Commons Sitting of 11 March 1823

NATIONAL DEBT REDUCTION BILL.—
On the order of the day for going into a committee on this bill,
Mr. Grenfellsaid, he wished to call the attention of the House to the subject of the sinking fund. In the first place, he would address his observations to that part of the subject which had been justly designated as the sham sinking fund. He hoped that the system which was abolished in 1819 would never be renewed; but he was afraid, that the indirect favour which the hon. member for Taunton had shown it, might tend to its revival. He would describe the operation of the sham sinking fund. It would be recollected that, in the original act of 1786, Mr. Fox had introduced a clause, the object of which was to allow the commissioners for the reduction of the national debt to apply the whole or part of the sinking fund money to the subscription for any loans. This he considered a most wise and provident clause; but, unfortunately, from the year 1793 to 1819, ministers had not acted upon that clause, but instead of that, had induced the House to believe, that it would be for the advantage of the in exchange for the money obtained from the loan contractors, they gave an article called three percents, and then sent commissioners and brokers into the market, who invested that identical money so received in the purchase of 3 percent stock. Such was the advantageous plan on which ministers had acted! He had addressed the House in 1814 on the subject, with the view of inducing the chancellor of the exchequer to change his plan, and in 1819, the system were innoxious, he would not quarrel with it; but it was capable of demonstration, that it had cost the country, during the four last loaus of the late war, a sum equal to a perpetual annuity of 268,000 l. On one loan alone it had cost 3,600,000 l. of 3 per cents. Nothing could more

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strongly illustrate this mode of doing business than the effect of its abandonment in 1819. On the 4th of June in that year, it was intimated, that a loan of 24,000,000 l. would be wanted; but when the contractors were, to their sorrow, informed by the chancellor of the exchequer that he only wanted 12,000,000 l., and that the government had at last determined to act upon Mr. Fox's clause, the price of the 3 per cents, which the moment before was 65, rose in two days to 70 and 71, and the contract for the 12,000,000 l. loan was effected at an advantage of at least 3,000,000 l. to the public. Had the minister acted upon Mr. Fox's clause from 1793 downwards, the country would have saved 50,000,000 l. of money. He would now say a few words of the real sinking fund, consisting of a surplus of income over expenditure. For the maintenance of this sinking fund, he was a steady advocate. It had been said, on a former night, as au objection to the existence of a sinking fund, that a rapacious minister might at any time sweep it away. He was not convinced that such could be done; for he thought no minister, however rapacious, could do so without the sanction of parliament and of the country. But suppose it was taken, it could only be applied to some purpose which was deemed advantageous to the country. And was not that in itself a sufficient reason for supporting a sinking fund? In 1813, he had supported Mr. Vansittart's plan, which was the greatest invasion that had ever been made upon the sinking fund. The country was then exhausted by taxation, and required breathing time; and, by the plan of 1813, it received it for three or four years. Was not that another proof of the value of a real sinking fund? Many plans had been devised to pay off, by one great effort, the national debt, and the crotchet of his hon. friend (Mr. Ricardo) for accomplishing that great object by a general contribution from all the property of the country, was the wildest of them all. How was it possible to arrange such a plan with equity and impartiality? How was the contribution from each species of property, lands, houses, goods, &c. to be arranged? But, that was not the whole difficulty. After the amount of each was ascertained, how would it be practicable to get each man's share, so as to liquidate in the mass the trifling sum of 800 millions? The hon. member then bore testimony to the merits of his hon. friend's (Mr. Hume's) finance
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resolutions, which, he said, contained more valuable information than any other paper he had seen upon the same object; although he differed from some of his hon. friend's inferences, His hon. friend had stated, truly, that the debt at the present time had greatly exceeded its amount, when the sinking fund was established in 1793; and from thence he inferred, that the sinking fund system was founded in fallacy and maintained by delusion. He denied this deduction: he denied that the increase of the debt was a proof that the principle of the sinking fund was founded in fallacy, and maintained by delusion. He trusted it would go on increasing, until the purposes of the bill should be effected.
Mr. John Smiththought it would be readily admitted, that, in the course of the long war in which we had been engaged, great difficulties had been sometimes experienced by the government in raising money upon the public securities. Now, whenever loans were to be borrowed, the greater the facilities of borrowing, the better were the terms. So far, although the sinking fund might have failed to be effectual in the discharge of debt, it would be granted that it had been very efficient. He was convinced, that, without the services of the sinking fund, this country could not have gone on for two years longer in its system of raising money He would give the bill his warmest approbation.
Sir H. Parnell,while he admitted the accuracy of the statements of the hon. member for Portarlington (Mr. Ricardo), on former discussions respecting the old sinking fund, could not agree with him in his conclusion, that there ought not to be any new sinking fund. The objections which he had to this measure might be removed by placing it on a better principle. The danger of a new sinking fund being misapplied by ministers, as the last one had been, might be obviated by giving it effect through the medium of long annuities, determinable in a fixed number of years. If one per cent was given to the holders of perpetual annuities for transferring their annuities for ever into annuities for years, each million of sinking fund per annum would extinguish 100 millions of debt. if the 3 per cents were at 80, one per cent applied in this way would pay 100 l. in about 45 years, or one million would pay off one hundred millions. The rate per cent might be

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more or less than 1 per cent to be so applied, and the term of years longer or shorter than 45 years, according as the demand for terminable annuities might exist. The advantage of this plan would be, that when once the sum forming the sinking fund was invested in a long annuity, it would be out of the reach of ministers, and there would be a certainty of the extinction of debt in proportion to the amount of the sinking fund appropriated towards its extinction. In respect to the general policy of having a sinking fund, that had been properly made to depend, by the right hon. member for Knares borough (Mr. Tierney) on the question, whether or not the country was in a situation to bear that amount of taxation which was wanting to form a sinking fund; in his (sir H. P.'s) opinion, it was able to bear it. Every one allowed the prosperous condition of commerce and manufactures; and now there was reason to feel tolerably confident, that the agricultural interest would soon be relieved from the pressure of distress. If, therefore, the country could ever be said to be in a state to make an effort to reduce the debt, this was a good time to do so. But when he said so, he gave that opinion with certain qualifications. He thought the surplus of income over expenditure which was required of 5 millions, should be obtained, first, by reducing the expenditure; and secondly, by a revision of all the taxes. He was quite certain that the expenditure might be greatly reduced: though ministers had done a great deal in the way of retrenchment in the last two years, if every public establishment was examined into with an honest and sincere determination to save every item of unnecessary expense, it would be found, that a great deal might be done by consolidating departments, simplifying the modes of conducting business, increasing the hours of attendance, and reducing salaries and allowances. In respect to the taxes, they had, for the most part, been imposed for the exigency of the moment, in haste; and if they were revised on proper principles of finance, all the revenue that was wanting might be obtained with much less injury and inconvenience to the public, than was the result of the existing system. Some of the present taxes did great injury by falling directly on capital, others by diminishing profits, and obstructing the accumulation of capital; but
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perhaps those which were most injurious, were the taxes for giving protection to partial interests, by which immense sums were drawn from the public by high prices, without any advantage to the exchequer. The hon. member concluded by saying, that he hoped the measure of providing for the half pay and pensions of the army and navy, by raising money by annuities, would be abandoned; for no greater inconsistency could exist than at one and the same time establishing a sinking fund to relieve posterity; and creating new debt on the principle, that posterity ought not to be relieved.
Mr. Ricardohighly approved of his hon. friend's plan, which, by taking the sinking fund out of the hands of ministers, would do away his great objection to it; namely, its liability to be perverted from the purpose for which it was originally intended. His hon. friend's proposition of converting what were at present permanent into determinable annuities, appeared to him to be deserving the serious attention of the House; and he must say, that he did not think his hon. friend did justice to his own plan, in stating, that it would liquidate the existing debt in 45 years; for the calculation on which he had proceeded was made when the 3 per cents were only at 80. The House might easily conceive how beneficially public credit would be affected, if a real sinking fund were thus continually operating over the whole extent of the debt. From the adoption of such a plan, ministers, in the event of any occurrence requiring an increased expenditure, would not, as heretofore, be enabled to despoil a fund, which ought to be sacredly appropriated to another purpose; but must come down to parliament, and otherwise provide for the public exigencies. While he was on his legs, he would say a few words on what an hon. friend had been pleased to call his "crotchet" for reducing the national debt by a general contribution of capital. His (Mr. R.'s) proposition would merely carry further the principle of the income tax. His hon. friend was quite deceived, if he supposed that he ever contemplated the possibility of effecting the object he had described at once. On the contrary, the operation might be extended by numerous instalments over a period of two, three, six, or twelve months. And when the immense benefits which would result from its adoption were considered, he could not think it so Utopian a scheme

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as his hon. friend seemed to imagine it to be.
Mr. Monckthought the best way would be, to abolish the sinking fund, and apply the surplus revenue to the remission of taxes.
Mr. J. Martinsaid, it would not be in the power of ministers to lay their hands upon any sinking fund which might be established, without the concurrence of parliament.
Mr. Humesaid, they had had ample experience of the readiness with which the House assented to any proposal of ministers to interfere with the sinking fund. They had already voted away 324,000,000 l. of the sinking fund. He protested altogether against the establishment of a sinking fund, unless an entire alteration took place in the system upon which it was to be managed.
The House having resolved itself into a committee, Mr. Hume moved, that, instead of fixing the sinking fund at five millions, it should consist of any surplus of revenue beyond expenditure, not exceeding five millions. Upon this, the committee divided: Ayes, 7; Noes, 55. The other clauses of the bill were agreed to.