808, an arrangement was in consequence entered into between the then chancellor of the exchequer, Mr. Perceval, and the Bank, for the advance of 3,000,000l. without interest, in consideration of the advantages which they derived from those balances. This arrangement, after subsisting for some years (for it was stipulated that it should remain in force till a certain number of years after the war), expired last year, "it was then thought advisable that the growing produce of the consolidated fund should be applied in a different manner—a statement being made by the Bank, that the public money rying in their hands was so small in amount, as not to warrant them to continue the advance of 3,000,000l. without interest. In lieu, therefore, of the former arrangement, by which the public had the use of 3,000,000l. without interest, a bill was introduced to enable the Treasury to borrow from the consolidated fund to the extent of 6,000,000l., the use of which the public were to have without interest. This was to be paid in any particular quarter, and to be renewed at the commencement of the next quarter; so that, instead of its being a permanent, it was a running advance. To prevent the disadvantage of anticipating too large a sum before the quarter, it was provided that the advances made by the Bank under this act, together with other advances to cover any deficiencies, should not exceed 6,000,000l.; and as the advance made by the Bank amounted to 3,400,000l., that sum, and 2,600,000l., making a gross amount of 6,000,000l., remained from that time to the present available to the public. From that period to the present time, the public had had the benefit of 2,600,000l. in exchequer bills, from which they derived very considerable advantage.
Mr. Grenfellsaid, the right hon. gentleman would, he was sure, recollect that, in the commencement of the session in February, 1819, a question arose during the. discussion, relative to the Bank balances, whether the sum of 18,000,000l. should not be applied to the public service. In consequence of that inquiry the 59th of the late king was introduced, 1027 But he had never yet been able to understand how a sum of 6,000,000l., or of 2,600,000l., had been, in point of fact and practice, made available, so as to save the public interest on that amount of money, he understood from the right hon. gentleman that 2,600,000l. were taken from the growing produce of the consolidated fund, for the service of the public; but it now appeared, that exchequer-bills to that amount, and bearing no interest, were tying in the teller's chest in lieu of this available sum. But how did it happen that this amount of exchequer-bills remained stationary? The consolidated fund must vary every quarter: it might be 6, or 7, or 8 millions; but still this sum of 2,600,000l. continued stationary. He had read attentively the act to which the right hon. gentleman alluded, and he thought the practice there recognized advantageous to the public; but he must repeat that he was wholly at a loss to know how the right hon. gentleman could make out his statement that the public were deriving advantage from the use of 2,600,000l., drawn from a fund which was so deeply in debt. With respect to the balances in the hands of the Bank, he had within the last three or four years repeatedly called the attention of the House to them. The system had been altered; but he was one of those who thought that, at a time like the present, some farther benefit might be derived from them by the public, with perfect fairness to the Bank of England.
The Chancellor of the Exchequersaid, that the 2,600,000l. taken out of the consolidated fund were replaced by exchequer-bills without interest.
§ Mr. J. Martinsaid, that at several different quarters there were seven or eight millions due on the consolidated fund; and yet the right hon. gentleman stated that he borrowed from it. By the act of parliament he could not borrow unless there was a surplus, and therefore he conceived that the statute had been violated.
§ Mr. Humesaid, that the authority to borrow 6,000,000l. from the consolidated fund would be very well, as long as there was any surplus of that fund; but on the 12th of April it appeared that it was 6,800,000l. in debt; consequently, out of that fund none of the sums stated could possibly be taken.
Mr. Grenfellsaid, it would be a most desirable thing if some means were devised to get rid of this deficiency of the consolidated fund. One objection to its continuance was, that it rendered the accounts so extremely complex, that he doubted much whether the right hon. gentleman himself understood them. He did not say this with any intention to offend the right hon. gentleman; but he did most positively know that many persons in official situations in the exchequer declared that they could not master them. When such men as his hon. friends, who had spoken in the course of this discussion, and who were in the habit of inspecting figures and accounts, stated that these accounts were unintelligible to them, something ought to be done to simplify them. The deficiency of the consolidated fund was a blot on the statement of their annual finance. It was clear that there was a deficit of from six to eight millions: he knew that that deficiency was provided for quarterly by the Bank; but it should be recollected that they paid the Bank interest for it. If they even paid a little more interest than they did to the Bank, in order to procure money to cover it completely, it would be advantageous to the public, since it would simplify the system. But if they did not raise the money by loan, and chose rather to issue exchequer-bills, still they would not be paying a greater interest than they now paid to the Bank. He was not sanguine enough to contemplate the period, within any moderate lapse of time, when the increase of the resources of this country would enable them to get rid of this deficiency. If the right hon. gentleman could state that in two or three years such an improvement was likely to take place as would be adequate to the expenditure, and also get rid of the deficiency of seven or eight millions, he would not be averse to giving him the full time.
The Chancellor of the Exchequersaid, there was one point which might account for the hon. gentleman's observations, which was, that he did not really understand the mode in which the sum of 2,600,000l. was borrowed from the consolidated fund. A great many gentlemen of knowledge and sagacity were often puzzled by a simple statement: their own knowledge and sagacity, which led them to unnecessary refinements, operated to defeat the object they had in view. He agreed with the hon. gentleman that it 1029 was desirable there should not be a deficiency on the consolidated fund; and he trusted, at no distant time, that such an arrangement would be made, with the assistance of parliament, as would effectually meet the evil. This, however, could not be done in the present year. The hon. gentleman stated the deficiency to be 7,000,000l. or 8,000,000l.: in this, however, he included the 2,600,000l. that were borrowed; so that in fact the actual deficiency was only 5,000,000l. He entertained hopes that it would be made good in the course of the next year. If in the next session he found that those hopes were not likely to be realized, he would submit a proposition to parliament relative to a part of it.
§ Mr. Ricardoobserved, that on the 5th of July, 1819, there was a deficiency of 8,400,000l. But," said the right hon. gentleman, "you have, without interest, 2,600,000l., for which exchequer-bills have been deposited." This he denied; and he would contend that the public had not the advantage of that sum.
The Chancellor of the Exchequersaid, if that sum had not been advanced from the consolidated fund, the difference would be, that the Bank would have 2,600,000l. of the public money in their hands, during the quarter, which would be employed by them for their own benefit, and not, as now, for the benefit of the public.
The resolution was then agreed to; as were also the resolutions, granting to the contractor, for every 100l. money, 100l. 3 per cent reduced, and 42l. 4s. consols. On the resolution being put, relative to the discount to be allowed on an anticipation of the period of payment,
Mr. Grenfellrose, and, adverting to the 12,000,000l. which it was proposed to take from the sinking fund, demanded whether it would not be better to do away that part of the machinery of the system altogether. The fact was, they borrowed 12,000,000l. from the commissioners of the national debt; but they must, in the first instance, advance those 12,000,000l., to enable them to lend it. Now, of. what consequence was it to the public whether they granted that sum to the commissioners, to be lent back to them, or retained it themselves, in the first instance? The system was completely absurd, and differed from every thing that was contemplated in 1783, when the fund was established. At present it was entirely 1030 nominal and delusive, and had no other effect but to render the finance statements perplexed and unintelligible. The right hon. gentleman had stated, that there was a sinking fund of 17,000,000l.; and then, said he, "see what a fine flourishing state we are in." But the fact was, they had no sinking fund left at ail. They took 12,000,000l. from the fund, and 5,000,000l. from the public, the interest of which must come out of the sinking fund; for he understood there were to be no new taxes. For his own part he did not think the loan contracted for this day necessary. If they really had a sinking fund, instead of taking 12,000,000l. from the commissioners, it would be better to lay hold of it all, and thus get rid of the delusion, At present, they were only borrowing 12,000,000l. from the commissioners, having previously furnished them with the means of lending it.
§ Mr. Humeunderstood the right hon. gentleman to have said, that he hoped this would be the last loan the country would require for a long time. But how could that be? Were these 12,000,000l. to be made up next year? If they were not, and this delusive system were to be continued, the right hon. gentleman might go on borrowing every succeeding year. Such a system could only embarrass the country.
The Chancellor of the Exchequerobserved, in reply, that he feared there would be much confusion in the supposed simplification of proceedings which had been suggested by hon. gentlemen.
Mr. Alderman Heygatebelieved, that during the war the loans would have been borrowed on worse terms if the public credit had not been kept up by the, sinking fund which had been established by Mr. Pitt and Mr. Fox, and ought to be held sacred. No delusion could now prevail upon the subject; for if its nominal amount had been stated at 17 millions, all classes in the country knew that it only consisted of five. With respect to loans, their result was evident. The present he conceived to have been contracted for on terms disadvantageous to the public; for it was done in a stock, the, nominal price of which was at a discount, of 30 per cent, and that price itself 14 or 15 per cent lower than the stock which, might have been created three years ago. It was most important for every man in the country, in whatever trade or profession, to know how the circulating medium 1031 was to be kept up. It was the most sacred duty of government to secure the maintenance of a circulation adequate to the taxation of the country. New, the money which this loan would take out of circulation could only be returned to it on the part of the Bank by purchases of gold, or exchequer bills by discounts. The last mode was inadequate, but he could not conceive what rational objection could exist to the Bank purchasing and selling exchequer-bills as they formerly did, by which means the circulation would be kept up when deficient and reduced when superfluous. He was persuaded the great cause of the present distress of our agriculture and trade arose from the continual reduction of the circulation which had of late been going on, and which tended, by raising unnaturally the value of money, to augment the pressure of taxes, pensions, and all fixed payments. It had been recommended to his majesty's government to issue bills to repay the Bank the advantages of the consolidated fund; but it was impossible to raise a loan to pay the Bank without producing a reduction of the circulating medium, which must be attended with increased distress throughout the country. He would therefore oppose any measure having that tendency; Such a reduction at present was unnecessary, for the price of gold being the same as the mint price, the Bank note was at par. He hoped the right hon. gentleman would state how the circulating medium was to be kept up notwithstanding the present loan. He deprecated the practice of taking loans after five years of peace. He thought the time was come when the country should look her situation fairly in the face; and was convinced that she still possessed sufficient wealth and energy to encounter and surmount her difficulties, without pertinaciously adhering to the ruinous system of borrowing.
§ Mr. Ricardothought it quite unnecessary for the Bank of England to reduce its circulating medium any further than it? was at present reduced. The worthy alderman had said that gold was now at the Mint-price; perhaps he might have said that it was a little under it; for he knew that many persons took gold to the Mint at the. Mint-price, in order to have it coined; and this they could not do if gold was not, in fact, a little under that price, because some space, of time must, elapse 1032 before they could receive the benefit of the coinage. But the worthy alderman appeared to labour under a mistake in supposing that a reduction of the circulating medium would be a consequence of this loan, or repaying the Bank. The reduction of bank-notes within the last year did not exceed 2,000,000l.; that reduction of 2,000,000l. was all that was necessary to bring about that state of the currency which all had united with the finance committee in desiring to see obtained. Indeed, if the Bank was desirous to follow their own interest, it was a clear and obvious one: if they were to effect a Very great reduction in their paper, which he should most sincerely lament, the consequence would be such a rise in paper, and such a fall in gold, that individuals would carry their gold to the Mint, and endeavour to fill up the circulation with it. As to the alarm felt by his hon. friend it was quite groundless, for there could be no fear but that the Bank would keep up a sufficient quantity of notes, as their own advantage depended upon the issue. As to the sinking fund, the argument of himself and his hon. friend had been, "Take away all which tends to delude the country—take away so much of that sinking fund as is not in reality an excess of income over expenditure;" Therefore he entirely concurred in the opinions of the worthy alderman, that they should immediately get rid of so much of the fund as, being nominal, was merely a delusion.
§ Mr. Humeobserved, that if the worthy alderman would refer to former cases, he would find, that upon occasions when the heaviest loans had been borrowed to the amount of 20,000,000l. and upwards, the contracting of such a loan had not withdrawn more than 1,000,000l. from circulation. The present loan could therefore have but little effect on it.
Mr. Alderman Heygatedenied that he ever intended to say that the circulating medium would be reduced to the full amount of the loan; but he was at a loss to know by what channels it would be poured in again upon the public. He should be most happy to find his fears groundless, and that the circulating medium would be kept up; in which case the industry and the revenue of the country might revive.
§ The resolution was then agreed to.