§ Order for Second Reading read.
§ SIR HENRY WILLOUGHBY
called the attention of the right hon. Gentleman the Chancellor of time Exchequer to the circumstance that a portion of these bonds being to be applied to the cancelling of Exchequer bills, and the remainder to the borrowing money, the accounts would be very much complicated, and it would be exceedingly difficult for any one to ascertain the exact state of the public finances, since, if they did not know the exact amount taken for money, they could not 1117 tell the sum added to the debt. The question he wished to submit was, the absolute necessity that the House should in these bills take some security that these bonds should not be converted into permanent funded debt. During the year 1853, the Chancellor of the Exchequer, by means of Exchequer bills and the sale of the savings bank stock, added 1,254,000l. to the permanent funded debt of the country. He sold 778,000l. Three per Cent Stock belonging to the savings banks at prices varying from 97 to 91, in order to buy Exchequer bills paying 30s. a year. That same stock had been purchased at prices varying from 97 to 101½. There was therefore a considerable loss upon the transaction, which would have to be made up by the country. If the right hon. Gentleman could thus, by a tortuous process, convert funded into unfunded debt last year, he could do it again, and some security ought to be taken that he should not repeat the process. So tortuous was the process by which this was effected, that he (Sir H. Willoughby) had only been able to convince two or three Members of that House that this addition to the debt had actually taken place. The right hon. Gentleman had criticised the conduct of Mr. Pitt for borrowing money during the pressure of a war; and he (Sir H. Willoughby), therefore, called upon him to tell the House how he (the Chancellor of the Exchequer) could sanction an addition to our funded debt in the fortieth year of peace, and to explain what was his real policy on this subject. He would propose the insertion of a clause to the effect, "that no portion of the unfunded debt be converted into funded debt without the knowledge and consent of Parliament." In the year 1853, between the months of May and October, a sum of 1,200,000l. belonging to the savings banks was sold, and the proceeds invested in Exchequer bills bearing interest of only a penny a day, and that sum was afterwards added to the funded debt. If they were to raise money by increasing the unfunded debt, let them do so, or, if they were to have a loan, let it be a loan in name also. The right hon. Gentleman, as one of the Commissioners for the reduction of the national debt, had a very considerable power vested in him of dealing with the savings-bank stock. He had used it last year to some extent, and there was nothing to prevent his using it again. The unfunded debt at present exceeded 17,000,000l., existing in Exche- 1118 quer bills, and it was now proposed to raise 4,000,000l. more. When the question of the saving banks came before the House, he would be prepared to prove that there had been a considerable loss on the operation of last year, but the calculations were too complicated to go into them at that moment. The power vested in the Chancellor of the Exchequer was so great that it ought not to be exercised without the consent of Parliament.
§ THE CHANCELLOR OF THE EXCHEQUER ,
was sorry to say that, under present circumstances, it was impossible for him to answer the appeal addressed to him by the hon. Baronet fully; for he spoke within the mark when he said that it would require at least two hours to make an explanation that would be intelligible of the complicated system of powers lodged in the hands of the Chancellor of the Exchequer by the existing law, and which the hon. Baronet had briefly, and he thought somewhat obscurely, alluded to. All he could say was that, in his opinion, those powers well deserved, and, indeed, he should say required, the deliberate consideration of the House; and that he should be very glad if he could find himself in a condition to bring the system under the calm and patient review of the House, with the view, at the same time, of recommending to the House the great improvements of which he thought it stood in need; because it appeared to him that, in various respects, the Finance Minister of this country had in many respects too little power in his hands for the good of the public, whereas, in other respects undoubtedly he agreed with the hon. Baronet—in fact, he was not sure that he did not go beyond him—he had a great deal too much power, and exercised powers that ought to be greatly restricted. The hon. Baronet had asked him for a pledge that there should be no new creation of funded debt without the authority of Parliament. He (the Chancellor of the Exchequer) could go thus far—he could tell the hon. Baronet that he did not anticipate the creation of any funded debt without the authority of Parliament, under the present circumstances of the country, but he should be going far beyond his duty if he were to give him any universal, permanent. and unconditional pledge to that effect. There were circumstances in which it might be an absolute obligation on the Chancellor of the Exchequer to perform processes which would result in the creation of funded debt 1119 without the authority of Parliament, but of course in the exercise of the powers which Parliament had entrusted to him. So far as the Bill on the table was concerned, the hon. Baronet was aware that it was for the purpose of making a permanent addition neither to the funded nor the unfunded debt, but for the purpose mainly of anticipating the produce of certain taxes, which Parliament had actually agreed to, but which could not be raised for some considerable time; and further, for the purpose of giving a margin of cash, in case of need, to the Government, tinder the extraordinary circumstances of the war, and the unforeseen demands of which a war might be productive. Retrospectively, he was bound to say that he should be happy to enter, upon any convenient occasion, into a discussion of the transactions of last year, to which the hon. Baronet had adverted; but he begged to say that he should stoutly contend that neither the public nor anybody else had lost one farthing by those transactions—that, on the contrary, they were a wise and prudent application of the public money, under the circumstances of the times. When it shall come before us, I hope the House will sift the subject; but so far as the savings banks were concerned, he could pledge himself to show that nobody had sustained any loss by the transactions of last year. With respect to the main purpose of the hon. Baronet, his object seemed to be to ascertain whether the present application was made to Parliament with a view of using the money which might be raised under the Bill for the formation of a funded debt without the assent or authority of Parliament. There was certainly no such intention, and he did not anticipate any circumstances occurring that would give rise to a necessity of the sort. The hon. Baronet said that he had found it difficult to persuade hon. Gentlemen that there had been an actual increase of funded debt during the last twelve months, and that he could not find a Gentleman who was aware of the fact. He (the Chancellor of the Exchequer) did not at all wonder at that. On the contrary, he should have been surprised if it had been otherwise; for there had been nothing of the kind—in reality the amount had been rather reduced. If, when he spoke of an increase of the funded debt in 1853, the hon. Baronet meant that certain stock had been created in the names of the National Debt Commissioners that did not exist before, and, moreover, that a portion of that 1120 stock was created out of moneys which were obtained by the sale of other stock, no doubt it was perfectly true; but the hon. Baronet must be aware that whilst 1,000,000l. or 1,250,000l. of new debt had been created, above 8,000,000l. of funded debt had been extinguished.
thought the observations of his hon. Friend (Sir H. Willoughby) should not be allowed to pass with the brief explanation just given by the Chancellor of the Exchequer. His hon. Friend had objected to the power of the Finance Minister to take the money of the savings banks for the purpose of supporting the credit of the Government in Exchequer bills. Some years ago that was done by a Chancellor of the Exchequer—Mr. Herries—and a great loss was incurred. Upon the debate which took place upon that occasion it was clearly acknowledged that the power, although possessed by the Chancellor of the Exchequer, ought only to be exercised in cases of emergency. At that time, he (Mr. Hume) wished that the power should be withdrawn, but the matter was met by the Chancellor of the Exchequer giving the assurance to the House that he would not again exercise it. Accordingly, it had not, until recently, been exercised—with a slight exception in the time of Lord Monteagle, who, however, at the same time, disapproved of it. He (Mr. Hume) had very great doubt whether the Chancellor of the Exchequer had any right to advertise for 4,000,000l. or 6,000,000l., without coming to Parliament for their authority; no Chancellor of the Exchequer should have power to raise money either on the funded or unfunded debt without a vote of the House of Commons. As he did not understand the right hon. Gentleman to object to the observations made, he hoped they would be sufficient to prevent any further interference with the savings bank stock. In his opinion, nothing of the kind ought to be done. Even the Exchequer bills fell to below the market price. The Chancellor of the Exchequer ought not to allow them to come to such a figure, but should keep the public credit above par. He did not wish to oppose the Bill, but wished to take this opportunity of stating his opinion, as he was absent on the last discussion. He did not agree with those who found fault with the right hon. Gentleman for attempting to raise money on these Exchequer bonds when he required it; but he had to find fault with him. He last year supported him in the pro- 1121 position which he made when money was plentiful, and when the change in the money market could not have been foreseen. But he found fault with him for having afterwards paid off the South Sea Stock holders, by taking the balances out of the Exchequer; and in the then state of the money market he ought to have come forward and have reinvested that 8,000,000l. rather than have paid it off under the change of circumstances. He complained of him for not having then come to Parliament and invested the money paid to the South Sea Company. He might have raised the 8,000,000l. on terminable annuities, without making any alteration in the amount of the debt, but simply replacing that which circumstances had obliged him to pay off. The change in the money market defeated him; but he (Mr. Hume) believed that no man could conscientiously say that twelve months ago, when the plan was before the House, he anticipated what had taken place. The Chancellor of the Exchequer was not to blame for not having foreseen what was almost impossible; he, therefore, did not think that he was to blame. The Chancellor had stated that he considered his powers too extensive; they ought to be taken away, and thus future Chancellors would be deprived of the power of doing harm even unintentionally. No money ought to be borrowed without the consent of Parliament. The confidence of the moneyed men would go with the Chancellor when they found everything done openly. He would find his best course to be to act openly and above board. Let him not attempt by secret means to outreach what were called the moneyed men. They were not to be got the better of. He (Mr. Hume) hoped the Chancellor would never attempt to raise money, either as funded or unfunded debt, without coming to Parliament. If he was in the right, Parliament would support him; if not, he would not, and ought not, to succeed. He hoped the House would take from the Chancellor the power of doing harm.
§ MR. THORNELY
wished to make a suggestion with regard to the Exchequer bonds. He thought they would become favourite securities when better known in the country, as they afforded the same Government security as Consols, without being subject to the fluctuations. He would suggest that when tenders were called for, they might be received not only in London or at the Bank of England, but 1122 in the country banks, or at least in all the branches of the Bank of England. The metropolis was the great centre of the money market, but there was a large amount of capital in the manufacturing districts.
said that the power lodged in the hands of the Chancellor of the Exchequer of effecting changes in the savings banks money had been complained of in that House a great many years; and no doubt it had at various periods been greatly misapplied and misused. If the right hon. Gentleman would consent to repeal that power, and introduce a clause for the purpose, he believed he would thereby add much to the reputation he had so justly acquired by the reforms and improvements which he had already introduced in the financial system of the country.
§ Mr. GLYN
concurred with his hon. Friend near him (Mr. Thornely) in the opinion that Exchequer bonds, when thoroughly understood, would become a favourite source for the employment of capital, not only in the metropolis, but in the country; and he thought there was considerable weight in what his hon. Friend had said about having recourse to tenders in different parts of the kingdom. But the Chancellor of the Exchequer had taken power by this Bill to issue the debentures at 4 per cent. Would it not be expedient, however, to consider if inconvenience might not possibly arise in the money market if he had two issues of Exchequer bonds—one at 3½ and the other at 4 per cent? To make these bonds popular there ought to be an extended market for them; but the right hon. Gentleman might rely upon it, that if there were two securities of the same form, but of different rates of interest, he would encounter considerable inconvenience on the part of the dealers with regard to the manner in which they would be inclined to deal with them. He could have wished, indeed, that the right hon. Gentleman had issued them all at 4 per cent. He would take that opportunity of asking the right hon. Gentleman whether any measures had been taken by the Bank of England for the purpose of bringing up, under the power vested in them by the Act of 1844, the fixed issues of the country to the amount which Parliament thought right to name in that Act? The right hon. Gentleman was aware that the country issues had already fallen off to the extent 1123 of 700,000l., and by the Act of 1844 the Bank of England, with the concurrence of the Queen in Council, had the power of replacing that amount by adding to the fixed amount of its inland issues. The most important part of the machinery of the Act was that to which he had just alluded; and he must say he could not understand why such a power was left in the hands of the Bank; because it was clear that they were the last body whose interest it would be to put it in force, seeing that the profit arising from their so doing was derivable by the Treasury and the public at large, and not by the Bank themselves. There was now no reason why the fixed issues should not be 14,700,000l. The London bankers had lately entered into an arrangement which would facilitate business and economise the currency, and they were entitled to every advantage that the provisions of the Bank could afford them.
§ THE CHANCELLOR OF THE EXCHEQUER
would answer the last question. No application had been made by the Bank to the Government to exercise the power given them by the Act of 1844 of replacing the country issues. The arrangement of the London bankers, which, as stated by the hon. Gentleman, tended to economise the currency, was rather a reason for not exercising the power.
§ MR. HENLEY
The right hon. Gentleman having to-night made the announcement that the powers vested in him were more extensive than they should be, and ought to be curtailed, he wished to know whether—not with reference to the discretion which he himself might exercise, but with reference to any other parties—it was the intention of the right hon. Gentleman in the present Session of Parliament to bring in any measure to limit and regulate those powers. If the right hon. Gentleman had made up his mind on this point; if he were of opinion that the power he possessed as Chancellor of the Exchequer, of dealing with the savings banks money was injurious, then it was highly desirable that he should introduce a measure upon the subject with the least possible loss of time. He (Mr. Henley) would be glad to know, therefore, if the right hon. Gentleman had any hope of dealing with that question in the present Session of Parliament?
§ THE CHANCELLOR OF THE EXCHEQUER
had not the slightest hope of being able to deal with the measure in the present Session. The right hon. Gentleman 1124 had omitted to notice half the statement to the effect that while the powers lodged in the hands of the Finance Minister were in some cases too large, they were in other respects much too limited.
Bill read 2°.