EXCHEQUER BILLS.

HC Deb 31 May 1820 vol 1 cc694-702

The Chancellor of the Exchequer

said, that it was usual, when any bargain had been concluded between the Treasury and the monied interest, that he should take the earliest opportunity of stating the terms of it to the House. He therefore wished it to be suffered that the committee of ways and means should have precedence, that he might now state the terms of a bargain which he had concluded.

The House having resolved itself into a committee of ways and means,

The Chancellor of the Exchequer

said, it was necessary for him to explain the reason why he had thus suddenly, without previous notice, risen to state the terms of the bargain which he had concluded on the part of the public. He had allowed three days for the operation of funding exchequer bills under the terms of his offer; and he thought he should have been enabled, before the conclusion of it, to give notice that he should state the terms of his bargain on Friday. But the whole business for which he had allowed three days had been transacted in half an hour; and as it was the invariable practice to take the earliest opportunity of stating the terms of such bargains, he had preferred doing so without notice, to the delay which a notice would have Occasioned. He did so with the more satisfaction, because he could recommend the bargain as one evidently advantageous to the public. It differed in one circumstance, indeed, from any similar bargain which the public had ever concluded, viz. in this—that the stock to be created was less than the actual sum of capital debt to be extinguished. He had a few days ago issued a notice, that a subscription would be opened for funding seven millions of exchequer bills. Oil the 1st of January the outstanding Exchequer bills had amounted to 35 or 36 millions, and four millions of Irish Treasury bills, making 39 millions of unfunded debt, which was ten millions less than the unfunded debt at the same period last year. Of those 39 millions, about 14; millions in Exchequer bills were in the hands of the Bank of England, and all the Irish Treasury bills were in the hands of the Bank of England and the Bank of Ireland. Three millions had been placed in the Exchequer, as security for payment of a sum borrowed from the consolidated fund; and two millions were also disposed of (in what way we could not understand, from the low tone in which the right hon. gentleman spoke); so that 16 millions remained with the public previously to the transactions of this day. The want of demand for this, species of security made it evident that it would be either necessary to pay off some part of them which were more expensive to the country than funding, or to resort to the system which had been followed. It had been thought the best way of supporting the credit of the unfunded debt, to call in seven millions of it, and convert it into stock. On a future day he should enter at large into the financial system of the country, but he should now state generally, with respect to this unfunded debt, that it was proposed to reduce it from between 38 and, 39 to 28 millions, in the course of the year Of the 10 millions thus reduced, 5 millions would be repaid to the Bank, and the other 5 millions would be reduced from the amount in the hands of the public. In the funding of the 7 millions which he had accomplished, the terms were these: For every 100l. Exchequer bills, 99l. capital stock of the 5l. per cents were offered; the funding taking place in that stock, because it was desirable to make as small an addition as possible to the nominal debt. The price at which the 5 per cents had been in the course of last week, varied from 104½ to 104½ from that was to be deducted 2½ for the July dividend, which the subscribers would not receive, and the price was equal to 102 per cent. To that was to be added an advantage on the discount of Exchequer bills, amounting perhaps to 19 shillings, making an obvious premium of about 2 per cent. Whether it was from the temptation of this premium, or the prospect of the advance of stocks, the competition was so great, that in half an hour that sum had been subscribed, to complete which three days had been allowed. The resolution which he had to offer the committee, was to sanction the bargain thus concluded.

A resolution to that effect having been put,

Mr. Grenfell

said, that the right hon. gentleman appeared to feel much satisfaction at the subscription having been concluded in a few hours instead of three days. The fact was, however, that the 7,000,000l. had been subscribed by eight persons; at least, more than ten persons had no opportunity of subscribing. The business had been conducted, he understood, in the most disgraceful manner. Many had rushed in at the risk of their lives. He had heard that some talked of an action against the right hon. gentleman for the risk and peril to which they had been exposed [A laugh]. But his object in rising was to ask one question of the right, hon. gentleman. Although 7,000,000l. of Exchequer-bills were now funded, was it not the intention of the right hon. gentleman to reissue Exchequer-bills to the same amount, and thus to leave the amount of the unfunded debt the same as it was now? There was a bill now before the House to enable the right hon. gentleman to apply 7,000,000l. the very same amount that was now to be funded, to the service of the year. It was obvious to the House that, if the 7,000,000l. were re-issued, the loan of 5,000,000l. would in fact be a loan of 12,000,000l.

The Chancellor of the Exchequer

said, that with respect to the first point to which the hon. gentleman had spoken, there would have been much complaint it previous notice had not been given for some time. The right hon gentleman then spoke of a different mode of managing the business, which would ensure perfect quiet and prevent any crush, by omitting a long previous notice, and thereby preventing a fair competition; but that plan would not have answered. He hoped, however, nothing of the kind alluded to would again occur. It was certainly desirable to obviate any crush or personal inconvenience. With respect to the second point, and the most important, he conceived that the hon. gentleman had not understood him. He had distinctly stated that the unfunded debt on the 5th of January last was 39,000,000l. and that this sum would be reduced to 28,000,000l. or 28,500,000l. by deducting about 10,500,000l. in the present year, as he had already explained.

Mr. Maberly

bad no intention of making any comments upon the bargain which had taken place that morning, but could not help observing that he did not understand the statement made by the right hon. gentleman, that the whole amount of the unfunded debt on the 5th of January, 1820, did not exceed 39,000,000l. From the information which he had himself obtained upon this subject, be would state that the right hon. gentleman would find that on the 5th of January, 1820, there were about 36,000,000 of exchequer bills in the market—of these500,000l. or 600,000l. were provided for, but outstanding. There were also about 2,000,000l. of Irish treasury-bills outstanding, which were provided for; and about 2,000,000l. more which were not provided for. Besides these sums there was also 2,600,000l. for which the right hon. gentleman had forgotten to account; this sum he had taken from the Bank, and had afterwards replaced by exchequer-bills to that amount. If these sums, and some other minor sums, were taken into consideration, the House would see that the amount of exchequer-bills now outstanding came to a sum little less than 45 or 46 millions, to which, if the rumours which he had heard were true, the right hon. gentleman had since added 300,000l. on land and malt. Therefore he must again repeat, that he could not understand what the right hon. gentleman had stated as to 39,000,000l. being the full amount of the unfunded debt. He wished to know whether in this statement the right hon. gentleman had included the exchequer-bills which he had issued on the arrear of the consolidated fund; because if he had not, there would be an addition of 2,000,000l. to the deficiency on the consolidated fund. That fund was already 7,000,000l. or 8,000,000l. in arrear; and, unless the revenue became much more flourishing than at present it appeared likely to become, it would be 10,000,000l. in arrear in July next. He could believe, if the right hon. gentleman had left the consolidated fund without providing for it, that he might have reduced what he chose to call the unfunded debt; but in leaving that fund unprovided for, he was leaving the fund out of which the dividends when due, were paid, also unprovided for; so that, after paying oft' these 10,000,000l. he would only have 3,000,000l. in the treasury, instead of 13,000,000l. to meet the dividends. If the right hon. commissioner of woods and forests had not been absent from the House, he would have called their attention to the strong opinion which he (Mr. Huskisson) had once expressed regarding the impropriety of increasing the arrears on the consolidated fund. Instead of the income of this fund being made equal to the charge, the charge upon it was progressively increas- ing, while the income was progressively falling off; and yet, notwithstanding this growing deficiency, it was intended, he understood, to provide for the payment of the interest upon the new loan out of that fund. A bill was now before the House to enable the bank to secure the re-payment of any advances which it might make to government out of the produce of the revenue, so that if its advances at any time to pay the dividends should exceed the produce of the preceding quarter, this establishment was to be paid the balance out of the revenue of the succeeding I quarter. Hence, in the event of the exchange being against us, and the occurrence of a bad harvest, it might happen that the run on the bank for cash or bullion might be such as to render that establishment unable to make any advance to the government, especially in consequence of the accumulation of the balances to which he had alluded. The bank must of course first attend to its own constituents and creditors, and should such attention disable it from accommodating the government, what was to become of public credit? He conjured the House, then, as, it valued that credit, as it regarded the interest and safety of the country, cautiously to consider the character and tendency of this bill. He by no means intended to throw out any reflection upon those gentlemen who had the direction of the Bank, but he deprecated the idea of investing them with the power which this bill proposed to establish; for if the Bank should be enabled through such a measure to lay hold of the growing produce of the revenue, what, in the event which he had mentioned, was to become of the public creditors, or how were the dividends to be paid? He hoped and trusted that the House would take these circumstances into its most serious consideration before it acceded to such a bill as that which he had described.

Mr. John Smith

did not understand that any answer had been given by the right hon. gentleman opposite to the question asked by the hon. member for Penrhyn, whether 7,000,000l. of exchequer-bills had not been issued in lieu of those which had recently been funded. If they had not been issued, he was anxious to undeceive that portion of the public which supposed that the right hon. gentleman either had filled up, or intended to fill up, the vacuum which he had just created in the market, by a fresh supply of exchequer-bills. Great satisfaction had pervaded the country, owing to a declaration which the chancellor of the exchequer had made in the last session, that not more than 5,000,000l. would be wanted for the year 1820, to repay the Bank; that declaration made by the chancellor of the exchequer in that House, had been reiterated by a person high in office in another place; and therefore it appeared to him that it was incumbent upon the right hon. gentleman to give some answer to the question which had been asked of him. He was sorry that a transaction of a nature like the present had been attended with so much confusion: the effect of it had been, that the individuals who had engaged in the subscription of the loan were only ten in number, and friends (he meant no insinuation again any individual) of persons now in office; and that every person who had attended, whether on their own account or on that of their friends, had been totally excluded from it.

The Chancellor of the Exchequer

asserted, that no preference had been shown to any individuals, and argued, that the long notice which had been given of the terms of this loan was a proof that no partiality had been exercised in any quarter. Since Friday last, every man in London knew how this loan was to be effected; and the conducting of the preparatory steps to it had been intrusted to the Bank directors, whose upright and impartial conduct upon all occasions nobody would dispute. He then proceeded to state, that he had no doubt but that the hon. gentleman would perceive that the transaction of transferring the supplies for the service of the year 1819, to the service of' the year 1820 could give no assistance to the general finances of the year, inasmuch as it could give the government no power to create fresh exchequer-bills. A reduction of 10 or 11 millions of exchequer-bills, from 39 to 28 millions and a half, had certainly been made; and if the hon. gentleman looked again into the papers presented to the House, he would find the statement which he had made to be perfectly correct.

Mr. Maberly

said, that he supposed the chancellor of the exchequer had declined to give an answer to his question, because it had not been worded with all the nicety and exactness of a special pleader. He was no lawyer, but still he would endeavour to put his question for once with special pleading accuracy. He therefore would ask, what amount of exchequer-bills voted for the service of the year 1819, were unsold on the 5th of January, 1820? The answer to that question would inform the House of the number of exchequer-bills which were yet to be put into the market for the year 1819; and then they would also know how many it would be necessary to put into the market for the year 1820. The hon. gentleman then repeated what he had before said, that there was a total of 45 millions of exchequer bills yet unfunded, and also ran over the details, which he had previously given necessary to prove it. He trusted that the right hon. gentleman would still consider the danger of increasing the deficiency on the consolidated fund, by putting additional loans on that which for some years past had been a decreasing fund. If he did not, he would always have a deficiency upon that fund on which Mr. Pitt had always had a surplus; and this, he must again repeat, could not long continue without producing deplorable consequences.

Mr. Peirce

vindicated the conduct of the Bank, and its agent, with regard to the transaction of this morning.

Mr. J. Smith

disclaimed any intention of casting the slightest reflection upon the Bank. He recollected a similar confusion some years ago, and from a suspicion of unfair practices, the transaction was referred to the examination of a committee, one of whom he happened to be, and the committee found that there was nothing of unfair preference. The confusion, indeed, arose from a trial of physical strength to get in, which, of course, respectable men would avoid; and therefore some measure should be taken, on a future occasion, to guard against such conduct.

Mr. Grenfell

perfectly agreed with his hon. friend as to the necessity of keeping up the consolidated fund, and not suffering it to go into arrears of seven millions and a half annually, to cover deficiencies of loans and exchequer bills. He thought there was something extremely unintelligible in the plans of the right hon. gentleman. All he understood of those plans in effect, was, that each quarter there were certain sums advanced by the bank, for which they were allowed to take possession of the growing produce of the revenue.

Mr. Ellice

observed that if he understood the remarks of the right hon. the chancellor of the exchequer, his object was, to borrow a million and a half, besides the sum to be derived from the sinking fund—that was, that the unfunded debt should be diminished by 10½ millions, while be was at the same time borrowing 12 millions. He would now ask, where were the promises which the right hon. gentleman had made last year, that the finances should be placed on a permanent system? But last year 3 millions of new taxes were proposed; those were found inefficient, and we were still going on borrowing from year to year, without any thing like a permanent system.

Mr. Maberly

repeated his question respecting the amount of exchequer bills remaining unsold in January last; stating his intention, if not distinctly answered, to bring forward a distinct motion upon the subject.

The Chancellor of the Exchequer

said, that the exchequer bills voted in 1819, were issued to replace those of 1818; so that this issue formed no addition whatever to the unfunded debt.

Mr. Maberly

asked, why did not the right hon. gentleman give a plain answer to a plain question, as to the amount, of the exchequer bills unsold in January last, whether issued to replace those of IS 18 or not? The right hon. gentleman's mode of answering was indeed complete special pleading.

The Chancellor of the Exchequer

declared, that the only answer which he could give to the hon. member's question, whether it was special pleading or not, was simply this, that it was not in his power distinctly to answer it, because be did not recollect the precise amount of the bills alluded to.

Mr. Baring

asked when it was intended by the Bank to issue the new notes which had been so long looked for, or whether the sort of note to be manufactured was yet determined upon?

Mr. Courtenay,

as one of the committee upon this subject stated, that the machinery for executing the notes alluded to, was constructed in the Bank, and that every practicable expedition was using to prepare the notes. He added that there was now no uncertainty whatever with respect to the sort of note to be issued.

Mr. Peirce

said, that some of the new notes would be struck off in a few days, but as a great quantity must obviously be manufactured before any were issued, it was impossible to say at what time their issue would commence.

Mr. Baring

did not at all doubt the diligence of the Bank upon this subject, but he could not see the propriety of the delay contemplated before any of the new notes were issued, as it did not appear to his mind necessary to provide at once for the exchange of all the old notes.

The Resolutions were agreed to.