HC Deb 25 March 1834 vol 22 cc637-45
Mr. Brocklehurst

rose, in pursuance of a notice he had given of his intention to move for a Select Committee, "To inquire into the constitution of the South-Sea Company, with a view to pay off or transfer the funds of the said Company to the Consolidated Fund, and to provide for the payment of the dividends thereon by the Bank of England." The hon. Member said, that in bringing this Motion under the consideration of the House, a very slight glance only at the origin of the South-Sea Company, and its progress to the present time, might be requisite, as we had to deal with it as we found it, rather than in reference to what might be its course of proceeding in times gone by. Its origin took place in the reign of Queen Anne, for during the long war with France in that reign, the payment of the sailors of the royal navy being neglected, they received tickets instead of money, and were frequently obliged to sell those tickets at a discount of forty or fifty per cent. By this and other means the debts of the nation unprovided for by Parliament, amounting to 9,000,000l. and upwards, fell into the hands of money-lenders; on which Mr. Harley, the then Chancellor of the Exchequer, proposed to allow the proprietors of these debts and deficiencies six per cent. per annum, and to incorporate them for the purpose of carrying on trade to the South Seas, under the title of "The Governor and Company of Merchants of Great Britain, trading to the South Seas and to other ports of America and for the encouraging the fishery, &c." Various acts subsequent to the Act of Incorporation had been passed for the regulation of the affairs of the Company; some of the acts to enable them to increase their capital, others requiring a reduction, and among them a singular one, the 8th of George 1st, enabling them to dispose of effects in their hands by way of lottery. Above thirty acts connected with the Company he had examined into. The year 1720 was the period of the bubble speculations, the history of which was just now worthy the consideration of the speculative portion of the public. In 1748, the Company had virtually ceased to be a trading Company, and were merely a convenient channel through which the Minister of the time managed the public monies, and from that period to 1806, their affairs remained comparatively undisturbed, when the growing state of the trade of the country called for some changes as to the monopoly possessed by the South-Sea Company, and, by the 47th of George 3rd, some of their exclusive privileges of trading and granting licenses were repealed. The most important act affecting the company was the 55th of George 3rd, c. 57, which repealed the provisions of all former acts, granting exclusive privileges of trade to the South-Sea Company, and this Act indemnified them for the loss of such privileges, by raising the interest on their capital from three up to three and a-half per cent; and to secure this increase of interest, the Act established a guarantee fund, to be raised out of certain duties on blubber and other merchandise imported from within the limits of their exclusive trade. A clause of this Act empowered the Government, on completion of the Guarantee Fund, to pay the amount over to the stock-holders and to dissolve the Company. These were the features in the extraordinary history of the Company that appeared to him worthy of detailing to the House. He now begged to call the attention of the House to some facts as to the present affairs and management of the Company. On turning to the returns of our na- tional expenditure, the sum of 5,900l. 9ls. 8½d. appeared to be annually paid for the management of their capital; and on going further, he observed this remarkable item of 10,174l. 18s. 1d. to make good the annual deficiency of profits. At first sight, it occurred to him that many other interests, both commercial and agricultural, might at times find their way to the Treasury with similar claims for indemnity for loss of profit, and it led him to take pains, so long ago as last Session, to trace out the origin, progress, and present circumstances of the Company, and it soon became evident to him that this Company was not only a cumbrous piece of machinery, but also a channel of unnecessary expenditure of the public money. The capital of the Company now consisted of 3,662,784l. 8s. 6d. stock, which was originally lent to Government at three per cent., and when, by the 55th of George 3rd, the Company gave up the privileges of trade, though they had long ceased to exercise them, the interest on their stock was raised to three and a-half per cent., until such time that the Guarantee Fund should accumulate to 610,464l. 1s. 6d., when it should be in the power of the Government, on paying over this sum to the proprietary, to annul the charter and to dissolve the Company. By the balance-sheet of the South-Sea Company it appeared they had the charge of paying the dividends on three small portions of the National Debt,—namely, 3,497,870l. 2s. 7d. Old South-Sea three per cent. Annuities, 2,460,830l. 2s. 10d. New-South Sea three per cent. Annuities, 523,100l. three per cent Annuities of 1751. Now, he must here call the attention of the House to the broad distinction that existed bewixt the proprietors of South-Sea stock and the receivers of these annuities; these latter had nothing to do with the Company beyond receiving at their hands the dividends as they became due from the Government, the interest, three per cent., being the same as on three per cent. Consols and three per cent. reduced, and the dividends were paid at the same periods of January and July, and April and October, and to these annuitants it was the same thing whether they received their dividends at the counter of the South-Sea House, or at the counter of the Bank of England; but, by consolidating these small annuities with the Consols and Re- duced, a great advantage would be conferred on the annuitants, for owing to these stocks being in the hands of the South-Sea Company, and being of small amount, they were not often inquired after by the public, and generally sold for one and a-half to two per cent. less in the market, although the dividends were the same, and also the periods of payment the same. But the Government might, he believed, save the public the 5,900l. paid for management, as he had good reason to suppose, that the Bank of England, for the advantage of the balance of dividends lying in their hands, would consent to manage these small sums free of charge to the public, as no extra charge clerk would be required to their present establishment, and his reason for saying so was, that he understood the Bank was now arranging to manage the Exchequer-bills gratuitously for the same consideration—that of the balances it would leave in their hands. He would now briefly refer to the interests of the real proprietors of the South-Sea Company, and he must in limine state, that he was not one who would sacrifice individual interests at the shrine of public good; the protection of these interests formed with him a primary object of solicitude, and he was happy to say, that whatever anxiety he felt on this point, had within these few days been entirely dissipated by a letter which he had received from some of the principal and most respectable proprietors in and around London; and although their letter went to confirm his previous views, it would be only an act of justice towards those gentlemen if, with the permission of the House, he should read their letter, in which they candidly set forth the advantages that would result to themselves and the country by the extinction of the South-Sea Company. The hon. Member was proceeding to read the letter referred to, when

Mr. Cobbett

said, that the hon. Member had no right to read his speech.

The Speaker

said, that it was undoubtedly out of order for a Member to read his speech, but to read documents and refer to details was not only not out of order, but a general adoption of the course would lead to the avoidance of many mistakes.

Mr. Brocklehurst

said, that his reasons for going into this detail were, that the country might know what he was doing.

The hon. Member then read the letter referred to, which was as follows:—

To John Brocklehurst, Esq. M.P., &c., March, 1834. Sir—We, the undersigned holders of South Sea stock, beg leave to make known to you our unqualified approval of the Motion you are about to submit to Parliament for an inquiry into the state and affairs of the South Sea Company. Should this inquiry be granted, we feel quite confident that it will be found equally advantageous to all parties to put an immediate end to the present unsatisfactory state of that Company. It may be well to recollect, that when the tonnage duties were originally appropriated to the establishment of the guarantee fund, they were very productive, and continued so for some years, but Government having remitted part of those duties they rapidly decreased, and for the last eight or nine years have only produced the insignificant sum of 3,000l. or 4,000l. per annum, consequently the completion of that fund must be protracted to a period far more remote than was ever contemplated by either party. This is felt as a severe hardship by the proprietors of South Sea stock, who only wait that event in order to make a division of the surplus balance in the hands of the Company, amounting, as per the half-yearly statement, to the sum of 193,000l. But this is not the only injurious effect that will result to them from this unexpected delay, for until some favourable change takes place in the affairs of this dormant company, the proprietors must continue to suffer from the greatly depreciated price their stock invariably bears in the stock market. We trust, Sir, you will not consider it presumption in us, if we venture to suggest, that a prompt and effectual mode to remedy these evils would be for Government to annul the charter and dissolve the company. This may at once be effected by Government's anticipating the completion of the guarantee fund, and making over the amount to the Company; this operation to be followed by converting the capital of the Company into 3 per cent consols, and incorporating the same into the great mass of the 3 per cent Consolidated Bank annuities. This process would be found productive of the following beneficial results to Government:— 1st. The extremely complicated accounts now subsisting, and which, without this, must continue to subsist to a very distant period, would instantly be done away with. 2nd. An annual saving of several thousands would also be effected. 3rd. A large amount of arrears, consisting of unclaimed dividends, now in the hands of the Company, would be transferred over to Government, and thus become available for the public service. 4th. The Capital of the Company, amount- ing to about 3,660,000l., is at present a bona fide money debt on the part of Government, but by converting that amount into a like sum of 3 per cent consols, Government would actually redeem that portion of the national debt at the rate of somewhere about 90 per cent, instead of paying it off at the par of 100, thus securing to the public an eventual saving of no less a sum than 300,000l. to 350,000l. sterling. It may at first sight appear incompatible that an operation of this description should prove equally beneficial to both the contracting parties, but it need only be kept in mind, that on the dissolution of the Company the heavy charge of 11,000l. sterling per annum, now expended for the maintenance of the establishment, would instantly cease. A considerable sum would also be produced by the sale of those valuable and extensive premises now occupied by the Company in Thread-needle-street. From all these considerations, we are induced to hope, that no trifling obstacle or legal technicality will be allowed to interfere with the adoption of a measure that undeniably will prove profitable both to the Government and the Company, more particularly as, on reference to the records of Parliament, it will be seen that several chartered companies have at various times been dissolved when found to have become, like our own, totally inefficient and useless. We have only to add our conviction, that the general body of proprietors will readily unite with ourselves, who have a large interest in the funds of the Company, in assenting to any equitable arrangement Government may think proper to propose for effecting the desirable object herein suggested. Be assured, Sir, by persevering in your patriotic efforts to promote a measure so manifestly conducive to the general good, you will not only insure the gratitude of the individuals who now address you, but that of the public at large. Believe us to remain, with the greatest respect, &c.,

J. CAPEL. R. WILLIAMS, (for the Hope Assurance Company.)

The subject had long been pursued by a very extensive and very respectable proprietor, Mr. Mocatta, who had done him the favour to place in his hands a few very important memoranda, concisely elucidating the advantages to be derived from the change; which, with the permission of the House, he would read. The hon. Member accordingly read,

A further elucidation of the consequences resulting from the dissolution of the South Sea Company.

The complex machinery which now connects it with Government will be at once removed, whereby the Government financial statements will be simplified and freed from the obscurity in which that branch of their accounts is at present involved.

The Company possess the right of issuing their bonds or notes, and should they at any future day avail themselves of that privilege (an event highly probable), it must greatly interfere with the interests of the Bank of England, and by creating a redundant paper currency prove equally detrimental to the country at large.—Annul the charter, and this evil is averted.

The operation of the guarantee fund at its present rate of accumulation will on an accurate calculation occupy a period of 23¾ years, but its duration may be greatly prolonged from the undermentioned circumstances—viz:

By a rise in the price of the Government funds.

By a remission or diminution in the product of the South Sea duties.

By any property or income-tax attaching to the public funds.

By a reduction of interest on the Government funds.

Either of these events would essentially diminish the means of accumulation, and in that case the completion of the guarantee fund could not be effected in a less period than 25 or 26 years.

The dissolution of the Company by the Legislature would clearly be conferring a great boon on the proprietary, to whom the results would be sufficiently advantageous without requiring from Government any bonus whatever for the surrender of their charter.

The pecuniary results to Government will appear by the following statements.

The charge now annually paid by Government is as follows:—

For managing the South Sea annuities and 3 per cent 1751 5,900
The Company's deficiency, as per half-yearly statements. 9,374
On dissolving the Company, Government must immediately complete the amount of stock now intended to be produced by the slow operation of the guarantee fund—namely, 3 per Cts.


Deduct the amount already accumulated, 223,920
So that the Government must at once give the holders of South Sea stock credit for 386,544
The money value of which, taking consols at 88 is Sterling


But if Government were to adopt
Per Annum
this course, they would be relieved from all future payments of the above mentioned charges, amounting to 15,274
(which, for the reasons before assigned, it is assumed they will otherwise he chargeable with for a period of 25 years);
And they would receive for their own use and benefit, during the 25 years, the South Sea duties, estimated at 3,200
Government would then, also, have the advantage of holding for the 25 years arrears of dividends, as shown in the half-yearly statements of the Company's accounts amounting to, £116,361
And a further sum of 38,000
Being arrears of the Company's trading and bond debts, making, together £154,361
This sum invested at an interest of:3½ per cent per annum, will produce 5,400
Gross annual gain for 25 years £23,874
From this, however, must be deducted the Bank charge for managing the Government funds, now managed by the Company—say about 10,500,000l., at 300l. per million 3,160
Leaving Government in possession of an annuity for 25 years £20,714
The worth of which annuity, calculated at the present market price, is 346,968
Deduct the present value of the 386,544l. 3 per cents to be advanced to the South Sea proprietary 340,159
So that there would be an actual gain to Government by the projected operation of £6,908

Besides Government would recover into its own hands the sum of 116,000l., being the amount of arrears on the public funds, and which appeared by the Company's statements to be the usual balance in hand, with very little variation, for many years past; and Government would also be put into immediate possession of the sum of 38,000l. being the amount of the unclaimed bond and trading debts of the Company. These debts have been outstanding during a period of eighty to 100 years; it may be fairly presumed that no claimant will ever appear, consequently this sum of 38,000l. must absolutely devolve to Government.

He should add only another reason or two why this Company should be extinguished; they negociated in vain for the dead weight, and the Bank undertook it on better terms; and in 1832 and 1833, when the Government were driving a bargain with the Bank, this South-Sea Company, if it had possessed any talent for business, might have come forward with a proposal to take a good slice of the management of the debt on better terms; but it slumbered at its post, and evinced a total inability to serve the public; the golden opportunity for twenty years had been allowed to pass away. The South-Sea House might be applied to the use of some of the projected establishments for national registry, poor-law commission, &c.; and if a fair price were given for it, raise the means for a retiring fund for the clerks. The Sub-governor and Deputy-governor, and twenty-one Directors, could have no cause to complain, as they were elected for three years, two and a-half of which were expired, and by the time the affairs were wound up, they would be entitled to the remainder of their sinecure pay, and could set up no objection on the plea of injured vested rights. He had entertained a hope that the Government would have had an opportunity before the recess to have taken up the subject; but as this was not the case, he should, with permission of the House, for the present, withdraw his Motion for a Committee, and take as early an opportunity as possible after the recess to move for it; and, as a ground-work for this future proceeding, he should beg to move that the returns he held in his hand be laid on the table. They related to the state of the affairs of the South-Sea Company up to the 5th of April, 1834, and also to the transfers of stock made by the Company up to the same period.

Motion agreed to.