HC Deb 14 March 1823 vol 8 cc579-89

On the order of the day for the third reading of this bill,

Mr. Grey Bennet

begged to remind the House, that they were now called upon to give their last vote for this most important bill. It was necessary for them, however, to pause. The question for them to consider was—Would they, or would they not, reduce taxation? Would they, or would they not, comply with the urgent petitions from all parts of the kingdom, calling on them to reduce taxes to their minimum, and to confine their amount to the positive wants of the country? He objected to the passing of the bill on two grounds: the first, that there was no necessity for a sinking fund; the other, that the proposed plan was not likely to effect its objects. Ever since the demise of Mr. Pitt, there had been the most violent departures from the original principle of the sinking fund. It was because the scheme of an hon. friend of his (sir H. Parnell) went to place any sinking fund that might be established out of the control of ministers, that he gave it a preference over that of the chancellor of the exchequer. How hon. gentlemen, who knew the distress which the country at large was at this moment enduring, could tolerate the principle of raising three millions in taxation above what was absolutely necessary, for the purpose of maintaining public credit, was to him a matter of utter astonishment. Feeling that the bill was most pernicious to the best interests of the public, he should move, as an amendment, "That it be read a third time on that day six months."

Mr. Whitmore

said that, looking to the situation in which the country stood, he thought a sinking fund was absolutely necessary for its preservation. If he were asked to adduce one argument stronger than another for the maintenance of such a fund, he should refer to the very beneficial operation effected last year in the reduction of the interest on a portion of the debt—an operation which could not have been achieved but for the keeping up of the sinking fund. Looking to the present state of that fund, he thought that a further operation of a similar beneficial tendency might speedily be effected through its agency. He regretted, that the proposition which was brought forward the other evening, to limit and confine the sinking fund to the amount of the positive surplus of income over expenditure, was not carried. The balance of 2,000,000l. on the dead charge, as it had been called, was, he felt no hesitation in saying, one of the greatest juggles that was ever attempted to be practised in that House; and after the merited ridicule which it had received, he had hoped that ministers would have given it up. If it were practicable to make an alteration in the bill to that effect, he should certainly vote for that alteration; but if he was obliged to take the whole bill as it was, or reject it, then, believing a sinking fund essential for the preservation of the credit of this country, he should vote for the original motion.

Mr. Hume

said, he was anxious to do away the error into which his hon. friend had, fallen, in attributing to the operation of the sinking fund that rise in the 5 per cents, which had enabled the finance minister last year to effect their reduction. It was evident, that there could be no real sinking fund but that which arose from a surplus revenue. The chancellor of the exchequer had, on a late occasion, brought down to the House the official returns of the amount of the sinking fund, from the 5th Jan. 1816, to the 5th Jan. 1823. So far, however, was the right hon. gentleman's. statement, that the reduction of the 5 per cents had been effected through the operation of the sinking fund, in raising the funds, from being borne out by the facts contained in those papers, that they were completely contradicted by them. In 1816, the revenue was 77,133,281l., the expenditure 83,896,768l. In 1817, the revenue was 57,650,589l., the expenditure 58,544,049l. It thus appeared, that in those two years, there was an excess of expenditure over the income derived from taxation, of 7,656,947l. In the next four years, 1818, 1819, 1820, and 1821, there was in each year a small surplus of income over expenditure. The aggregate of the six years was, of income, 373,590,658l.; and of expenditure, 372,822,437l., being an excess of revenue of only 768,221l. To that sum must be added a balance of loans funded in 1815, and brought over to 1816, amounting to 5,939,803l.; as also an excess of charge amounting to 2,856,862l. which had crept into the finance accounts of the expenditure of 1816. The total surplus, therefore, was 9,564,886l. of income over expenditure in the six years, which, if it had been applied in the simplest and most direct way in reducing the debt, would have effected a diminution in the annual charge exceeding 500,000l. per annum; whilst, on the other hand, by the very complicated system followed of raising loans, issuing exchequer bills, and afterwards funding them to the extent of 57 millions, exclusive of 36 millions borrowed from the sinking fund, and thus transferring and retransferring about 120 millions of capital, instead of any diminution, although there had been an actual diminution of charge within the six years in question to the amount of about 230,000l. per annum, by the expiry of life and other terminable annuities, and of 941,500l. per annum, by the reduced rate of interest at which exchequer bills had been issued—notwithstanding all these circumstances, the charge on the debt, funded and un funded together, for the year 1821, considerably exceeded the charge for any preceding year. By the papers on the table, it appeared, that in 1816, when there was an excess of expenditure to the amount of 6,763,487l., the chancellor of the exchequer gave the commissioners of the sinking fund the sum of 13,047,317l., with which they relieved stock to the extent to which it would go; although it was evident, that the deficiency of income ought first to have been supplied. In 1817, the excess of expenditure over income was 893,460l. Still, however, the chancellor of the exchequer gave 13,555,722l. to be employed by the commissioners of the sham sinking fund. In 1818, though the surplus of revenue over expenditure was only 1,795,513l. the chancellor of the exchequer gave the commissioners 14,418,295l. In 1819 the chancellor of the exchequer gave the commissioners for the reduction of the debt 9,285,677l.; in 1820, 4,101,025l. and in 1821, 4,324,574l.; so that, during the six years to which he had referred, the chancellor of the exchequer enabled the commissioners of the sinking fund to purchase stock to the amount of 58,732,610l., although the actual surplus in those six years, was no more than 9,564,886l. The fact was, that the chancellor of the exchequer had created a new debt of 57,500,000l. to enable him to make up the money which he had given to the commissioners. How was it possible that such a proceeding could have any beneficial effect on public credit, or the price of the funds? With regard to the present measure, it was precisely the same in principle (although on a smaller scale), as the system which had led to the results that he had stated; and he therefore gave it his decided opposition. He was convinced that, until all the different interests of the country had recovered sufficiently to bear the taxation at present imposed upon them, we ought to abstain from adopting any sinking fund at all; so that at present, he was averse even to the application of the 3,000,000l. of real surplus to that purpose. Whenever a real surplus should be so applied, it ought to be in converting permanent into long annuities, so as to afford the prospect of an actual cancelling of a portion of the debt.—But, he had a more serious objection to make to the bill than any he had yet stated. It called on the chancellor of the exchequer to pay 5,000,000l. to the commissioners of the sinking fund, even if the surplus revenue should not exceed 500,000l. The consequence therefore, in that event would be, that the chancellor of the exchequer must go into the market, with exchequer bills, to raise money to supply the deficiency. In fact, the whole of the late vicious system would be travelled over again. He could show, by accurate calculations, that if there had been no sinking fund during the last five years, the country would have been subjected to a charge of only about 28,530,000l. for that which cost it about 31,392,000l. But for the hocus pocus of the sinking fund, the country would have been less in debt at the present moment by the difference between those two sums. He called upon the House, therefore, to pause before they agreed to the bill.

The Chancellor of the Exchequer

said, that the hon. member seemed to assume, that he (the chancellor of the exchequer) had, on a former occasion, affirmed, that the reduction which had taken place in the funded and unfunded debt, and in the charge which they imposed upon the country, had been entirely owing to the sinking fund. Now, he had affirmed no such thing. His argument was simply this—that, if the House took the amount of the funded and unfunded debt on the 5th of Jan. 1816, they would find, that it was 864,000,000l.: that if they took the amount of the funded and unfunded debt on the 5th Jan. 1823, they would find that it was 840,000,000l.; it followed, therefore, as a necessary consequence, that in the course of the seven years, by some process or other, there had been an actual reduction of debt to the amount of 24,000,000l. But he had never said that 'this reduction was entirely owing to the operation of the sinking fund. On the contrary, he knew that it was not so. But he did maintain, that by some operation or another, there had been a reduction to that amount made during the last seven years. Why, then, should they now decide against carrying that reduction still further? The measures adopted by government had enabled them both to provide for the reduction of the debt, and to lessen the burthens of the people, and, therefore, ought to be persevered in.

Mr. Tierney

did not rise with the intention of denying that a reduction of the amount of the debt had been effected. That did not appear to be the question at issue. The hon. member for Aberdeen merely wished to show, that no reduction of debt had been caused by the operation of the sinking fund; and, if the clear statement of the hon. member had failed to convince the House of that fact, it would be useless for him to attempt, to do so. He regretted that his hon. friend had proposed to postpone the third reading of the bill for six months. He thought that a delay of six weeks would afford the House sufficient time to determine what measures it would be necessary to adopt. He still thought, that more good would result to the country from the remission of taxes, to the amount of the sinking fund, than from the maintenance of that fund; but, as the feeling of the House was against him, he would not trouble them with one word more respecting it. He would confine himself to the amount of the surplus revenue over expenditure; and that brought him back to the dispute of a former night, as to whether the surplus was 5,00000l. or 3,000,000l., and whether the operation proposed to be performed on what was called the dead weight, would furnish 2,000,000l. to be applied to the redemption of the debt. He implored the House to consider those questions maturely. He believed the chancellor of the exchequer, whatever ne- cessity he might suppose to exist for the maintenance of a sinking fund, would not desire to have one which did not consist of a real surplus of income. He (Mr. T.) would contend, that, according to the papers before the House, the sinking fund consisted of only 3,000,000l., and that there was no surplus revenue beyond that amount. The answer which the chancellor of the exchequer had given to him on a former evening, appeared to have been satisfactory to the House. He had understood the right hon. gentleman to say, that, by his new plan, with respect to the half pay and pensions, the sum of 2,000,000l. would annually be saved to the country; that, in fact, instead of paying the whole amount of the pensions and half pay, as at present, the sum of 2,800,000l. would be spread over a surface of 45 years, in the payment of annuities, which would leave 2,000,000l. available in the hands of parliament, for any purpose which might be considered proper, and which might, therefore, be applied to the reduction of the debt. That being the case, nothing in the way of benefit could result from the operation. Dealing in round numbers, he might say, that 5,000,000l. was, at present, to be paid to persons who had claims upon the government in the shape of pensions and half pay; and, it should be remembered, that 2,800,000l. was, by act of parliament, provided out of the sinking fund, for the payment of those claims: that would leave about 2,000,000l. to be provided for. The chancellor of the exchequer said, that he would make an arrangement with the parties, by which they should accept annuities for the term of 45 years, instead of receiving the two millions which would be left in his hands. With these two millions the right hon. gentleman proposed to go into the market, and purchase perpetual annuities in the three per cents. Now, how it could, be maintained, that these two millions were not borrowed, he could not understand; and he was equally at a loss to perceive, how a single shilling could be saved to the country by the operation, more than would have been obtained by continuing to pay off dead weight as it was paid at present. By passing the bill, the House would be sanctioning two things, as much opposed to each other as black was to white. He could not perceive the wisdom or the efficacy of the plan. If a person, having claims upon his estate to the amount of 2,000l., should burthen his property with annuities for 45 years, and employ the 2,000l., which would be thus set at liberty, in improving his estate, by digging a canal, or by other means, he would act wisely; but, if the same person employed the money in the redemption of another debt, he would gain nothing by the operation; in fact, he would lose, in consequence of having to pay for stamp duties, and the employment of lawyers. The effect of agreeing to the bill, would be to prevent the House from taking off any more taxes; and yet, when the chancellor of the exchequer's plan was first introduced, it was supported on the ground that it would of rd an opportunity for the reduction of taxation. He hoped, therefore, that the House would agree with him as to the necessity of confining the sinking fund to 3,000,000l., and not give the chancellor of the exchequer the other 2,000,000l., which would not advance the redemption of the debt at all. He entreated gentlemen who desired to see a further reduction of taxation effected, not to let slip the only opportunity which now remained of attaining their object. The House had acted wrong in approving of the plan with respect to the dead weight, because the principle of it was directly in the teeth of that of the sinking fund; but, having done so, in the name of God, let them stick to it. For his own part, he should not consider himself at liberty to vote for the repeal of a single tax after the passing of the bill.

Mr. Huskisson

expressed his satisfaction at finding, that after the numerous discussions which had taken place on this question, there were so many gentlemen favourable to the principle of' maintaining a sinking fund. He was glad to find that even the right hon. member who spoke last, as well as the hon. member for Portarlington, had in some measure come round to the opinion, that it was necessary to possess a sinking fund composed of the surplus revenue, to be applied to the reduction of the debt; the last hon. member's main objection to it, arising out of a fear that it would operate as a temptation to extravagance on the part of ministers. But, ministers could not touch the sinking fund without the consent of that House. It was not fair to charge ministers with extravagance, for having, on former occasions, with the consent of the House, disposed of portions of the sinking fund in a manner most con- ducive to the interests of the country. An available sinking fund was necessary to the public credit; and unless they acted on that principle, they would place the country in a situation which would prevent them from acting with promptness and energy, in the event of any future contest. It was to the punctuality with which public credit had always been supported, that this country owed the elevation to which she had risen. He would admit, that the real surplus of income over expenditure, after deducting the taxes remitted, amounted only to 3,000,000l.; and he would admit, that the other 2,000,000l. which were to be added to the sinking fund, were not derived from surplus revenue, but the operation with respect to the half-pay, which had been described by the right hon. gentleman. The country had to pay annually 4,800,000l. for the half-pay and pensions; and by the plan of last year, annuities were granted for the term of 45 years, by which 2,000,000l. a-year would be set at liberty, and applied to the redemption of debt. The hon. member for Portarlington had asked, from time to time, why not apply the money us the lives dropped in? The hon. baronet had answered that question, by showing, that it would be more advantageous to obtain possession of the whole sum by one operation. It had been objected, that the plan would prevent the remission of taxation. So far from that being the case, the very recommendation of the plan was, that it enabled the House to relieve the country from taxes, to the amount of the sum which would be saved in consequence of its being carried into effect. So far from the plan tying up the discretion of parliament with respect to the remission of taxation, parliament bad already taken advantage of the opportunity which it afforded for the remission of taxation, and had thus in a manner pledged itself to the support of the plan. He believed that, in future, the true principle of a sinking fund would be adhered to. He could not concur in the gloomy anticipations of the rapacity of ministers with respect to the sinking fund. It was not probable that circumstances would again rise, which would induce parliament to depart from the principle laid down in 1792, with regard to the sinking fund. If the war had terminated in 1798 or 1799, which was about the ordinary duration of wars, that principle would never have been broken in upon. He wished the House to consider what would be the consequence of postponing the bill for six months. According to the law as it stood, the government would be obliged to supply the commissioners for the reduction of the national debt with 4,000,000l. to be applied to the purchase of stock between the 5th of April and the 5th of July. In order to do that, they would be obliged to borrow money; and thus would they be thrown back to the old system of raising loans, which had been so properly condemned.

Lord A. Hamilton

contended, that the sinking fund, as it was proposed to be applied, was not calculated for an effective reduction of debt. We had, since the year 1816, had 9,000,000l. of surplus, and no reduction of debt; and indeed the experience of the last thirty years clearly proved, that we had no effective sinking fund. As far as a sinking fund went, he thought the plan of the hon. baronet a sound and just one; for it would tie it up from the hands of ministers, who had already abused it. A great objection to the bill was, that it would, to a certain degree, prevent the remission of taxes.

Mr. Baring

said, he had some difficulty as to the vote which he should give on this occasion. He was favourable to the principle of a sinking fund, but he could not see the justice or policy of making that sinking fund appear more than it really was. It was now admitted, that we had only a sinking fund of three and not one of five millions. This plan was not the offspring of the present chancellor of the exchequer. It had a nearer relation—his predecessor in office—who had left the child at his door, and he believed the right hon. gentleman would be much obliged to the House if it would enable him to throw the baby, basket and all, into the river. With respect to the plan of the hon. baronet, he thought it would not have been a bad one, if it had been applied to the reduction of the 5 per cents last year; but it could not be applied to the 3 per cents without the consent of the holders of stock; which could not be well calculated upon, because there would be a difficulty of selling the new stock in the market. In order to encourage purchasers, some advantage must be held out; and, in that case, less money would be obtained than if government laid out its stock otherwise. But suppose some advantage gained by it, would it not be counterbalanced by the loss of that simplicity in the public accounts which was so desirable, but which could not be continued in the new plan? He did not wish to see the bill pass in its present complicated form. If the motion was negatived, he would then take the sense of the House on limiting the sinking-fund to three millions; and then he hoped the chancellor of the exchequer would be prepared to give up altogether, or defend, the child of his predecessor. It was true that, besides the three millions, the public had a beneficial interest in the life-annuities for 45 years, which would be increasing yearly; and he had no objection to a value being set upon it, even of the sum stated; but he could not consent to see it now made that which it was not in reality—a surplus which should be calculated upon as real sinking fund.

Mr. Haskisson

observed, that he had not said, that we had only three millions applicable to the debt, but that we had only an excess of three millions of taxes paid into the exchequer; but he did say, that if the proposed plan were adopted, we should have a sinking fund of five millions.

Mr. Ricardo

said, that he felt great delight at the admissions which had at length been made, as to the real amount of the sinking fund now in the exchequer. That pleasure, however, was somewhat qualified, by finding that the House was now called upon to augment this real sum of three millions to the sum of five millions. The chancellor of the exchequer, a few evenings ago, had said, that he did not think there was any hocus pocus in his plan. The House, after that declaration, could scarcely expect to be called on to vote that there was at present a surplus of five millions. An act of parliament could not create a surplus where it was not. As to the objection which had been made against the plan of the hon. baronet, that it might not be agreed to by the holders of the 3 per cents, it had much weight. The plan of the hon. baronet did not presume any such consent. He only proposed, that a trial should be made whether or not the public would consent to it. He proposed to convert a certain sum, say 50,000,000l. from 3 per cents to 4 per. cents. Why should not ministers try the experiment? The public opinion would thereby be ascertained. They did not want grounds for estimating the probable event of that plan. There were then long annuities in the market, of which 37 years remained unexpired. Taking them at 4 per cent at 19 years purchase, they would be worth 75 or 76. If ministers, therefore, could go to market to sell the 4 per cent annuities at 37 years for 76, they might buy 100l. three per cents at less than 76. It was said, that we had reduced 24 million of debt since 1816. Any one would imagine, in the way this was put, that the reduction was the effect of the sinking fund. It was no such thing. The reduction was occasioned by changing one kind of stock into another. We thus lessened the capital, but we did not diminish the charge; except to a very trifling amount. He would prefer being without any sinking fund, to one upon the plan now proposed; and he was sure, that if we were, public credit would not suffer. He would therefore support the amendment, and if that were negatived, then he would support the proposition of his hon. friend (Mr. Baring.)

Mr. Ellice

thought there was much inconsistency in the measure before the House. He did not see how he could vote against the bill, seeing that it got rid of the old machinery of the sinking fund, which was so objectionable; at the same time, he did not wish to support that part of the plan, which presumed a surplus of two millions where it did not exist. The best way would be to postpone the measure for six weeks.

The House divided on Mr. Bennet's Amendment: Ayes, 59; Noes, 109.

List of the Minority.
Abercromby, hon. J. Hamilton, lord A.
Althorp, visc. Hill, lord A.
Barrett, S. M. Hughes, W. L.
Benyon, B. Hurst, R.
Bernal, R. Hutchinson, hon. C. H.
Birch, J. James, W.
Blake, sir F. Jervoise, G. P.
Boughton, sir W. Lamb, hon. G.
Browne, Dom. Lambton, T. G.
Calcraft, J. Lemon, sir W.
Calvert, C. Lennard, T. B.
Campbell, W. J. Lethbridge, sir T.
Creevey, T. Leycester, R.
Davenport, D. Lushiligton, S.
Denison, W. J. Leader, W.
De Crespigny, sir W. Maberly, J.
Duncannon, visc. Macdonald, J.
Dundas, C. Marjoribanks, S.
Fergusson, sir R. Monck, J. B.
Foley, J. H. H. Normanby, visc.
Guise, sir W. Ord, Wm.
Pares, T. Titchfield, marquis
Price, Robt. Webb, E.
Poyntz, W. S. Wilson, sir R.
Pym, F. Wood, M.
Ridley, sir M. W. Wyvill, M.
Robarts, G. J. TELLERS.
Robinson, sir G. Hume, J.
Sefton, earl of Bennet, hon. H. G.
Smith, W.
Talbot, R. W. Anson, sir G.
Tierney, right hon. G. Burdett, sir F.

On Mr. Baring's amendment, to leave out the words "five millions," in order to insert "three millions," the House again divided: Ayes, 72; Noes, 100. The bill was then read a third time, and passed.