THE FINANCIAL STATEMENT.—THE BUDGET. (Hansard, 20 April 1855)

THE CHANCELLOR OF THE EXCHEQUER said

I feel, Sir, that some apology, or at least some explanation, is due to the House for the postponement of the financial statement which I have to make on the part of Her Majesty's Government to the present moment. It was the wish of the Government that this statement should be as complete and, as far as it was in their power to make it, as satisfactory to the House as possible; and they were apprehensive that if it had been made shortly after the formation of a new Administration, and immediately after the appointment of a new Chancellor of the Exchequer, such a statement would have been less satisfactory to the House than if a longer period were allowed to elapse. The Government also felt that there was an advantage in waiting until the financial year had expired, as they would thereby be enabled to lay the annual accounts before the country in a more perfect form. At the same time, the Conferences at Vienna having lately commenced, Her Majesty's Government thought that it would be more seemly if at the commencement of these Conferences, and before they were able to form any judgment of the views likely to be entertained by the other great Powers, they did not proceed at once to lay before the House a statement of our annual expenditure and estimates founded on supplies already voted, and 1556 which assumed a continuance of the war. Her Majesty's Government, under these circumstances, thought it would be better to postpone until after Easter the time for making this statement, but in taking that course they feel they have extended the delay as far as they could with propriety; and they feel also that with a due regard to the public interests and consistently with the respect they owe to this House the period for making the financial statement can no longer be postponed. In making the statement, which it is now my duty to submit to the House, I am aware how much I have need of their kind indulgence. I will try to simplify the statement I shall have to lay before them as much as I am able, and it will be my purpose to render it as complete in itself, and satisfactory as possible to the extent of my power. I will begin by referring to the estimates made, for the revenue and expenses of the year which has just elapsed, by my right hon. Friend my predecessor in office, the Member for the University of Oxford (Mr. Gladstone). The estimate he made for the revenue of the year which expired on the 31st of March last, was as follows:— The produce of existing taxes he took at 53,349,000l.; and the produce of the new taxes which he proposed for the ensuing year he estimated at 10,157,600l.; but the amount of the new taxes to be received within the year he calculated at only 6,147,000l. So that his estimate of the taxation to be received within the year amounted to 59,496,000l. Now, I must certainly congratulate my right hon. Friend on having exercised, in this instance, a species of financial second-sight, for whereas his estimated produce of the year was 59,496,000l., the amount actually received was 59,496,154l. Hon. Gentlemen will see that the difference between the sum estimated and the sum actually received is, upon that very large amount, not greater than 154l. In the Ways and Means of last year, my right hon. Friend took a further power of issuing 1,750,000l. Exchequer bills, which were actually realised; and he also made an estimate for 6,000,000l. Exchequer bonds, which operation produced 5,375,513l., making together an amount of unfunded debt equal to 7,125,513l. Therefore the produce of the taxation of the year being 59,496,154l., and the unfunded debt thus created being 7,125,513l., the total revenue of the year was 66,621,667l. The actual expenditure 1557 of last year having been 65,692,962l., there was thus left an excess of receipts over expenditure of 928,705l., which excess was, as I have already explained, produced by the issue of certain securities creating a further portion of unfunded debt. The revenue from taxation having been during the last year 59,496,154l., and the expenditure 65,692,962l., it follows that there was an actual deficit of revenue to the amount of 6,196,808l. But the entire amount of the new taxes imposed by my right hon. Friend last year was not received within the year, and there remains uncollected of the taxes which were imposed last year, but which have not been collected in the year ending the 31st March last, according to the best estimate that can be formed, a sum of 5,020,000l.—adding that sum to the revenue produced from the taxation of last year, the sum is 64,516,154l. The whole revenue estimated for the year, with the new taxes, including the portion uncollected, was estimated to be 63,506,000l., and assuming that the uncollected portion should produce what it is now estimated it will produce, there will be on the estimate of revenue made by my right hon. Friend a gain of more than 1,000,000l. This result has taken place, though, in consequence of the alteration in the quarters of the year, the present year contains five days less than the estimate was made for; and, as the receipts would amount to about one million a week, the difference of the five days is not unimportant. I call the attention of the House to this result, inasmuch as it shows that, notwithstanding the burdens which unhappily it has been necessary to impose upon the people, and notwithstanding the disturbance of trade and industry and manufactures which a state of war must necessarily produce, the revenue that has been received, and that will, on a safe estimate, be received, including the new taxes imposed in the last year, exceeds the estimated amount by more than 1,000,000l.

I shall now proceed to estimate the expenditure for the ensuing year. The expenditure for the financial year, ending on the 5th of April, 1854, that is to say, the last year of peace, which included only a small military expense for the Kafir war, amounted to 51,198,000l.; but the expenditure for the year which has just expired has been 65,692,962l. I shall now, with the permission of the Committee, state the estimate of the expenditure for the present 1558 year, judged by a mode that with tolerable closeness approaches to the truth, inasmuch as all our military estimates have been voted, and some progress has been made in voting the Miscellaneous Estimates. The first item is the charge for the funded and unfunded debt, amounting to 27,974,000l., in which a saving will be produced this year in consequence of the reduction of the 3¼ per cent stock to 3 per cent, which, as was arranged by the Act of 1844, comes into effect in the course of the present year. The other charges on the Consolidated Fund, which have been now somewhat reduced in consequence of the numerous transfers made from that fund last Session, amount to 1,750,000l. The charge for the army, which has been already voted, amounts to 16,211,477l.; the charge for the navy, which has been also voted, amounts to 16,653,042l.; and the charge for the Ordnance amounts to 7,808,000l.; and I propose to take a vote of credit in aid of the military service for the year to the amount of 3,000,000l. The charge for the Civil Service amounts to 6,500,000l.; which makes a total for Supply services of 50,175,561l. I further include an estimate for two instalments of the Sardinian loan, one of which is now in progress of payment, and another may become due before the end of the year. That produces a total of expenditure, which we are able to estimate with tolerable accuracy, of 80,899,561l. I beg to state that the charge I have stated for the funded debt includes the additional expense of the interest of the loan which has been contracted this day, and which now awaits the confirmation of Parliament. The Committee will probably think that the sum of nearly 81,000,000l., which I have just stated, may be excessive compared with the probable wants of the ensuing year. I fear, however, that any such anticipation will be over sanguine when we advert to the fact that during the last quarter—consisting of the months of January, February, and March of this year—the sum actually expended and disbursed from the Exchequer amounted to 19,474,000l. This great expenditure, as the Committee will naturally conceive, has been owing almost exclusively to the additional expenses of the war. Perhaps it may be satisfactory to the Committee to be informed, and I shall therefore state, what have been the expenses of the present year as compared with the expenses of the last year of peace and of the previous year. The total 1559 amount voted for the Army, Navy, and Ordnance and the Vote of Credit, constituting the military expenditure for the year 1853–1854, was 16,487,000l. The expenditure under the same heads for the last year amounted to 30,121,000l., and the sum estimated for the corresponding expenditure of this year amounts to 43,675,000l. I shall further state the progress of the expenditure within the six last quarters. In the quarter ending January 5, 1854, the expenses for the supply services, which include the expenses of the Civil Service, amounted to 4,650,000l.; in the quarter ending April 5, 1854, they amounted to 5,640,000l.; in the quarter ending July 5, 1854, they amounted to 7,445,000l.; in the quarter ending the 10th of October last they amounted to 8,500,000l.; in the quarter ending the 5th of January last they amounted to 8,600,000l.; and in the quarter ending the 31st of March last they amounted to 11,664,000l.

I shall now proceed to state to the Committee the estimated income of the ensuing year, upon which we may rely to meet the estimated expenditure which I have laid before the Committee. It is estimated that the Customs for the present year will produce 20,500,000l., in which sum is included that portion of the tea duty which would have been abandoned but for the Act passed at the beginning of this year. The amount which it is estimated will be received from the Excise is 17,071,000l.; stamps, 6,815,000l., exclusive of 480,000l. stamp duty upon newspapers; land and assessed taxes, 2,920,000l.; property and income tax, 13,535,000l.; Post Office, 1,150,000l., to which I add 288,000l. for postage on newspapers; Crown lands, 260,000l.; miscellaneous, 800,000l.—making a total revenue of 63,339,000l. The estimated expenditure, as I have already stated, amounts to 80,899,561l.; and I further include in the estimate for the expenditure for this year a suns of 1,000,000l. for Ways and Means Bills issued in the last year, and redeemable this year, issued to the Commissioners of the National Debt in consequence of the sales of stock belonging to the savings banks, and which will be replaced out of the revenue of this quarter. I further propose to take, in order to guard against those contingencies which may not unreasonably be expected, a margin of 4,440,000l. The Vote of Credit will be immediately applicable to 1560 the military services; but, in addition to the Vote of Credit so appropriated, I propose to leave an unappropriated margin of surplus revenue for the amount I have mentioned. This will make a total estimated expenditure for next year of 86,339,000l. I have already stated that the estimated revenue arising from the existing taxes amounts to 63,339,000l.; and we have therefore to provide in the service of the ensuing year for a deficit amounting to the ensuing year for a deficit amounting to the difference between 86,339,000l. and 63,339,000l.—namely, for a deficit of 23,000,000l. The question now arises for the consideration of the Committee, how this deficiency is to be supplied; and it will be my duty to submit to your consideration the Ways and Means by which we propose that that deficiency shall be met.

It has been stated at different times that the entire expenditure for the war should be defrayed by taxes levied within the year. And it is said that it is not safe to intrust to a Government the power of effecting a loan—of borrowing money and mortgaging the revenues of posterity—for the purpose of defraying the extraordinary expenses of a war. I shall not enter into a long recapitulation of the opinions expressed on that subject, but I will take the liberty of reading a single passage from the celebrated essay of Mr. Hume on Public Credit, in which he states his opinion upon this question— It is very tempting to a Minister to employ such an expedient, as it enables him to make a great figure during his administration, without overburdening the people with taxes, or exciting any immediate clamours against himself. The practice, therefore, of contracting debt will almost infallibly be abused by every Government. It would scarcely be more imprudent to give a prodigal son a credit in every banker's shop in London, than to empower a statesman to draw bills in this manner upon posterity. That is a plain statement of the doctrine that it is not expedient, under any circumstances, to attempt to defray the extraordinary expenses of a war by a loan, or by any other means than by taxes levied within the year. But the experience of this country and of other countries in all times has shown the impossibility of reducing to practice this attractive theory. It is impossible, with a large expenditure for military purposes immediately to be met, to raise by taxation the sum necessary for defraying the whole additional charge within the year. And even if it were found by experience to be practicable, the encroachment 1561 upon the savings of the industrious classes, which would be caused by excessive taxation, would be a greater evil than the abstraction of capital by means of a loan, and its expenditure upon the war. I apprehend that nothing can be more certain than the effect of excessive taxation in making inroads into the savings of the industrious classes. We can see this fact proved to a certain extent in the diminution of useful projects of various kinds that has already begun to take place in this country, and which exhibits itself in the diminution of the private business of this House. It is well known that a diminution has taken place in the number of Bills for new projects of different kinds which have been brought before the Private Bills Committee, and by the fact that many projects which had already received the sanction of the House, have been suspended during the past year, because the calls upon the shareholders have not been paid up. Taxes which cripple enterprise and derange industry, or interfere with the ordinary distribution of capital, are more detrimental to the community than loans effected by the Government. The practice which was resorted to by Mr. Pitt and his successors during the last war, as it had been previously resorted to by their predecessors, was every year to defray the increased charge upon the Exchequer, partly by loan, and partly by additional taxes; and there is not a single year, during the Seven Years' war, during the American war, or during the French war, in which a loan was not contracted. Our experience, which has been purchased at the expense of much hardship upon individuals, and much privation endured by the public, should warn us against the attempt to meet any large temporary deficiency exclusively by taxation. Her Majesty's Government therefore determined to take steps for negotiating a loan to cover a portion of the deficiency arising within the year; and in so doing they felt that they were fortified by uniform experience, and by the constant example of their predecessors.

Before, however, I proceed with the explanation of the details of the loan, for which Her Majesty's Government have made a provisional contract, I would take the liberty of asking the Committee to listen to a short statement of the progress of the national debt, with a view of making them perfectly aware of the nature of the proceeding in which the Government has 1562 now embarked. Sir, at the beginning of the last century, in the year 1702, the national debt consisted of only 10,000,000l.; at the beginning of the reign of George II. it had risen to 53,000,000l. It was then reduced during the succeeding years of peace to 46,000,000l., which was its amount at the beginning of the Spanish war in 1739. During that war it rose to 72,000,000l., at which amount it stood in 1748, at the conclusion of the Peace of Aix-la-Chapelle. At the beginning of the Seven Years' war in 1757 it amounted to 76,000,000l., and at the end of the war, and at the Peace of Paris in 1763, it amounted to 135,000,000l., at which sum it remained up to the commencement of the American war in 1776. In 1786, three years after the termination of the American war, it stood at 259,000,000l.; and in 1793, at the commencement of the French war, it had risen to 269,000,000l. In 1800 it amounted to 491,000,000l., and in the month of February, 1816, it had reached 816,000,000l. Since the peace it has undergone some reductions, and on the 5th of January last the funded debt of this country amounted to 751,000,000l.—the decrease since the peace in 1816 having been 64,471,968l. The details which I have read to the Committee show the continual tendency of a great national debt to increase. They show that we bequeath to our successors, w toether with the advantages of our free Government, our religion, our established institutions, our arts and sciences, a debt which is a mortgage upon our late posterity; and they show, also, that the additions which are made to that debt during a time of war are but imperfectly removed by the slight reductions effected during the subsequent periods of peace. If, therefore, upon the renewal of hostilities, and under the circumstances in which this country is now placed, it becomes necessary to resort to the practice of borrowing, it is certainly incumbent upon Parliament to take such means as are at its disposal to prevent us from imposing a perpetual burden upon our successors. It is said that the creation of a perpetual debt is merely the short-sighted expedient of improvident Ministers, and that by proper attention to finance, and to the modes of providing for the extinction of the debt, this perpetual charge may be avoided. But it will be found, on closer examination, that this system of borrowing is forced, to a great extent, upon the 1563 Government by the interests and preferences of the lenders. It suits the lender to purchase perpetual annuities, the capital of which he can at all times realise by going into the market; and, at the same time, he is protected by their perpetuity from the danger of redemption. It is the danger of redemption, in fact, which so greatly influences the value of public stocks—those stocks which are least exposed to the danger of being redeemed being those that command the highest prices in the market. I will take the liberty of mentioning that a gentleman who holds the situation of actuary of one of the leading insurance offices—Mr. Newmarch—has recently examined, in an able pamphlet, the question of the loans effected during the last war, and he successfully shows that those loans were obtained upon terms much less disadvantageous to the public than we have been accustomed, of late years, to suppose. Our predecessors, while thus creating this enormous burden of debt in successive years, were, notwithstanding, fully conscious of the evils they entailed upon posterity, and they took at different times measures, which they believed to be efficacious, for preventing the continuance of that evil. From an early period different schemes were proposed for the creation of a sinking fund for the extinction of the national debt; and a plan, which at the time was thought to be efficacious, was devised by Mr. Pitt, carried in 1786, and maintained in one form or another during the whole of the late war. There is no doubt that Mr. Pitt, and most of his contemporaries, believed in the efficacy of the sinking fund for the extinction of the debt, although the sinking fund was itself created by borrowing, and the delusion under which they laboured was, that by some contrivance of keeping up a nominal sinking fund, supported by loans, and by some imaginary operation of compound interest, it would be possible, at no distant time, to extinguish the whole of the national debt. This idea was fondly cherished by Mr. Pitt, who unquestionably died, as he had lived, in the conviction of its soundness, and that great statesman would not believe that he had been the means of entailing a burden upon future generations, the end of which it is scarcely possible for us even to conjecture. There is also another class of cases in which Parliament has recognised the inexpediency of a perpetual loan, namely, in all those cases in which money is borrowed by subordinate 1564 bodies; I may refer, for example, to cases in which meney is advanced to boards of guardians to the justices of the peace, and to other subordinate authorities, who are entitled to charge the rates of their districts with the payment of loans raised for some permanently useful purposes. I may state, for instance, to the Committee that the expenses for building or repairing county bridges, prisons, town-halls, asylums, and other similar works, must be paid off, according to Act of Parliament, within twenty or thirty years. In fact, there is a long series of Acts of Parliament, in which powers arc given to local bodies to raise loans upon the security of the taxes within their command, and in every case the creation of an annual sinking fund is made compulsory upon them, and it is required of them that they should extinguish the debt within a limited number of years. This practice sanctions the principle of not permitting the existence of a perpetual debt where the body contracting the loan is under the control of Parliament; and, indeed, I doubt whether there is a single example in which a loan of that kind is authorised to be raised by a public body without an express provision having been made for its liquidation within a definite period. With respect, again, to the case of railway companies, the Railway Clauses Consolidation Act has a clause which provides that unless the money borrowed by any company on mortgage be repaid by the specified period before agreed on, it shall be open for the parties interested to demand the repayment of the principal on giving six months' notice to that effect, thus distinctly preventing the possibility of the debt being perpetual. Another means of preventing the existence of a perpetual national debt has been adopted by the mode of raising loans upon terminable annuities. The raising of money for the Government in the last-named manner is a plan which has recommended itself to many persons, and unquestionably offers great advantages with respect to the extinction of the debt. The Committee are doubtless aware of the nature of terminable annuities. An annuity is granted by Government for a limited number of years, and it pays to the annuitant annually not only a sum calculated as interest, but also a certain portion calculated as principal, so that at the end of the given term, whatever it may be, the entire debt, both principal and interest, is discharged. The advantage of the system of 1565 terminable annuities, in securing the extinction of debt, so far as the Government is concerned, is obvious, inasmuch as the periodical repayment of a portion of the principal sum borrowed is made a distinct and component part of the contract entered into between the Government and the party lending; and, without breach of faith, the Government cannot omit to pay every year a portion of the principal. But although Government in this manner finds its hands, as it were, tied up, and is bound to extinguish a certain portion of the debt, unless it be guilty of a breach of faith; it is found in practice that terminable annuities are to so little extent a marketable commodity, the demand for them by the public is so limited, and the dislike to receiving annually a portion of the principal, which the individual must either spend as revenue, thereby diminishing his principal, or else reinvest in very small sums, as he receives them, is so great and general, that at no time in this country has it been possible for the Government to effect a loan on terminable annuities only. There is no example of an entire loan having been effected on that species of security; and the terminable annuities have in every instance been combined with a loan for a perpetual annuity; they now amount to a considerable sum, and are formed of the aggregate amount of the terminable annuities of the different loans that have been effected. They are formed of the aggregate of loans on terminable annuities similar to that which the Government has this day effected. Therefore, however much Her Majesty's Government may have desired to effect the whole loan that is necessary on terminable annuities, they had no option in the matter. It was impossible for them to obtain such a sum as is required for the service of the year on terminable annuities without giving a price which would be justly considered as exorbitant and unjustifiable. It seems to be supposed by many persons, with regard to terminable annuities, as it was at one time thought with regard to the sinking fund, that it acts by some mechanical and spontaneous operation towards the extinction of the debt. It was considered that the nation thus obtained value without equivalent or security, and effected a reduction of their debt without an expenditure of taxation; and that by some mysterious and occult process, which no one has been ever able to describe, the 1566 national debt might be reduced and ultimately extinguished, without any burdens being imposed upon the people. Unfortunately, nothing can be less well-founded than these suppositions, which are wholly chimerical and illusory. A terminable annuity consists of the repayment of principal as well as the payment of interest; and although at the end of the given time the debt will be extinguished, it will have been extinguished by the ordinary mode of repayment of principal with interest, the repayments having been provided for out of the annual produce of the taxation of the country. Under the circumstances I have stated, Her Majesty's Government found it was necessary that a part of the loan they were called upon to contract should be effected in perpetual stock; that is to say, the only means by which they could have avoided the creation of a perpetual stock would have been by borrowing the whole amount on stock of a terminable nature, and thus leaving the whole amount borrowed to be repaid at the end of a fixed time. For instance, if the Government had determined to effect a loan on stock terminable at the end of thirty years, when that period arrived it would be necessary for the Chancellor of the Exchequer of that year to provide a surplus of 16,000,000l. for the extinction of the debt. Now we all know from experience that nothing is more improbable than that a provision would have been made by previous Parliaments for the payment of a sum of 16,000,000l. for the extinction of that debt when the time should arrive. If such a mode of creating terminable stock had been resorted to, it would infallibly, at the conclusion of the period, end in disappointment. We should find that the nation would resort to some method of re-borrowing like that adopted by railway companies, who, having borrowed on debentures payable in three, five, or seven years, simply continue them when they expire, and scarcely ever extinguish the debt. Her Majesty's Government therefore thought that any plan that created terminable stock, the whole of which would become payable at the end of a certain term, would be an ineffectual mode of obtaining the object they had in view; and I, therefore, propose as a means—so far as lies in our power—of preventing the creation of a perpetual burden by the loan which we have found it necessary to effect, to insert in the Loan Act a clause which 1567 will render it incumbent upon the Government for the time being at the end of the year following the signature of a treaty of peace, to set aside one million sterling annually until the whole perpetual portion of the debt which they propose to contract shall be extinguished. In that manner a legal obligation will be imposed upon the Government of the day to provide one million sterling annually for the redemption of the debt now about to be incurred. I am aware that any Act of Parliament we may now pass may be repealed or modified by subsequent Acts. All similar Acts, I must be allowed to say, have been violated, and it is impossible to make any law which our successors can be prevented from altering; there is no irrevocable Act of Parliament. But we can pass an Act which will produce the only effect it is in our power to accomplish—namely, to render it incumbent on the Government for the time being to provide funds for the extinction of the debt, and to make it obligatory on the Chancellor of the Exchequer, for each successive year, to include that amount in his estimate of expenditure, and to provide the funds necessary for the extinction of the debt, unless Parliament should deem it otherwise expedient. Sir, it appears to me that the only sound sinking fund—the only effectual mode of discharging the debt—is that Parliament should agree, upon the return of peace, to create a special revenue by taxation, and to set aside annually a certain portion of revenue for the reduction of the debt. If Parliament would again return to the policy which it pursued after the peace, but which unfortunately was soon afterwards abrogated, of creating a sinking fund of 5,000,000l. annually, and applying those 5,000,000l. to the redemption of debt during times of peace, when no loans are necessary, then we should be making undoubtedly slow but steady progress towards the extinction of the debt. If, unhappily, another war should arise, or any other circumstance, to create an extraordinary demand on the Exchequer, it would then be in the power of Parliament to release the Government from the obligation of the extinction of debt, and to apply that margin of surplus revenue to defray the extraordinary expenditure of the year, thus rendering the imposition of new taxes unnecessary, and affording a reliable surplus to fall back upon. When those extraordinary demands shall have 1568 been met, the way would then be prepared to continue the extinction of debt by the only sure means by which it can be extinguished—namely, by the creation of a surplus of taxation, and not by any imaginary expedient of a sinking fund founded on borrowed capital.

Sir, in the Essay on Public Credit, from which I have already read an extract, Mr. Hume remarks that either the nation must destroy public credit, or public credit will destroy the nation. Now, Sir, I beg leave, with great submission to so high an authority on questions of this sort, to dispute both branches of this dictum. We see, by long experience, that the nation has not destroyed public credit; for during the exigencies of the most disastrous wars —during that period of great depression which followed the American war—during the Irish rebellion, during the mutiny at the Nore, and other occurrences tending to shake the stability of our institutions in the course of the French revolutionary war, the sacredness of our public credit was never for a moment violated. On the other hand, I may equally venture to question the other branch of the dictum, that public credit will destroy the nation. Notwithstanding the rapid increase and vast amount of the national debt, the magnitude of which I have already laid before the Committee, there has been a perpetual growth of the prosperity of the country since the conclusion of the last peace, and the proportion which the wealth of the country bears to its means of paying taxes and affording a revenue to the Government has been perpetually augmenting. Moreover, at the same time, annual means have been found, in consequence of this prosperity, of reducing the interest of the national debt, and thus making the debt a smaller annual charge on the country. In the year 1816, the charge of the national debt was 30,458,207l.; in the year 1854 the charge was 26,521,190l.; being a decrease of 3,937,017l. in the actual charge of the debt. The income tax in the last year of the war, which then stood at 10 per cent, produced 14,880,000l.; the income tax of 6 per cent in the last year produced nearly 14,000,000l.; showing how great has been the increase in the income of the country since the peace, and how far, therefore, the ability of the country to bear taxation has been augmented. Sir, I can see nothing in the present state of our national debt, with all the burdens it 1569 entails on us, to cause any well-grounded feeling of despondency at our future prospects; but I see ample ground for confidence with forethought and good management of our national finances.

Having stated the grounds on which Her Majesty's Government have determined to effect a loan of 16,000,000l. for the service of the present year, I will merely observe that they have negotiated such portion of it as they thought they could obtain in terminable annuities on that species of security, recognising the value of the principle that the nation should bind itself to discharge a portion of the loan by the annual repayment of principal as well as interest. With respect to the remaining portion of the loan, they have necessarily borrowed it, in a perpetual stock; but, at the same time, they propose to undertake an obligation to repay 1,000,000l. in each year, after the conclusion of peace until the whole is paid off.

While on the one hand Her Majesty's Government have rejected the plan of attempting to defray the whole expenditure of the year out of the annual taxation, so, on the other hand, they have rejected the plan of defraying the whole of that expenditure out of borrowed money. They have judged it prudent to follow the example of former years, in which the extraordinary expenses of the war were defrayed by an addition to the taxes of the year as well as by an annual loan.

With the permission of the Committee I will briefly state the progress of taxation during the late war; from which they will see that with the system then adopted, although it was founded upon the defrayment of the expenses of each year in part by loan—the loan having been generally annual, though sometimes even two loans were contracted in one year—it was, notwithstanding, found necessary to make a considerable addition to the annual taxation. In 1793, the sum raised by taxation was 17,656,418Cl.; in 1801, it was 35,229,968l.; in 1808, it was 58,390,255l.; in 1815, it was 69,684,192l.; thereby showing the great addition which was made to the annual taxation of the country during the war, notwithstanding the large sums raised by borrowing. We propose, therefore, Sir, to make an addition to the public taxation of this year of a sum amounting, according to the estimate we have made, to 5,300,000l. I will now, with the permission of the Committee, state to them the manner in which this addition is pro- 1570 posed to be effected. In the first place we propose an addition to the present duties on sugar, of 3s. per cwt., to be varied according to the quality. That additional duty, we estimate, will produce the sum of 1,200,000l. In justification of that estimate I will, with the permission of the Committee, state briefly the recent stock and consumption of sugar. The stock of sugar in London on the 14th April, 1855, was 51,890 tons. At the same time last year, the stock was only 42,120 tons. In consequence of the last year's importation, the short price of sugar (by which is meant the price minus the duty) was lower from 3s. to 4s. a cwt. than it was a year ago. I will now state the comparative prices of sugar in two years since 1844, by which the Committee will see that, notwithstanding the addition now to be proposed to the duty, the price to the consumer is at present considerably lower than it was at that period. In 1844 the importation amounted to 4,129,000 cwts.; the price in bond was 33s. 8d., and the duty 25s. 2d., making the full price 58s. 10d. In 1846, after the alteration of the duty had taken place, the importation amounted to 5,220,000 cwts.; the price in bond was 34s. 5d. and the duty 14s., making the full price 48s. 5d. In 1854 the consumption had risen to 8,096,000 cwts.; the price in bond was only 25s., the duty was 12s., making the full price to the consumer 37s. Under the new duties at present the price in bond is only 23s., the new duty is 15s., and the price to the consumer will be only 38ss., that is to say ls. more than the price of last year, 10s. less than the price of 1846, and 20s. less than the price of 1844. We further propose an addition of ld. per lb. to the duty on coffee, which is at present 3d. per lb.—that is an extremely moderate duty; we propose to increase it to 4d.; and we estimate that this will yield an additional revenue of 150,000l. I have already stated that the reduction in the duty on tea which would have taken place this year was stayed by the Act passed at the beginning of the year. I propose, also, to make some addition to the duty on tea. In 1853, the duty on tea stood at 2s. 2½d. per lb.; it was reduced in the first year to ls. 10d., and next year to ls. 6d., at which rate it now stands. I propose to raise it to ls. 9d. per lb., which will be ld. less than the rate at which it stood in the first year of the reduction. That addition to the duty 1571 on tea I estimate to produce 750,000l. This will make a total addition to the revenue derived from Customs duties of 2,100,000l. With respect to the Stamp Duties, they have undergone recently so systematic a revision, that it is not my intention to propose any alteration in them, with one exception—that of the removal of the exemption which bankers' cheques now possess when drawn within fifteen miles of the place where they are payable. This exemption is the means of diminishing the duty from receipt stamps, inasmuch as unstamped cheques frequently perform the duty of stamped receipts. I propose to withdraw that exemption; and the effect of this withdrawal, it is estimated, will be to produce about 200,000l. additional revenue. I come now, Sir, to the head of Excise. The only duty of Excise upon which I shall propose any augmentation to the Committee is the duty on spirits. My proposal is to assimilate the duties on Scottish spirits to those upon English. The duty on English spirits is now 7s. 10d. a gallon; the duty on Scotch spirits is 6s. a gallon, and I propose to equalise them. The present duty on Irish spirits is 4s. a gallon. On account, Sir, of the circumstances of Ireland regarding illicit distillation, I do not propose to equalise the duty on Irish spirits to the English and Scotch rate, but I propose to raise it to 6s. a gallon. The additions which have recently been made to the spirit duty both in Scotland and Ireland have not produced any increase of illicit distillation, nor have they diminished consumption. I will state to the Committee the consumption of English, Scottish, and Irish spirits during the last ten years. The consumption in England during the financial year, ending January 5, 1854, was 10,350,000 gallons; in 1855, it was 10,839,000 gallons. In Scotland, the consumption of the financial year 1854 was 6,534,000 gallons; that of 1855, was 6,553,000 gallons; thus showing a slight increase of consumption, notwithstanding the addition to the duty. In Ireland, the consumption of 1854 was 8,136,000 gallons; in 1855, it had risen to 8,440,000 gallons. The effect, therefore, of this experiment in increasing the duties on spirits is to recommend a further advance in the same direction. It can hardly be disputed that if an increased duty, producing a considerable sum, can be obtained from spirits without increasing illicit distillation, smuggling, and all the evils which go in their train, it is as legiti- 1572 mate a means of providing an additional revenue during the heavy expenditure inevitable in a time of war as can well be found. I estimate, not on a sanguine conjecture, the produce of this increased duty on Scottish and Irish spirits at 1,000,000l. sterling; and this, with the augmentations I have already stated to the Customs, Stamps, and Excise duties will bring an addition to the revenue of 3,300,000l. In order, however, to raise a sum sufficient for the service of the year, it is still further necessary that we should propose some addition to the direct taxation of the country. Last year the additions made to the direct and indirect taxes were in this proportion. The additions to the indirect taxes were calculated to produce 2,600,000l.; the addition to the direct taxes, 6,557,000l.; therefore the great increase was on the direct taxes, being more than double that on the indirect. In the plan, however, which I have now the honour of submitting to the Committee, it has been thought desirable to throw the excess into the other side of the scale, and to levy the larger sum by indirect taxation, and a less sum by direct taxation. While, therefore, we propose to raise 3,300,000l. from the indirect taxes in the manner I have stated, 2,000,000l. are left to be raised by direct taxes. Now, the number of direct taxes to which a Chancellor of the Exchequer can resort with advantage for the purpose of raising additional revenue is very limited. It is well known that the land tax in this country is an impost which is fixed at rates varying in different localities, which has been made the subject of partial redemption; and it is in a state which renders all attempts to increase it impossible except in a very partial degree, and by means which it would be very difficult to carry into operation. The only direct taxes of any magnitude besides the income tax to which our attention can be directed are the house and assessed taxes. With respect to the house tax, its produce is not very considerable; it is between 700,000l. and 800,000l. a year; and even if the tax were doubled, and some extension given to its area, it still would hardly produce above 1,000,000l. of additional revenue. The house tax is, after all, only a species of income tax, and the same may be said of the assessed taxes, which, moreover, fall upon a narrower class of persons than the income tax, and which are not only subject to the objection of their incidence while any increase 1573 in them would interfere with the employment of industry. Her Majesty's Government, therefore, after consideration, have come to the conclusion that the best form of direct taxation which now exists is the income tax. It reaches on the whole the largest number of persons, and its operation falls with fairness on different classes of incomes, whilst an additional sum can be collected through the existing machinery, thus obviating the necessity of creating any new tax, of creating a new inspection, or of extending the machinery of collection to meet an extraordinary expenditure which I hope will not be of long duration. On the whole, then, we propose that the additional sum of 2,000,000l. required shall be raised by an augmentation of the income tax, by simply adding I per cent, or 2d. in the pound, to its present amount. With this enhanced rate of income tax, I calculate that an addition of 2,000,000l. will be secured for the service of the next year, 1,000,000l. of which will be received within the present financial year. This addition to the income tax therefore, conjoined with the additions to the other indirect taxes already specified, will produce a sum of 5,300,000l., which, together with the loan, and the sum of 3,0007000l. in Exchequer bills, for the issue of which we propose to take a power equivalent to that of a vote of credit as taken in former years, will complete the sum necessary for the service of the year.

With the permission of the Committee, I will now state precisely the Ways and Means by which we propose to meet the estimated expenditure of the ensuing year. That expenditure, I have already sated to the Committee at 86,339,000l.; the estimated revenue from existing taxes I have given at 63,339,000l.; the loan will furnish 16,000,000l.; and the new taxes receivable in the year 1855–56 will be 4,000,000l. I say 4,000,000l., leaving out 1,000,000l. of income tax which will not be receivable within the year, and, in order to avoid the appearance of over sanguine calculation, I have also omitted 300,000l. of indirect taxes. I think this is a safe and moderate calculation in making allowance for the fluctuations which may occur in consumption. The issue of Exchequer bills, for which I propose to ask power to the extent of 3,000,000l., will not, under any circumstances, take place until the last instalment of the loan, payable in December next, shall have been paid up. All these Ways and Means will 1574 produce a sum available for the service of the year of 86,339,000l.

To enable the country to bear the increased charge, the items of which I have now submitted to the Committee, all that is necessary is, that its resources should remain unimpaired, and that the vast creation of wealth which has been going on without interruption for some years past should not suffer any diminution in consequence of the vicissitudes of the war. Now, Sir, there is one cause of favourable anticipation, to which I think hardly sufficient attention has been paid in this House, and to which, as it seems to me, scarcely sufficient credit has been given to the Government which preceded that of my noble Friend near me—I mean the measures they adopted with respect to trade with neutral nations. It is well known that during the late war a large portion of the disturbance of trade and interruption to manufactures was owing to the unwise retaliatory measures adopted by this country against the Berlin and Milan decrees. The Orders in Council then issued led to great disturbance of the trade with neutral nations, and created an amount of loss and disturbance of commerce and industry, which it would, perhaps, be no exaggeration to say was equal to the entire detriment and suffering created by the increased taxes. From that cause of national loss the country has been fortunately saved by the wise measures which the late Government have adopted. In consequence of the measures adopted in former years by the Legislature, as well as of the measures taken for the protection of our commerce since the war, hitherto with success, a sound state of commerce has been preserved, and it appears that a vast increase has taken place in the amount of our foreign trade. As a proof of the present power of the country to bear increased taxation, I will beg to draw the attention of the Committee to a comparison of our imports and exports in the year in which the French war broke out, in the year when peace was concluded, and the present year. In 1793 the imports into the United Kingdom were valued at 17,850,000l.; in 1815 they were valued at 32,987,000l..; in 1853 they had risen to 123,099,000l.. Our exports in 1793 were 18,486,000l..; in 1815 they were 58,629,000l.; and in 1853 they were 242,072,000l. These figures, Sir, present incontestable proofs of the enormous increase of the trade of this country 1575 since the beginning of the French war and since the last peace; and they prove that an enormous mass of wealth exists in the country, from which an additional amount of taxation can be raised to defray the extraordinary expenditure of the country.

I fear that it has been necessary for me to detain the Committee at very considerable length in laying these statements before them; but I preferred running the risk of being tedious, to that of subjecting myself to the charge of having withheld from the knowledge of the Committee information necessary for their guidance. The plan I have introduced to their notice is proposed in a spirit of fairness to all the various interests of the country, and I submit it to the Committee with the confidence that it will receive a fair and liberal consideration, and that an impartial judgment will be passed upon it. I will only entreat hon. Members that in examining the ways and means by which the Government propose to defray the expenditure of the year, and to meet the exigencies of the times, they will take the whole plan into consideration at once, that they will not single out particular details of it, that they will look at it as a whole, and will form a combined judgment on the scheme proposed by the Government, keeping constantly in mind that if they change any part of the plan now proposed, they must look to some practical alternative, to some other less objectionable means by which we may provide for the service of the country.

Perhaps, before I conclude, the Committee would wish for some particulars with respect to the loan which was contracted for this morning. The Government required that the party proposing for the loan should give 100l. in money for every 100l. stock created, in order to avoid that state of things which sometimes occurred during the late war, of a large debt in stock being created, for which the Government received an imperfect equivalent. By the mode which has been adopted the Government will receive 100l. in money for every 100l. of stock created. I will briefly point out what was done during the late war in this respect. In 1798 a loan of 17,000,000l. was contracted for, to meet which 34,000,000l. of stock was created; in 1801 there was a loan of 28,000,000l. and stock created to the extent of 49,210,000l.; in 1813, a loan of 27,000,000l., with 45,900,000l. stock; and in 1815, a loan of 36,000,000l. with 62,240,000l. stock. 1576 By adopting the course we have this day followed, we at least secure to the public 100l. for every 100l. of stock issued. That portion of the price of the loan necessary to make up the price of Consols for the day, is contracted in a terminable annuity of 14s. 6d., which will necessarily expire by annual payments at the end of thirty years. We have every reason to believe that the terms of that loan are fair between the contractors and the public, and that the public has reason to be satisfied with the rate at which it has been taken. A provisional contract only is entered into between the Government and the lenders. The Government must lay the terms of the loan before Parliament in order to receive its sanction As it is my duty to submit them to the Committee, I now ask them to agree to Resolutions embodying the terms and conditions of the loan.