§ SIR H. WILLOUGHBYhere rose, and said, he wished to call the attention of the House to two or three points of recent financial operations. At the commencement of the present Session the right hon. Gentleman the Chancellor of the Exchequer, on behalf of Her Majesty's Government, appeared to lay down the very important principle that, though we were carrying on an 1489 expensive war, the supplies which would be necessary to be raised within the year should be defrayed by funds derived from taxation within that year. Now, he very much doubted the possibility of their succeeding in that object. The first question he wished to ask was, how we stood in that respect? The first Budget of the right hon. Gentleman assumed an expenditure of 56,000,000l., and a short time afterwards that estimated expenditure was increased to 62,000,000l. He apprehended it was pretty certain that, including the Vote of Credit of 3,000,000l., the expenditure of the country during the year would be from 64,000,000l. to 65,000,000l., and, indeed, he greatly suspected that that would not be the whole expenditure within the year, when we came to the end of the financial year 1854–5. Taking it, however—as it appeared from the papers on the table of the House—at something between 64,000,000l. and 65,000,000l., the question he wished to put to the right hon. Gentleman was this—Would the expenditure be defrayed by taxes within the year; or, if that were not possible, and the principle which was laid down at the commencement of the Session could not be carried into effect, to what extent would the right hon. Gentleman be compelled to abandon that principle? Or, in other words, what amount of debt, in some shape or other, must this country contract in order to meet the amount of its expenditure? In addition to the ordinary expenditure, he would remind the right hon. Gentleman that there was a little bill to the amount of some 805,000l. presented by the East India Company for the balance of expenses during the Chinese war, and he should be glad if the right hon. Gentleman would explain whether this entered into his calculations. There was another point to which he wished to direct the attention of the right hon. Gentleman and of the House. He observed that the right hon. Gentleman had been selling savings bank stock; and he (Sir H. Willoughby) confessed that he took a very serious view of that operation. It appeared that in the month of June last the right hon. Gentleman had in ten sales disposed of 617,000l. worth of three per cent savings bank stock, at prices varying from ninety-one to nicety-four and a fraction. He also perceived that in the same month the right hon. Gentleman had bought on account of the savings banks 750,000l. of Exchequer bills. [The CHANCELLOR of the EXCHEQUER: Not 1490 Exchequer bills.] Well, perhaps, the right hon. Gentleman would give them some explanation upon that point; but he (Sir H. Willoughby) had certainly understood that those were the bills which had been bought. At all events, some species of public bills had been purchased by the right hon. Gentleman to that amount; and, in his opinion, that was a very serious transaction. Now, he wanted to know if the House could think it a safe system of finance that, with the large amount of stock to the credit of the savings banks, any Chancellor of the Exchequer should be allowed to exercise a power of selling savings bank stock and of buying any species of bills? Could it be right and fair that any Chancellor of the Exchequer should have this general power, without the knowledge of the public and without the authority of this House, to convert this stock and to buy bills? This seemed to him a most dangerous power—one which was most injurious to the savings banks, and which was also a most injurious transaction as regarded the public, who looked to the stocks as operated upon only by sales between individuals or by such transactions as were authorised by that House. He would also ask, did the right hon. Gentleman contemplate converting any of this stock into new three per cent stock? It was now in the power of any Chancellor of the Exchequer, without leave or licence from that House, to create what was virtually a new and fresh debt, and to add to the amount of the three per cent stock of this kingdom. This was a monstrous power and one which, if it were well understood, he believed that House would not give to any Minister. He contended that the operation to which he referred was a loss to the savings banks, and this point involved a great constitutional question. He admitted that the extent to which the transaction had gone in the present year was not very great; but we knew that, when Lord Monteagle was Chancellor of the Exchequer, these operations had gone on to a great extent, and had led to very serious loss. He hoped that upon the points to which he had referred the House would receive a satisfactory explanation from the Chancellor of the Exchequer.
§ THE CHANCELLOR OF THE EXCHEQUERSir, the hon. Baronet has divided his remarks, and I will also divide my reply to them, into two branches. The first relates to the general state of the public revenue and expenditure; and the second 1491 relates to the savings bank stock. Now, with respect to the state of the public revenue and expenditure, I really do not think I can add anything to what I stated to the House at considerable length on two former occasions in the course of the present Session. I am very happy to be able to say, that although a time of war is necessarily a time of very great uncertainty; although it is a time when you may naturally expect your expenses to run beyond your estimates, and your revenue to fall short of them, yet at the present moment—on the 9th of August—I do not see any reason, in any respect, to retract or qualify any estimate I made, or any expectation I held out to this House—on the 8th of May—when I submitted to them the financial statement on which the subsequent proposals of the Government, and the subsequent Votes of the House, with respect to our financial arrangements, were founded, I am bound to say, that up to the present moment I am entirely satisfied with the state of the revenue and finances of the country. I think I may as well take this opportunity of giving an explanation to the House, which will not occupy me many minutes, with reference to the last quarterly statement of the revenue, which seems to have made upon the minds of some persons an impression less favourable than the facts of the case would, in my opinion, warrant. It will be recollected that the last quarterly statement of the revenue showed a decrease, as compared with the statement of the corresponding quarter of the preceding year, in the permanent branches of the revenue, to the extent of about 570,000l. But I consider it right that I should show the House how dangerous it is to form hasty judgments from statements of that character, which are very partial, and which are, perhaps, not so happily adjusted and arranged as they might be. With regard to the last quarterly statement, I think I can show that the apparent decrease of revenue which it exhibited was entirely fallacious; and I will now proceed to point out why it was fallacious. In the first place, it must be recollected that last year the House was pleased, on my Motion, to pass a Bill authorising the payment of advances for metropolitan improvements. The first effect of that measure was, that in the second quarter of the year 1853 a sum of about 140,000l. was paid to the credit of the land revenue of the Crown as being due to it on account of the transactions of former years. 1492 This 140,000l. had, of course, nothing to do with the revenue of that year; but although they had nothing to do with the real revenue of the year, they formed an apparent portion of the receipts during the second quarter of the year 1853, and in comparing the revenue of the second quarter of that year with the revenue of the corresponding quarter of the present year, which shows, according to the published statement, a deficiency of 570,000l., you must deduct from that deficiency, in the first place, this 140,000l. There is another item in the statement which I wish to explain to the House. On the 6th of April of the present year there was a fall in the tea duty, and, as might natuturally be expected, there was a desire among parties engaged in the tea trade to release a considerable quantity of the article at as early an hour as possible on the 6th of April. The practice of the Custom House officers in such cases is to receive the duty on the day preceding that on which the tax on an article of which a large quantity is to be released is to be reduced, and the consequence was, in the instance to which I am now referring, that no less a sum than 233,000l., as well as I can recollect, which were entirely due to the revenue of the second quarter of the present year for goods taken out on the 6th of April, went to the revenue of the first quarter of the year, because it had been received on the afternoon of the preceding day. And let it not be said that this money was really due to the revenue of the first quarter of the year, on the ground that the tea trade had remained stagnant throughout that first quarter in expectation of a remission of the duty. That latter statement is, no doubt, perfectly true; but it is also true that there was a precisely similar stagnation, or rather a much greater stagnation in 1853, prolonged from December, 1852, till May, 1853; and thus 233,000l. more were due to the second quarter of 1854. These two items will reduce the apparent deficiency of 570,000l. in the revenue of the last quarter by a sum of 373,000l. There is another point in reference to the last quarterly statement of revenue to which I must now beg to direct the attention of the House. That statement referred to England and Scotland only, and did not include Ireland. If it had included Ireland, and if it had given us the revenue of the United Kingdom, which is, of course, what we have to deal with, and not the 1493 revenue of England and Scotland only, in attempting to arrive at any complete and accurate conclusion upon this subject, you would have found an addition to the apparent revenue of the last quarter, which would have disposed of all the remaining portion of the deficiency of 570,000l. which it exhibited; so that, in point of fact, although we are comparing the revenue of a period of war with the revenue of a period of peace, although we are comparing the revenue of a period of dear money with the revenue of a period of cheap money, and although we are comparing the revenue of a period of dear bread with the revenue of a period of cheap bread, yet the revenue of the second quarter of the present year, derived from permanent sources, and fairly estimated, equals that of the corresponding quarter of last year, notwithstanding the great reductions of taxation that had in the interval come into operation. Now, I say that that is a satisfactory statement. With regard to the state of the demands on us, I do not think it would be desirable, and I do not suppose the hon. Baronet could expect, that I should repeat the figures which I laid in great detail before the House at an earlier period of the Session. I must, however, correct the hon. Baronet when he says that I undertook at the commencement of the Session to lay down the principle that the cost of the war during the year should be paid out of the taxes of the year. On the contrary, I am sure the hon. Baronet, and, indeed, his speech contained the avowal, must be aware that I always pointed out to the House that it would be impossible to raise the new taxes within the year, and that, therefore, a temporary advance, which should, of course, be borrowed in some form or another, would be absolutely necessary for the present year. What has the House done? It has provided us with taxing powers which, when added to the available surplus of revenue, will realise a sum equal to the expenses of the war as they have been estimated for the year; and the money that is to accrue from the taxes laid on in the present year, when it shall have been received, will, I have no doubt, be fully equal to the amount of those expenses, and will, if by any good fortune we should, on the 5th April next, have a peace, be sufficient to enable us completely to liquidate those expenses up to that date without adding a shilling to the national debt. I make that statement as far as we have 1494 gone at present, without at all attempting what it could never be safe to attempt—without at all attempting to prophecy for the future. All that I venture to state is that none of the appearances presented to us on the 8th of May have as yet been falsified, or in any way rendered less encouraging on the 8th of August. The total addition to the expenditure between the 5th of April and the 29th of July in the present year, which is about sixteen weeks, as compared with the expenditure of the corresponding period of 1853, is about 3,500,000l., and these figures give me reason to suppose, as far as they go, that there will not be at any rate that extravagant departure from our Estimates which undoubtedly in former wars the House had the most serious reason to lament. But, at the same time, I cannot speak with confidence on the matter, for confidence in such a case would undoubtedly be presumption. The provision made by the House, not only with respect to the taxes, of which a large portion cannot be available before the 5th of April next, but also with respect to the money for the purpose of meeting the immediate necessities of the war, has been liberal and ample; and I think it quite possible that I may not even be compelled to use it to the full amount. Speaking from memory, and in round numbers, I may state the case thus. 4,000,000l. of Exchequer bonds have been negotiated, and 3,000,000l. of that sum have been received. There is an unexhausted power of issuing Exchequer bills still remaining to the amount of about 600,000l. or 700,000l., and the amount of Exchequer bills in the market is lower than usual, being, I believe, only about 16,500,000l. As respects the balances of the public money, I consider they are in a satisfactory state, and I have not the least expectation of my being under the necessity of calling on the Bank for the use of any funds which are properly its own. The balances in the Exchequer, which were only about 2,000,000l. on the 5th of April, rose on the 5th of July to 3,610,000l.; and on the 10th of October I expect that they will amount to about 4,500,000l. I do not, therefore, think it will be necessary for us to take any special measures, as far as I can judge, with a view to increase the balances in the Exchequer. And now, without troubling the House further with details of finance which have been already laid before them with the utmost completeness, I think I must 1495 be content with furnishing the information I have just afforded upon that subject. The hon. Baronet has alluded in the course of his observations to the claim of the East India Company for a sum of about 800,000l. That claim was a legacy bequeathed to us by a former Government. It was long a subject of controversy, and it was highly desirable, and propriety required that it should be brought to some conclusion; and, indeed, the East India Company were as anxious for its settlement as we were ourselves. It is perfectly true that the East India Company made a claim of that kind. That claim has been, however, I am bound to say, deliberately disallowed by us; and, I believe, that is a decision in the justice of which this House will acquiesce. But, at the same time, as my hon. Friend the Member for Honiton (Sir J. W. Hogg) has given notice of his intention to bring the case under the notice of the House at an early period in the next Session, I do not think that I ought to forestall its decision, or to enter into any explanation of the grounds on which the Government have proceeded in disallowing the claim. I now come to the second question opened by the hon. Baronet with respect to what he termed the sale of stock belonging to the savings banks, and the purchase of Exchequer bills with the proceeds of that sale. There is here an old quarrel between the hon. Baronet and myself, which I am afraid we can never settle. He insists on calling the stock held by the Commissioners of the National Debt the stock of the savings banks. But I believe it is no more the stock of the savings banks than any stock which may happen to belong to him or to any other Member of this House. The savings banks have nothing to do with it. If that stock were increased twofold the savings banks would not be a penny the richer, and if every farthing of it were pitched into the bottom of the sea the savings banks would not be a penny the poorer. It is a stock not standing to the credit of the savings banks, as the hon. Baronet supposes, but standing to the credit of the National Debt Commissioners, and being in law their property, and theirs only. That which stands to the credit of the savings banks is only a certain sum of money, and not a stock in the books of the National Debt Commissioners, that sum representing the actual receipts of the Commissioners from the savings bank depositors, with the interest 1496 credited to their account. That is the property of the savings banks and nothing else whatever. It has no connection except in the imagination of some hon. Gentlemen in this House, and elsewhere perhaps, with the position of the savings banks. But at the same time that stock is the fund placed by Parliament in the hands of the National Debt Commissioners, in order to enable them to meet the calls upon them. It is not in the power of the National Debt Commissioners to control those calls; for they are calls which must be met absolutely. What is the state of the case? Why, the state of the case is, that, generally speaking, when money is cheap, and when the price of the funds is high, the labouring classes save a good deal of money, and the deposits in the savings banks become much larger than the outgoings; considerable sums are then sent up to the Commissioners for the National Debt, which it is their duty to invest in the public securities, and which very frequently, no doubt, they do invest at high prices. At other periods you have money dear, and the pressure on the labouring classes, or, as at present, not so much the pressure on the labouring classes, as the demand for emigration, necessitate the withdrawal of a good deal of money from the savings banks. The same result is produced by the popularity of the building societies, and other modes of investing money; and large demands are then made on the National Debt Commissioners. This year happens to be one in which the calls made on them have been very considerable, and have very greatly exceeded the sums they have received. The hon. Baronet says that I sold out 500,000l. or 600,000l. worth of stock, at prices varying from 91 to 94, whereas at former periods large quantities of stock have been bought at a much higher price; and he says that that is a very improvident proceeding. Why, Sir, there never was a more gross non sequitur. What I had to consider was, not the price at which they were bought, but the possible terms on which I could provide for the calls made on the savings banks and consequently upon the National Debt Commissioners. Suppose every farthing of the stock had been purchased at par; suppose the price of the stock was 90, and suppose that I had foreseen with certainty that the price of stock must fall and that the drain would continue, of course it would have been my duty to sell at 90 rather than wait until the funds should 1497 fall to 85, and that is the principle on which I acted this year. I am happy to say that the tide seems now to be turning, and that the drain has of late become greatly diminished. But having seen that heavy drain going on, it was my duty to provide for it, and the question for me to consider was, whether the price of stock was such as to make it my interest to take the opportunity of making that provision at the present time, or to wait and take my chance of the harvest, of the war, and of the state of the money market. I certainly thought that we had a few weeks ago an extraordinary high price of the funds. There is no doubt about that; it was observed by everybody. We had the funds running up from 91, to 92, 93, and 94, during a period of war, and with the rate of discount at 5½ per cent. That was a state of things little less than marvellous, and it was one which I could not expect would continue. Having this drain going on to the extent of 30,000l. or 40,000l. a week, it was my duty—and I think the proceeding was a provident one—to avail myself of the state of the money market, and to raise money by the sale of stock, and that was the course which I pursued. I was very glad, therefore, that the hon. Baronet mentioned the circumstance, for I consider it a provident proceeding on my part to have taken advantage of that state of the money market, and to have realised some of the money at the high prices then prevailing, rather than sell from week to week, with the certainty of stock being lower. I thought it was wise and expedient to replenish the balance which I held at the time, as I found I could do so with great advantage to the public. But the hon. Baronet says that I not only, sold savings bank stock, but that I purchased with the proceeds Exchequer bills. There is a little mistake of the hon. Baronet in that statement, because the bills which I purchased were not Exchequer bills, but Consolidated Fund bills, which are securities of a different character. The latter securities are, in point of fact, deficiency bills, payable at par on quarter day. The taking up of these Consolidated Fund bills was a very simple operation. They amounted to 500,000l., and if I had not taken them up through the National Debt Commissioners I should have paid interest on them to the Bank at the rate of 2d. per day, or 3l. 8s. per cent per annum. I believe that the measure I have adopted was a much better one than buying Exche- 1498 quer bills. If I purchased bills in order to meet the drain on the savings banks, I must have afterwards gone to the money market and sold them—an operation which would have been very inconvenient, and which would have tended to disturb and depress that market. The hon. Baronet need not entertain any apprehension that in respect of these bills there is the slightest intention to create a new stock. I entirely demur to the doctrine of the hon. Baronet that the consolidation of Exchequer bills last year was a creation of a new debt; it was merely a funding of Exchequer bills. But, at the same time, this is a transaction of an entirely different character, and these bills have no connection with the creation of a new stock. I informed the hon. Baronet, at the commencement of the Session, in reply to a question which he addressed to me, that there was no intention of creating any new stock—that it was impossible to give any pledge upon such a subject, or to foresee what the public interest might require; but that, as far as the Government could then see, they had no such intention. This is a simple fact. It has had nothing to do with the creation of a new stock; it is an economical arrangement, and one which I am sure will meet with the approval of the House. That is all the information I have now to give upon the subject; and I hope I have fully answered the questions of the hon. Baronet.
§ MR. WILKINSONsaid, it appeared to him that the Government were placed in a very disadvantageous position by an arrangement which compelled them to purchase in the market when stock was high, and to sell stock when it was low. In his opinion some much better arrangement might be adopted, and he hoped the right hon. Gentleman would direct his attention to the improvement of the present system.
§ THE CHANCELLOR OF THE EXCHEQUERI have been endeavouring to make a thorough investigation of the matter, in order to see how the system has worked. I have lately had a statement prepared, but which is not quite completed, from which it appears that the average price of all the purchases in the Three per Cent Stock by the National Debt Commissioners is 91 1–16th, and that the average price of all their sales in the same stock has been 87⅞, and therefore so far as the principal operation of the National Debt Commissioners is concerned, their sales have realised less than their purchases by the difference be- 1499 tween 87⅞ and 91 1–16th. But in another description of stock, namely—the Three-and-a-half per Cents—they have bought at 95 13–16ths and sold at 96⅛, thereby realising a profit, although not a very considerable one. I shall direct my earnest attention to the subject, with a view to devise some improvement of the practice which has hitherto prevailed.
§ SIR HENRY WILLOUGHBYsaid, he had not made the mistake imputed to him by the right hon. Gentleman of confounding money with stock. What he wished to hear from the right hon. Gentleman was, a denial that the savings banks money, which he believed to be a sacred trust, had ever been used for State purposes, or to sustain the Exchequer-bill market.
MR. HUMEsaid, that he had some years since laid Resolutions on the table of the House, showing, that up to that period there had been a loss of nearly 3,000,000l. to the country, and it had now, he believed, reached to very nearly 5,000,000l. He had endeavoured year after year to prevent this waste of public money, but his efforts had been futile. He trusted, however, that the Government would see the necessity of remedying so glaring an evil. He hoped that the result of the discussion would tend to cause inquiry into the causes of loss sustained by the public. At present one source of loss arose from greater interest being paid than the average rate of interest, and losses also arose from other causes.
§ THE CHANCELLOR OF THE EXCHEQUERI wish to remind the hon. Member for Montrose that I have introduced a Bill on the subject of the interest paid by savings banks, but that it has been impossible to proceed with it during the present Session. I must, however, protest against the doctrine that the savings-banks money is trust money; it is no more trust money than money in the till of a private banker.
Bill read 3°, and passed.