HC Deb 11 April 1823 vol 8 cc822-9

On the order of the day for going into a committee on this bill,

The Chancellor of the Exchequer

said, he did not think it necessary on the present occasion to argue over again, the policy of the arrangement which had been made for apportioning the burthen occasioned by the naval and military pensions, and also by the civil superannuations. He deemed it, however, to be necessary to say a few words, regarding the arrangement which had been made on the recent bargain with the Bank. It would not have been necessary to trouble the House at all upon this occasion, had it not been for the imperfect manner in which the act of last session was worded. The words used seemed to exclude the trustees from making a bargain for a longer period than one year; whereas, the meaning of them was, that a larger sum of money should not be brought into the Exchequer than was sufficient for the service of one year. In consequence of this oversight, it had become necessary to call upon the House to amend the act and to ratify the agreement with the Bank. That agreement was to last five years and a quarter, and was to conclude on the 5th of July, 1828. The basis on which it was formed, was an agreement to take the long annuities at the price on which they were on the 1st of March, the day on which they closed. On that day, an annuity of 1l. for 36 years and three quarters, was worth 18l. 17s. 9d.; and the calculation was, that the interest on that sum was the same as 4l. 2s. 1d. per cent. The total sum which the Bank would have to advance in the 5¼ years amounted to 13,089,419l. But as it was not to be advanced at once, but by instalments, it was calculated to be the same as if the Bank advanced at once 11,883, 194l. If that sum had been advanced at once, then the permanent interest would have been 487,700l.; but as the plan was to give an annuity for 44 years at the same rate of interest, it would amount to 585,740l.; and on that arrangement had the treaty been concluded. That arrangement had been made for one year, and it might have remained open from year to year, and so on; but it appeared to the trustees, that if they could make the bargain upon fair and equitable terms, it would be advisable for them to make it for a longer period, because it might happen, in the course of public events, that before five years and a quarter had elapsed, they might not be able to obtain such good terms as 4l. 2s. 1d. per cent. It was upon that principle they had made the present arrangement; and he conceived it to be as fair an arrangement as could possibly be made. The right hon. gentleman then concluded by moving, "That the Speaker do now leave the chair."

Mr. Grenfell

said, it would be in the recollection of the House, that on the first appearance of this bill, he had given notice that he would propose its rejection and would take the sense of the House upon it. He now rose in pursuance o his promise to move, that the House do resolve itself into a committee on this bill upon that day six months. He was no prepared to quarrel with the terms of the arrangement; but he would say, that the right hon. gentleman was not justified in making such an arrangement with an public body whatsoever for more than one year; for, though the terms were advantageous to the public according to the present price of stocks, they might be still more so in the course of next year. Neither was he prepared to quarrel with the Bank for having accepted them; for as they had been voluntarily offered to the Bank, it could not be said that the Bank had done wrong in accepting them. He quarrelled, however, with the bill altogether; and would shortly explain the grounds upon which he did so. It might be in the recollection of the House, that a great difference of opinion had existed in it last year, when this arrangement was first proposed. At that time he was one of those who had supported the bill which contained it, on the ground that it would immediately lead to a remission of 2,000,000l. of direct taxation. There was, however, one point in the bill in which all persons agreed; and that was, that that mode of carrying the arrangement into effect ought to be adopted, which was the most simple in its plan, and the least onerous to the public in its execution. Now, he would contend, that another mode might be adopted, that would be more advantageous to the public than that which parliament was now called upon to ratify, Hon. gentlemen might perhaps recollect that last year he had proposed the introduction of a clause precisely similar, in its nature and object, to that which Mr. Fox had proposed in 1786, by which the commissioners of the sinking fund were allowed to be loan contractors to a certain amount. It was unnecessary for him to state, that this arrangement was in every respect a loan. The only difference between it and an ordinary loan was, that money, in the one case, was raised by a permanent annuity of 3 per cent; and that it was now proposed to raise it by a long annuity of 44 years. He had been of opinion, that when the government failed last year in carrying their arrangement into effect through the agency of the South Sea Company, and of the Bank, it had adopted his clause; and he now maintained, f that if they had acted upon his clause, they would have acted more advantageously for the public. Could any man dispute that it would be more advantageous to the public to take this money from the sinking fund than from the Bank? The Bank evidently would not enter into y the bargain, unless it expected to derive a considerable profit front it: and the ad- vantage of carrying on the transaction through the commissioners of the sinking-fund would be just equivalent to the gain made by the Bank. The ground, therefore, on which he opposed this bill was, that it deprived the public of the profit, which it gave to the Bank. There was another reason why he objected to this bill. If they passed it, they would depart, for the first time since the year 1694, from a principle which had then been laid down, that the Bank of England was not to be a dealer in the public funds. But this bill enabled the Bank, not merely to purchase, but also to sell annuities, and authorized it to become not merely a seller, but even a jobber and speculator in public securities. It was for the House to consider whether that reason alone was not sufficient to authorize them to throw out this bill. He thought it was; and should certainly take the sense of the House upon his motion.

Mr. Haldimand

supported the amendment, and contended that the measure was a mere delusion, intended to throw dust in the eyes of two classes of persons—those who desired a reduction of taxation, and those who wished to support public credit by means of a sinking fund.

Sir F. Blake

expressed his surprise, that the present chancellor of the exchequer should have adopted this ricketty, ill-formed bantling of his predecessor. He would oppose the measure, because it militated against the chancellor of the exchequer's own principle, of not having any sinking fund, but what arose from surplus revenue. It was nothing but a legerdemain trick, to give with one hand and take away with the other. It was called the dead-weight bill; and indeed, it would be found a dead weight, to clog the wheels of government. It was a monster of such frightful mien, "That to be hated, needs but to be seen. Though he wished the debt to be got rid of, he wished it to be known as his opinion, that the public creditor had as good a right, not only to the interest of the money he had lent, but also to the principal, as any private creditor who had lent money on a mortgage.

Mr. Hume

said, he should like to know whether the chancellor of the exchequer had at all considered in what situation the public was likely to be at the termination of this annuity transaction? He had expected the right hon. gentleman to take some pains to show that, at the end of the 44 years, the nation would be benefitted in some way or other. He (Mr. H.) insisted, that the plan could at not time be advantageous. In the first place, he wished to ask how it happened that the right hon. gentleman had given his sanction to the Bank of England becoming stockjobbers, when it had hitherto been prevented in every charter, excepting as far as related to certain exchequer bills. As, the matter now stood, the Bank could at' any time go into the market, and at its pleasure raise or depress the funds, one, two, or three per cent, to the utter ruin of private individuals. It was to be remembered also, that at the time the charter was granted, the disposition to speculate was trifling compared with what it was at the present time. He had asked the former chancellor of the exchequer, whether he intended the annuities should be sold in the public market by competition? The answer was, that it was not intended that the commissioners of the sinking fund should buy them; but that they should be openly disposed of to the best bidder. He accused the present chancellor of the exchequer, therefore, of a breach of faith in this respect. He had deviated from the practice of all the governments for the last thirty years; for the present was the only instance in which a loan had been made a private job. As far as regarded the public, he insisted that the bargain was most improvident. The right hon. gentleman ought to have looked to the result at the end of 44 year, and he would, perhaps, have made this discovery. The right hon. gentleman said, that the amount would be equal to the present payment of 11,883,000l.; but he (Mr. H.) would be glad to know how he arrived at that conclusion. He contended, that on the 10th of October, 1828, when this contract with the Bank would terminate, the amount of money paid would be 11,247,000l. The chancellor of the exchequer ought to have asked himself this question—"What am I to do with this money?" He did not want it to relieve taxation; and he was bound to tell the House what he meant to do with it. He (Mr. H.) would endeavour to supply some part of what the right hon. gentleman should have stated. If he invested the money in 3 per cent capital, he would be able to buy a perpetual annuity of 449,000l., instead of which the right hon. gentleman had agreed to pay 585,000l., or 136,000l., too much, for thirty-eight years and a half, which, at compound interest, would amount to 12,000,000l., and would produce a dividend of more than 500,000l. Thus, instead of relieving the country, a heavy and perpetual loss was incurred. He pledged himself, that the result would be most calamitous to the country, in case of a rise in the funds during the five years. He begged to be informed, also, why the right hon. gentleman had made the engagement for so long a period; or even if it must be made for five years, why he had not gone publicly into the market? If he had sold an annuity of 97,500l. at the price he had stated, he might have raised 2,187,000l., the sum wanted for the first year. The public, according to the arrangement now entered into, would lose no less than one million and a half sterling, provided the funds kept up at their present elevation; and there seemed no probability of a decline below 75, upon the reasonable anticipation that peace would be preserved. Had the right hon. gentleman looked at what the long annuities had opened at? They had opened at 19l. 3s. 9d.; yet the Bank was only to give 18l. 17s. 9d. The difference was all clear profit to that establishment. If the right hon. gentleman were at this moment to go openly into the market, he would be able to raise a much larger sum than he had obtained at present, and upon the same terms. He strongly expressed his hope, that the House would reject the plan as impolitic for the country, and unjust towards the public. He called upon all those who professed the slightest regard for economy, to put an end to a system, at once so ruinous and absurd.

Mr. Maberly

said, he had expected, but in vain, to hear of some bonus and great advantage to result from the measure, from allowing all at once the Bank to become a purchaser of stock. He did think some good reason should be given for departing front this long established principle.

The Chancellor of the Exchequer

said, that public competition had been invited and nobody had bid, neither corporations nor individuals. It was only when this attempt had failed that recourse was had to the Bank. There was no reason to suppose that if an offer had been publicly made this year, that it would have been accepted. The transaction was not a job: it had been openly and fairly conducted.

Mr. Baring

objected to giving to the Bank the power of stock-jobbing. He complained that the whole transaction was unintelligible, and that great loss would result to the country therefrom. Setting aside the absurdity of the measure, he believed it was a had bargain, and intended to deceive two classes of persons. The very fact stated by the chancellor of the exchequer, that nobody would bid for the annuities; was a proof of its absurdity. There was no want of capital in the country; there was in fact a great abundance of money; and when the offer of the chancellor found no bidders, it was a proof that his plan was a had one. He had hoped that the candour which distinguished the right hon. gentleman would have induced him to yield to the general feeling which prevailed on this subject he effect of the measure would be, to erect the Bank into a company of stockjobbers, and though he was not prepared to say that circumstances might not exist in which it might be expedient for the Bank to become purchasers of the public securities, yet he thought such a measure ought not to be resorted to without the strongest necessity. Another objection to this measure was, the time at which the government had made the bargain with the Bank. The three per cents were a short time ago, up at 83, but they had subsequently fallen to 73, from the probability of this country being involved in a war; and it was at the period of their lowest depression that the right hon. gentleman had thought proper to make his bargain with the Bank. Nor had the right hon. gentleman contented himself with merely making the bargain for the year; but, to show that the plan was perfectly feasible, and that it involved no bubble or delusion, he had made the contract for five years. The conduct of the government was equally improvident and ridiculous, whether we were likely to be embarked in a war or not. If we were not likely to go to war, there was every reason to suppose that the funds would recover, and the time for making the bargain was most improvidently chosen. If, on the other hand, this country were likely to be involved in the contest, then we were encumbering with this vast operation, the very institution to whose efforts we should look for the means of carrying on the war. In every point of view he could not but regard this measure as the most un- wise, and even the most ridiculous that had ever been presented to the House.

Mr. Huskisson

said, the observations of the hon. member might have been applied well enough, in point of time, either to the principle of the measure when it was originated by the late chancellor of the exchequer, or to the discussions on the sinking fund which had taken place before the recess; but they were wholly irrelevant to the present question, which merely regarded the ratification of a particular contract with the Bank. He thought, that in the discussions which had taken place on the new-modelling of the sinking fund, the principle of the measure had been generally understood and agreed to by the House. With regard to the power of the Bank to hold stock, it must be in the recollection of the hon. mover, that the Bank held a million of the loyalty loan in the last war. In the present case, the Bank might keep the whole of the long annuities, and divide them among the proprietors of Bank stock, as in the instance of the loyalty loan. As to the time at which the bargain was made, the government could only take the market as they found it, in any transaction of this nature. It was impossible for them to determine whether the funds were likely to be higher or lower at any future period.

Mr. Grenfell

said, it was true that the Bank held a million of the loyalty loan in the last war; but, a short time after the contract was concluded, it was suggested to them by their own solicitor, that it was made in direct violation of their charter, and they, therefore, divided the whole of the loan among the proprietors. In the present bill, however, there were two clauses; one expressly authorising the Bank to hold, and another to sell stock.

The House divided: For the amendment, 44. For the original motion, 55. The House then went into a committee on the bill.