HC Deb 03 May 1822 vol 7 cc316-24

On the order of the day for receiving the report of the committee on the payment of the Naval and Military Pensions,

Mr. Bernal

said, he considered the proposition simply as a loan; but was at a loss to understand how the same security could be obtained from the contractors for the performance of the conditions of such a loan as for those of a fixed loan. If no such security could be afforded, in what a situation of loss might the country be placed. Some contingency might render the contract so oppressively burthensome, that the contractors would abandon it. There were contingencies also that might give the contractors an undue advantage.—If a war should occur in the course of four or five years, many of the officers at present on half-pay would immediately be put on full-pay; and that full-pay would be charged on another fund. In that event the terms of the contract would be unduly improved to the benefit of the contractor.

The report was brought up, and the four first resolutions agreed to. On the fifth resolution being put,

Mr. Hume

said, that to this resolution he should move an amendment. The object of it was to burthen posterity and to relieve ourselves—a direct violation of the principle of the sinking fund. But, besides other objections, the operation was so complex that it was almost unintelligible, and the perplexity spread over a period of 45 years. The project was so novel, and the amount so large, that it would be found very difficult to find contractors. For sixteen years they would not receive a single shilling, and would be paying many millions in advance. It was clear, also, that the public must be losers by the transaction, if private parties entered into the speculation with government; but if the loan (for it was nothing else) were taken by the com- missioners of the sinking fund, the public would gain, and the scheme would be rendered comparatively simple and intelligible. He would therefore move as an amendment, "that the commissioners of the treasury should treat and contract with the commissioners for the redemption of the national debt for the sum required."

Mr. Cripps

thought the noble marquis had conferred a benefit on the country by adhering to the sinking fund. He admitted, nevertheless, than the plan now proposed militated in a slight degree against it. But it was necessary that some relief in the shape of taxation should be given, and he knew of no better mode of giving it than the present. The whole of the leather-tax, a moiety of the salt-tax, and a large portion of the House and window-tax, would thus be removed. He did not see any of the complication of which the hon. member had spoken, and had no doubt that if the terms were proposed, contractors would be found for the whole before to-morrow night.

Mr. Whitmore

thought it would be more economical to borrow the money of the sinking fund than of contractors. He had voted for preserving the sinking fund at the beginning of the session, because a great financial project was then before the country—the payment of the 5 per cents; but now that that object had been effected, it became the duty of the House to consider the best means of affording relief to the country. If the contract were made according to the amendment, all complexity would be avoided.

Mr. J. Martin

felt it his duty to oppose the proposition of the chancellor of the exchequer. The bargain would be made upon most disadvantageous terms. The right hon. gentleman was daily in the habit of selling annuities on the lowest terms: while, his present plan went to purchase them at the highest.

Mr. Ricardo

said, that the proposition of the hon. member for Montrose was the same as that of ministers, only he wished the contract to be made on the most advantageous terms. Whatever bonus the private contractor obtained, would be a clear loss to the country. There could be no doubt that, if the sum required were now taken from the sinking fund, at the end of 45 years the country would be in a better situation than if the money were borrowed of individuals. He was an enemy to all complicated schemes, and was for avoiding a crooked path when there was a straight one before him leading to the same end. The obvious course was to take the sum from the sinking fund.

Mr. T. Wilson

contended, that at the present moment, whole the 3 per cents were at 78 or 79, ministers could make a more advantageous bargain than at a subsequent period when they might be lower. Besides, they would thus avoid the contingencies of war. It was just as proper now to support the sinking fund, as in the beginning of the session; because the period might not be far distant, and he hoped it was not, when ministers would be prepared to pay off the 4 per cents. The present amendment was an attack upon the sinking fund by a side wind. Though relief from taxation was very desirable, it was even more desirable to keep faith with the public creditor. If that faith were not kept, the agricultural interest might suffer even more severely than they did at the present moment.

Mr. Brougham

said, it now appeared that all sides were for a reduction of taxes, though, at the beginning of the session, reduction was declared to be impossible, on account of the preservation of the sinking fund. It was hardly necessary to congratulate the House, that the chancellor of the exchequer had thus yielded to the necessities of the country, and was willing to relinquish taxation to the extent of 1,800,000l. This was a pretty good nest-egg to begin with; and it should not be his (Mr. B's.) fault, if the right hon. gentleman was not urged to give up several millions more. The question before the House was precisely this: whether, according to the plan of ministers, or of the hon. member for Montrose, the proposed reduction of taxes could be most economically made? The hon. members who spoke last rested the defence of ministers entirely upon the present high price of stocks and the contingency of war during the next forty-five years. If this asgument was correct, why not carry it further? Why not borrow 20,000,000l. at once, and apply the principle of the sinking fund to the extinction of that loan in the usual manner? But there was another consideration beyond all these. Had we not an unfounded debt of more than 30,000,000l. Why not fund this? Stocks were high at present, and therefore the opportunity was most favourable. If these 30,000,000l. were funded when stocks were 78, government would have all the benefit of the operation.—It was perfectly obvious, that the mode in which the present commutation could be most economically effected, must be for the government to secure to themselves the whole of that benefit which the contractors would reap, provided the bargain should be struck. Whatever name the right hon. gentleman might give to his plan, it eventually must be neither more nor less than an interference with the sinking fund. Who were to gain relief by the proposed plan? They who should live and pay taxes for the next 16 years. Who would suffer by the relief which was to be effected? They who should live and pay taxes after the expiration of the first 16 years of the 45. Until after the first 16 years should expire, the country would have gone on borrowing, but without making any payment. Now, the only difference between such a project and ordinary loans was this; that in the case of ordinary loans the country paid the interest regularly every year, but, in this instance, it would not begin to pay at all until the seventeenth year. But then, for the remaining 29 years of the term, it would have to pay principal, interest, and profit too. It followed from these premises, that the persons to be relieved by the scheme were those who should pay taxes during the first 16 years; and that the persons who would be pressed, in order to enable government to extend that relief, would be those who were to pay taxes during the remaining 29 years. Now, the sinking fund pressed hardest upon the former of these classes. It was supported by means of the sums paid for that purpose by those who lived and paid taxes during the earliest series of 16 years. But who were the persons that would derive the profit of it? They, clearly, who should pay taxes after that series of 16 years had passed. The noble marquis had intimated that the sinking fund was intended to be 5,000,000l. yearly, and to accumulate at compound interest, for ten years; at the end of which time the noble lord calculated, that its operation would have reduced about 70,000,000l. of the capital debt, and that the accumulation would have reached between 7,000,000l. and 8,000,000l. only. But, during this period of ten years it was proposed that no taxes should be remitted. That is, the sum of 250,000l. (being the interest of 5,000,000l. at 5 per cent) was not to be applied towards the repealing of taxes, to that amount, but it was to accumulate. The public was only to be re- lieved from a portion of the taxes, at present paid for defraying the interest of the debt, when, at the expiration of the 10 years, the interest on the accumulated sinking fund should arrive at 400,000l.; and then it was to be applied towards the reduction of the interest. Now, of this plan he would say, that while the country continued in its present lamentable state, it ought never to be put in execution—that, the country being under circumstances such as those in which she now found herself, no sinking fund at all should be kept up, until she could better afford it. He should recommend that, instead of leaving these 5,000,000l. to accumulate at compound interest, the whole sum should be taken and applied in the relief of taxation. Let the public creditor be satisfied with all that he could fairly demand; namely, the payment of his interest.—The next question was, which of two sinking funds offered to their attention they would have? He had already stated what he conceived to be the objections against a fund of 5,000,000l. accumulating for 10 years at compound interest. He would rather say, let them take their 5,000,000l., and the year's interest would be 250,000l. The next year there would be other 250,000l. and so on, till the term of 10 years was completed. This proposition assumed that the sinking fund was, in the meanwhile, strictly kept up at 5,000,000l., but not accumulating at compound interest. Now, the total simple interest on that sum, at 5 per cent, would form a very eligible fund, applicable to the relief of taxes. In ten years it would amount to 2,500,000l. During the next period of ten years, this same sum would be generated; so that at the end of the next 20 years, the government might have reduced taxes to the amount of 5,000,000l. This was his proposal for a sinking fund. Now, what was the nature of the noble lord's plan? The noble lord would begin with 400,000l. at a period of 11 years hence, rather than with 250,000l. this very year. What would be the relative effects of these two schemes? At the end of 20 years, the noble lord would have remitted 4,000,000l. of taxes. He (Mr. B.) in the same period, would have remitted 5,000,000l. The noble lord would have sacrificed relief to the present generation wholly, as far as regarded those who were to pay taxes for the first 10 years; and partially, as respected those who would have to pay them during the second term of 10 years. It resulted, therefore, that down to the termination of that second period, that was, in 20 years, his (Mr. B's.) plan would have remitted taxes to a greater amount by 1,000,000l. than the project of the noble lord would have done. But, in about six years after that point, it seemed that the noble lord's project might overtake his; and after that time (26 years hence), it might work undoubtedly a much more considerable operation than his (Mr. B's) scheme would effect. But that scheme would afford partial relief to the present generation, and chiefly during the ensuing ten years; besides the relief which it would diffuse in some degree over the whole 26 years. But—how would this plan of the noble lord's consist with the other plan which he had brought forward—the commutation of the half-pay charge? The plan respecting the half-pay was exactly the reverse of this; for it was applying all the relief to the present generation. Government were to pay 2,800,000l. a year for the whole of the 45 years. Taking the present mode of paying pensions, they would be gainers for 16 years to come: after that period the thing would become equal. To those who lived subsequently to those 10 years, the bargain would he a great burthen. It was impossible that any person who looked at the noble lord's plan for a fund, in conjunction with this plan of commutation, could entertain a doubt as to the ultimate effect of both. It was this—that every 1,000,000l. taken as from the one, was added to the other.—The next question was—what terms was the right hon. gentleman likely to get in the market? In the first place, the novelty of the plan must inevitably raise the market against himself. It was clear that men, in order to be induced to take that sort of bargain which was new and strange to them, must always be bribed by a certain bonus. That bonus must, of necessity, be Paid by the public. In the second place, the market into which the right hon. gentleman would have to go, must, of course, be a very contracted one. A common loan was easily disposed of. A man felt no hesitation about buying 1,000l. of stock, upon which he knew that in the next half-year he should receive his dividend. But the case must be quite different where the party knew, that only at the end of 16 years his bargain would begin to pay him; and that not until the expiration of 45 years would he have realized his full profit upon it. The number of those who would offer to take this bargain would be very limited; the competition, of consequence, would be very slight, and the terms very disadvantageous. Great companies, indeed, might be found to bid; but even they must be such as, possessing great capitals, had some sort of surplus which they could afford to sink under a prospect of large profit, for so long a term of years. At all events, the bonus must be paid by the country and the advantage, most disproportionately, result to the contractor. The simple and obvious way of effecting an arrangement of this kind would be, to take the money from the sinking fund, and thereby save the country the charge of the exorbitant premium which would attend the proposed transaction. He must he allowed once more to suggest how gross an absurdity that was, which they were called upon to sanction; and what ridicule and just censure it would entail upon them out of doors. They were taking 5,000,000l., and putting it into a chest, in order that it might accumulate for the payment of a debt at the end of a certain period. In one and the same moment, they borrowed the same sum as they had in their chest, but at a great disadvantage. They were going into debt as lenders and as borrowers. They were taking especial care that the benefit should be all to the contractors, and, in short, upholding an absurdity of that kind, that the man, who, in private life, should suggest such a principle, would stand a chance of being conveyed to Bedlam, rather than to his own mansion. He would suppose the case of a man, who, with an income of 10,000l. a-year, was unfortunately incumbered with a debt of 100,000l. To extinguish the principal and interest of his debt, this person had reserved one half of his income every year, being a reservation of 5,000l. Besides this debt, there was a jointure, or annuity, charged on his estate, of 2,000l. a-year; and, being anxious to enlarge his sinking fund of 5,000l., he put by other 2,000l. a-year for the same purpose, reserving for his own expenses only 1,000l. He would suppose that the chancellor of the exchequer found the individual in this state, and advised him to carry his jointure into the market and sell it, on the ground that the money to be raised by the sale would enable the gentleman to add 1,000l. a-year to his own reserved income. The right hon. gent. would say, "It is very true that a few years hence, by the sale of this jointure or annuity, you my find yourself a loser of some 30,000l. or 40,000l. a-year;" but then he would console the gentleman with the reflection that, is sinking fund—the fund of which he had made a brag, as it were, to the public—remained untouched. Upon the grounds he had assigned, he must oppose the proposition of the right hon. gentleman, and express his hope that he would be induced to take money from the sinking fund.

The chancellor of the Exchequer

observed, that on the question of the sinking fund, gentlemen had long been much divided, members on the Opposition benches wishing to take it away altogether, and those on his side preferring to keep it inviolate. That principle of sacredness, to which he considered the faith of parliament to be pledged, and upon the strength of which this country had been enabled to execute such vast achievements in the course of the late war, [Cheers] he hoped that House never would depart from. It was upon this principle that government had just been enabled to perform one of the greatest financial operations that had been of late years attempted, and by which they would be enabled to remit very speedily taxes to the amount of nearly 1,500,000l. The present plan, would obtain at once a saving of 2,000,000l., and with perfect good faith to all parties. It was said, that this was done to relieve ourselves at the expence of posterity. This was not the case. The question was, whether we should pay an annuity of five millions, gradually diminishing for 45 years, or whether we should divide the burthen equally through all the years of the term? The amount of the charge at the end of the term was equal. The gentlemen opposite had all at once become extremely jealous of an attack upon the sinking fund. But the fact was, that the sinking fund would go on as before, there being nothing added to the debt, but a charge which was to be extinguished by the mere operation of time. Since the conclusion of the peace, taxes had been remitted to the amount of twenty millions; and if the remission of taxes was to be considered as a panacea for the distresses of the country, government were at least entitled to that extent, to the gratitude of the country. With respect to the mode of carrying the plan into effect, he could assure the House that there should be a fair and general competition among those who were disposed to buy.

Mr. J. P. Grant

said, that nothing but a remission of taxation could save the country. As to the sinking fund, as it was now placed, its operation was quite delusive.

Mr. Jones

approved of the plan, and thought the amendment would, if acted upon, suspend the operation of the sinking fund, and prove disadvantageous to the country. It was said, that to effect this plan, the contractors must get a bonus, the amount of which would be lost to the public. He did not concur in that opinion. The speculators might gain, but it was equally possible they might lose.

Mr. Denis Browne

expressed his surprise that gentlemen opposite should feel averse to any proposition which went to the reduction of taxation; that having been the theme of their speeches during the session.

Mr. Bennet

said, the ground of complaint was, not that taxes to the amount of 1,800,000l. had been reduced, but that a much larger portion of the public burthens had not been remitted. He would say, take away the whole of the sinking fund, and reduce taxation to that amount. The country had a right to expect this. The national creditor had no claim beyond the interest of his debt; and, considering the terms by which his debt was contracted, he ought, in the distressed state of the country, to consider himself fortunate if he got that.

The House divided: For the amendment, 56. Against it, 135.

List of the Minority.
Althorp. viscount Grant, J. P.
Boughey, sir J. F. Griffith, J. W.
Bright, H. Hamilton, lord A.
Bernal, R. Hornby, E.
Blake, sir F. Hughes, col.
Brougham, H. Heron, sir R.
Clifton, viscount Hutchinson, hon. H.
Coffin, sir Isaac Jervis, G.
Calvert, C. Kennedy, T. F.
Concannon, L. Langston, J. H.
Crespigny, sir W. De Lloyd, sir E.
Crawley, S. Leycester, R.
Crompton, S. Lemon, sir W.
Dundas, Charles Maberly, J.
Davies, col. Maberly, W. L.
Evans, W. Marjoribanks, S.
Grattan, J. Milbank, M.
Monck, J. B. Scarlett, J.
Newman, R. W. Stanley, lord
Newport, sir J. Tierney, G.
O'Callaghan, J. Webbe, col.
Palmer, C. F. Whitmore, W. W.
Ramsden, J. Williams, J.
Rice, T. S. Wyvill, M.
Ricardo, D. Wilson, sir R.
Rickford, W. TELLERS.
Smith, W. Hume, J.
Sykes, D. Bennet, hon. H. G.
Sebright, Sir. J.