HC Deb 15 July 1828 vol 19 cc1704-9

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

Mr. Huskisson

said, that in the general view which the chancellor of the Exchequer had taken of our finances, he for the most part cordially concurred: but there was no opinion of his right hon. friend in which he more cordially concurred, than that in which he declared, that we ought to have no Sinking-fund save that which was produced by the surplus of our revenue above our expenditure. Though he was not prepared to quarrel with the proposed reduction in the Sinking-fund, he was disposed to lament that that fund would not he larger in amount. A Sinking-fund of 3,000,000l. was, in his opinion, much too small, when compared with the debt, to the reduction of which it was to be -appropriated. Their first care should be to guard against an increase of the debt, and he was therefore for applying whatever surplus there existed to its reduction. He wished also to state, that, in his view of the matter, to the unfunded debt of the country, a jealous attention ought to be paid. Taking all the circumstances of this unfunded debt into account, and connecting it with the present engagements and advances of the Bank of England, he was satisfied that there was ground for prospective disquietude and alarm. In 1819, when we were called upon to consider of the resumption of cash payments, we were told by the Bank of England, that it was necessary that we should pay them the 10,000,000l., advanced by them to the government on Exchequer bilk. The 10,000,000l. were re-paid; but since then more than that sum had been advanced by the Bank to the government, and that in a manner which placed the money less under their control, than when they advanced it on Exchequer bills, and under circumstances which, should a case of emergency arise, would place the country in a situation of difficulty, and possibly of eventual loss. In 1823, the Bank contracted with the government for what was called the Deadweight, that was the purchase of annuities to the amount of 585,000l. for forty-four years. Now, certainly, at the time this contract was made, it was the expectation, he did not mean to say of the directors of the Bank, but of those who treated with them on the part of government, and also the expectation of the public, that the annuity so purchased by them should be gradually distributed and sold to the public. Otherwise the Bank keeping the whole of the annuity, and paying not less than 13,000,000l. during forty-four years, might as well have had its-capital invested in land, houses, or in any thing else not convertible into the means of meeting other engagements.—Had it been intended, on the part of the directors, to keep the annuity permanently, the natural thing to have done was, to have called together the whole body of the Bank proprietors, and to have stated to them, that such was the nature of the contract, that it was an advantageous arrangement with the government and them, and to have called upon them to advance the necessary capital. In that case the public would have dealt with the Bank as with any other party who made an advance of money. But, as it was, instead of the capital being advanced in order to make the payments to the government, all the Bank did was to lend its credit, without an advance of capital being made on the part of any one person who had a pecuniary interest in that corporation. The difference between such an advance and one on Exchequer bills was very material. If the advance was made on Exchequer bills, in case of emergency they could be redeemed; and the public, if they thought the amount too large, might pay them off; or if the Bank found they were too much in advance, they might claim payment: but now the public had no control over the matter; for there was no possibility of their setting themselves free from any part of the sum without the consent of the Bank. That body had advanced nearly eleven millions on this score; to be added to that was a large sum on account of Exchequer bills; also eight millions in deficiency bills, besides something considerable on the malt duties. The only description of advance in which the Bank was deficient was that on mercantile bills of Exchange. Looking to all these circumstances, and the distant possibility of a change in the situation of the country, he thought it desirable that we should not be placed in a position in which the Bank, in order to do justice to the engagements which it had elsewhere contracted, would be under the necessity of destroying the circulation of the country, or of taking a course which might be inconsistent with the maintenance of our present metallic currency. Not only was it desirable that we should not, for these reasons, be placed in such a position, but also it was desirable, that we should avoid, in order to guard against the greatest of all evils, the possibility of again having recourse to a Bank Restriction act. What had been the result of the course lately pursued? We heard from various parts of the country, that there was at that moment, or was likely to be, an obstructed and straightened circulation, owing to the calling in of the one-pound notes. He did not believe that such would be the effect of that measure; and he knew that in the metropolis there was a perfect plethora of money; indeed, such as had never before been known.—The Bank, at that moment, had deposited in its hands 6,000,000l. of money, which could find no beneficial employment. This was a far greater amount than he had ever known to be lying idle in its hands before. Every banker in London also had large deposits in his hands, for which he could find no employment, consistent with the ordinary operations of banking. If the country came to be placed in a situation in which it would be required to make great pecuniary exertions, a demand for money would arise, and these deposits, amounting- to six millions, would be withdrawn, which would prevent the Bank from diminishing the circulation, to protect the issue of bullion. Under any of the unfavourable circumstances which, in the course of events, must occur, he thought it desirable, upon principles of economy and of security, that considerable efforts should be made. He called upon the government, as soon as possible, to place the unfunded debt upon a more contracted scale. The Bank Restriction in 1797, which continued for a quarter of a century, had produced more calamitous consequences, more confusion, more moral and political evils, than any other measure parliament ever sanctioned. There was no sacrifice which they ought not to make to prevent the renewal of those calamities. The Bank of France, with a capital of 8,000,000l., employed half of it in mercantile discounts, the legitimate use of a banker's funds. The mercantile discounts of the Bank of England were inconsiderable. If the directors were to relieve themselves of the public securities, which they held to an inconvenient extent, in proportion as the circulation was called in by their sale would arise the demand for discounts, and the other legitimate modes in which banks generally employed their capital. He did not mean to say that the safety of the Bank was in danger; but the steps it would take for its own security would distress the other ranks of society, in the same manner as it did in 1825. If the Bank found that they had not so great a demand for discounts as he apprehended, they would have let them reduce their rate of interest. Should we be placed in such a situation as we were in 1825, we should suffer for the advantages we now enjoyed. The signs of those times were obvious to many; and before the event he had himself given warning- of what might happen. The Bank would be safe; but it would be obliged to protect itself, by taking a course which must create alarm in the country, and cause those great fluctuations in the value of property, which were so fatal in commercial communities. He therefore in treated his right hon. friend not to postpone the revision of that part of our finances, which related to the Unfunded Debt, and the manner in which so large a portion of the credit and capital of the Bank was placed beyond that control which it ought to have overall its funds.

Mr. Maberley

was aware of the great inconvenience of the present state of the Unfunded Debt. In 1825, the Bank could scarcely have gone on two hours without a Restriction act. He thought the present system of the deficiency-bills was dangerous. The Bank, by the government anticipating its quarter's revenue, might be in a situation to say, if they did not grant them a Restriction act, that they would not make advances to pay the dividends. The Bank ought never to have had a Restriction act without paying for it to the country. It ought to reduce its rate of discount, and the Sinking-fund should be spent in reducing the Unfunded Debt; for, by purchasing in the 3½ per cents, instead of the Unfunded Debt, the country would lose 200,000l., in the expenditure of the 3,000,000l. of Sinking-fund.

The Chancellor of the Exchequer

said, he entirely concurred in the general principles which his right hon. friend had laid down. With regard to the Bank, he would observe, that the directors were the best judges of its proper management, and that the government had nothing more to do than to watch their proceedings, if their transactions appeared to interfere with the concerns of the country. With regard to what had fallen from the hon. gentleman, he must beg it to be distinctly understood, that he had given no pledge that the surplus revenue should be applied solely to the reduction of the Unfunded Debt. While the government diligently attended to the pecuniary concerns of the country, they would not fail to avail themselves of any circumstances which might appear advantageous for the reduction of the Debt, whether funded or unfunded. But he could not think that it would be at all beneficial to accede to limit the power of the commissioners to the purchase of one particular fund. He did not pledge himself to any particular course of conduct: he only asked, on behalf of the government, that they should be left free and unrestricted, but responsible for their conduct, if they should be found to abuse the powers placed in their hand by parliament.

Mr. Hume

said, that ministers ought to be compelled to apply the surplus according to some settled principle, and to redeem some particular Stock. He could not approve of the principle of the bill; because it obliged the government to appropriate three millions to the redemption of the Debt, until parliament again met; and if the consolidated fund did not yield this sum, it was only establishing a Sinking-fund with two millions less. The bill was inconsistent with the resolution of the Finance Committee, and therefore he objected to it.

The bill was read a second time.