LOAN BILL.

HC Deb 30 April 1855 vol 137 cc1955-73

On the Order of the Day for considering the Bill as amended,

SIR FITZROY KELLY

said, that in reference to the clause which provides for the repayment of the loan by annual sums of 1,000,000l. he doubted if the advocates of the measure themselves really and conscientiously believed that the promise they asked the House to give would be adhered to by succeeding Parliaments. It had been well pointed out by the right hon. Member for the University of Cambridge (Mr. Goulburn) the other night, that Parliament gave a pledge for the repayment of a loan at the rate of 5,000,000l. per annum; and that so far from that legislative promise being observed, a very short time afterwards the 5,000,000l. was reduced to 3,000,000l. and ultimately at no distant date the payment was altogether abandoned. Considering, then, that such had been the course in that instance—and he thought he might say the invariable course, whenever a pledge of this nature had been given in an Act of Parliment—surely the House might reasonably doubt whether in this instance such a pledge would be redeemed, and whether it would be found practicable, and if practicable politic, to pay this large sum of 1,000,000l. a year for the term of sixteen years after peace should be restored. He ventured, therefore, to ask the Government, upon what grounds they entertained the hope that the Minister and Parliament of 1860 or 1865 would be more ready to adhere to the pledges of their predecessors than were the Minister and Parliament of 1815 or 1820? He submitted that it was at once unjust and impolitic, and had a tendency to bring the House and the Government into discredit with the country, to hold out, in the form of a legislative enactment, a pledge to the people which they knew at the time they gave it could not reasonably be performed. And if it were not probable that the promise contained in the clause would be redeemed by future Ministers and Parliaments, then the introduction of such a clause was unnecessary, and was neither more nor less than a delusion and a snare. The pledge was not made conditional on the circumstances of the country, or the state of its finances. It was absolute in its character. Now, supposing that we should have, as in 1848–49, famine in Ireland, and a revolution in France, followed by commercial distress and convulsion, would the Ministers of the Crown be warranted, in such circumstances, in calling upon Parliament to adhere to this pledge? Most certainly not. Then, why should such a plege be imposed? The proper course for the Minister to pursue was to apply the surplus revenues of the State in times of peace and prosperity to the gradual reduction and ultimate extinction of the debt. That was the course which had been taken by the right hon. Gentleman's predecessors in office, and especially by the right hon. Member for the University of Cambridge, and it was the only rational course. Seeing, then, that the principle now sought to be introduced into the Bill had never been successful in practice, and that even if it admitted of practical application it was vicious and impolitic, he begged to move that the clause be expunged from the Bill.

Amendment proposed, in page 9, line 9, to leave out from the word "respectively," to the word "if," in line 39.

THE CHANCELLOR OF THE EXCHEQUER

said, he had explained, in former stages of the Bill, the grounds on which this clause was proposed by Her Majesty's Government. When called on to effect a loan for 16,000,000l., they thought it right that it should not remain as a charge on the nation in perpetuity, but felt themselves bound to make it on such terms as they believed would secure the probability of its extinction. It was generally admitted by those best acquainted with the condition of the money market that any attempt to borrow 16,000,000l. on terminable annuities would have resulted in failure; and as an unsuccessful attempt on the part of the Government to effect a loan would have put them in a worse position for making a subsequent loan on more favourable terms than they would have been had they made no such attempt, they abandoned the idea of having exclusive recourse to a system of terminable annuities. There were two alternatives before the Government; one was, to borrow 14,000,000l. on perpetual annuities, and to repay in annual sums in successive years; the other was that of borrowing on a permanent stock, rendering it incumbent on the Government to repay the sum at certain times. It would have been possible to borrow on a stock of thirty years' duration; but then it would have been necessary at the end of those thirty years, that the Government should be prepared, either out of savings previously made or by other means, to raise a sum of 14,000,000l., applicable to the extinction of debt at that particular period. All the experience of former years negatived the probability that any future Parliament would make a provision for so large a sum as 14,000,000l. for the extinction of the debt at a given time, or raise so large a sum, even in time of peace, without recurring to a new loan. Therefore it was thought preferable to borrow in perpetual annuities, making it incumbent on the Government at the return of peace to set aside an annual sinking fund of 1,000,000l. sterling for the extinction of that debt. The hon. and learned Gentleman (Sir F. Kelly) said, that the Government in doing so were practising a delusion on the House, for they could not expect that so large a portion of the public revenue would be set aside by a future Parliament for that purpose. With the view of trying how far that criticism was or was not well founded, he would call attention to the operation of provisions made in former times for the extinction of the debt. Mr. Pitt's celebrated Act of 1786 enacted that 1,000,000l. should be expended annually in the purchase of stock, until the stock so purchased by the Commissioners should produce an interest of 4,000,000l., to be applied to the redemption of the debt. That Act was certainly not observed during the years of war, and in 1823 another Act was passed charging the Consolidated Fund with 5,000,000l. annually, to be applied to the redemption of the debt. This was a positive charge on the Consolidated Fund, similar to the one created by the present Bill, and only differing in the amount. That Act remained in force until 1828, and in 1829 another Act was passed substituting the sum of 3,000,000l. for the former sum of 5,000,000l., to be applied not only to the redemption of the funded debt, but also of the unfunded debt. The surplus so created might also be employed in the payment of deficiency bills, so that what was now called a sinking fund might then be applied to the purpose of the current expenditure. Under the operation of these several Acts, the reduction of the national debt during the six years from 1816 to 1822 only amounted to 8,000,000l.; but in the six years from 1822 to 1828, when the Act for the application of 5,000,000l. annually came into operation, the amount of the reduction of the national debt was 36,000,000l., being the largest sum ever paid off in a similar period. With respect to the operation effected at the time when the right hon. Gentleman the Member for the University of Cambridge (Mr. Goulburn) was Chancellor of the Exchequer, that was a reduction of the interest of a portion of the debt—namely, the three and a half per cents. That operation was undoubtedly most advantageous to the public service; but he was not aware that any reduction of the debt by the application of an annual surplus took place during the period when the right hon. Gentleman was Chancellor of the Exchequer. On the grounds he had explained, it had been thought expedient to introduce the present clause into the Bill. He was willing to admit that, if any extraordinary circumstances of pressure should occur during the years when that clause should come into operation, it might be necessary for a future Parliament to suspend its operation, and to allow the whole income to be applied to the current services of the year; but he wished to call attention to the circumstance, that when the Long Annuities terminated in 1860 and the dead weight ceased, there would be a sum of 2,000,000l. annually available for the redemption of the debt. He thought, therefore, that there existed a fair prospect that there would be the desired means to extinguish this debt; but if the Government or Parliament of the day should think it inexpedient to apply so large a sum annually for that purpose, the remedy would be in their own hands. Until Parliament interfered, however, it would be incumbent on the Government to propose means for the payment of this 1,000,000l. annually towards the redemption of the loan now contracted.

MR. GLADSTONE

said, he should feel it incumbent on him, if this matter went to a division, to vote with the hon. and learned Gentleman (Sir F. Kelly), in conformity with the strong opinion he entertained of the inexpediency of provisions of this nature. It was, in his opinion, beyond the legitimate province of the House of Commons of 1855 to undertake to determine what should be the financial policy of a future Parliament ten or fifteen years hence. Nor did he think that such a course had any tendency to secure a respect for the decisions of that House, either now or at any future time. He denied the right of the Chancellor of the Exchequer to fall back for support upon the Sinking Fund Acts of Mr. Pitt, because his right hon. Friend objected to the principle on which those Acts were founded. It was no doubt very natural for Parliament to persevere in taking measures for maintaining a sinking fund when there was an idea prevalent that some magical effect in the reduction of the debt was attributable to it. But, at the present period, when it was discovered not only that a sinking fund had no magical operation at all, but in a fiscal point of view was an extremely impolitic and wasteful proceeding, it was not to be supposed that Parliament would continue to act upon the principle with similar constancy. He should not regret to see a division take place on this subject, because those hon. Gentlemen who supported the clause would, if they should have the honour of sitting in Parliament when the clause ought to come into operation, feel bound, it was to be hoped, in honour, to support the repayment of the debt, whatever pressure might be put upon them by their constituents for the reduction of taxation in preference. He had no doubt that his right hon. Friend and himself, though voting to-night on different sides, would then be found supporting the Chancellor of the Exchequer of the day in providing an adequate surplus for the re- duction of the debt; but he feared that many of the hon. Gentlemen who would go into the lobby to vote for what they were pleased to call the assertion of a principle, would be disposed to flinch from the maintenance of that principle, when they felt a strong pressure from without for the reduction of the hop, malt, insurance, or paper duties. It had been said that this clause would insure the actual application of this 1,000,000l. per annum to the redemption of the debt, but he denied that this was so. Let them suppose they had arrived at a time of peace. In the next financial year they would have a surplus or they would not. If they had a surplus, this clause would be entirely inoperative, because, under the present law as it stood, they were bound to apply their surplus to the extinction of debt. Indeed, the clause in that case would do a positive mischief, because under the existing law the Chancellor of the Exchequer would be free to apply his surplus to the reduction of the public debt in whatever form it might seem most advantageous for the public at the time. If it should be expedient to reduce the unfunded debt, he might do it; if it should be expedient to buy up terminable annuities, he might do it; if it should be expedient to reduce Consols or the new three per cents, or the Reduced, he might make his choice among all the commodities in the market, and lay out his money to the best advantage for the public. But he could not do that under this clause, which bound him to apply his surplus of 1,000,000l. to the purchase of one particular commodity—the three per cent Consols. But let them suppose a different case—the occurrence of an adverse change of circumstances, and that the Chancellor of the Exchequer found himself with a deficiency. What would then take place? The Chancellor of the Exchequer, under the law as it stood, might completely defeat the principle of the clause. The clause required him to issue 1,000,000l. from the Consolidated Fund. He issued it. The clause required him to purchase Consols. He purchased them. The clause required him to cancel those Consols. He cancelled them. But he could purchase his Consols from whomsoever he pleased—if he liked from the National Debt Commissioners. If he purchased them from the Commissioners, what would they do with the 1,000,000l. They would buy deficiency bills most probably; those bills would be cancelled, and so the money that was taken out of the revenue for one purpose would come back to it by a roundabout process for another. The Chancellor of the Exchequer would thus have the means of rendering the clause entirely nugatory. He was not prepared to say that circumstances might not arise in which it would not be the absolute duty of the Finance Minister to go through that process; because, practically, if he, when he had a deficient revenue, was obliged to apply 1,000,000l. annually to the purchase of stock, he would be redeeming debt with borrowed money, besides subjecting the public to the cost and charge of the operation. It was quite possible that the law might be altered; he himself thought that it ought to be altered; but such things as the purchase of deficiency bills in the way he had mentioned had taken place, and he had no doubt they would occur again. There was another point to which he wished to call the attention of the House. He had moved for a return showing the state of the Government account with the Bank of England so far as regarded the deposit received on account of the new loan. A sum of 1,600,000l. had been received on account of the loan, and the money was lying idle in the coffers of the Bank. At the same time the Government—not by any fault of the Chancellor of the Exchequer, but under the provisions of the law—were paying interest to the Bank for a large amount of money, something like 2,500,000l., supposed to be advanced to them by the Bank upon deficiency bills. It appeared to him that that state of the law was perfectly absurd. He knew he should be told that the faith of Parliament was not a sufficient security for the public creditor, and that it was necessary he should be assured his money was in the hands of the Bank, so that, if the Act of Parliament did not pass, he might know how to get it back again. He hoped the House would never assent to such doctrines. He knew there could be no higher security than the faith of the Bank of England; but if there could be a higher, it was the faith of Parliament; and it was important the country and Parliament should understand that it was a vote of the House of Commons which constituted a contract in the highest sense, and that there was no security, written or unwritten, that the public creditor could enjoy which was comparable to a vote of that House. He believed that altogether there wore between 5,000,000l. and 6,000,000l. belonging to the Government at the present moment in the hands of the Bank, which did not produce one farthing, while the public was paying interest day by day upon 2,500,000l. which the Bank was supposed to lend to the Government; that was to say, the public was paying the Bank interest for giving them the use of their own money. He hoped the Government would be disposed to give the House, upon a convenient opportunity, the means of altering the law in this respect, and of authorising the immediate issue for public purposes of the deposits that might be received on account of the loan. With respect to the clause more immediately under discussion, he hoped the opinion of the House would be manifested in a sense favourable to the Motion of the hon. and learned Gentleman the Member for East Suffolk (Sir F. Kelly), and that, if so, the Chancellor of the Exchequer would withdraw it from the Bill, especially since it was not connected with the substance of his measure or with the object he had in view.

MR. HENLEY

said, that everything he had heard stated in favour of the clause made him view it with increased dislike. No man was more anxious than he was for a surplus revenue, but he believed that the clause, instead of furthering that object, would lay the foundation for breaking it down. In the beginning of a war, of which no one could foresee the end, the Government were laying down as a principle that one-sixteenth of the money they borrowed was to be paid off year by year out of the Consolidated Fund. He believed that the effects of the clause, though described as forming no part of the contract, would give ground for the charge of a breach of faith on the part of those who lent the money, if the stipulation which it contained should not be adhered to. Another inconvenience of the clause would be to make certain stocks more valuable than others. No man would be bold enough to say that circumstances might not arise, and probably would arise, when a future Parliament would not feel itself bound to carry out the provisions of the clause. The public creditor, therefore, would be in a position to say that in passing it in the first instance dust had been thrown into his eyes. In matters of this kind there was no security unless there was a clear bargain upon both sides. If the House divided on this clause he should vote with his hon. and learned Friend (Sir F. Kelly) against it, as it gave no security, and as it introduced an objectionable principle.

MR. LABOUCHERE

said, that if the question went to a division he should feel it his duty to vote with the hon. and learned Gentleman opposite; but he so much wished that the financial scheme of the Government, which he approved as a whole, should pass without a division that he hoped the Chancellor of the Exchequer would consider whether it was worth while to disturb the unanimity of the House by pressing this clause. There was no characteristic of that House which more honourably distinguished it—none which it was of more importance to preserve unsullied—than its strict adherence to the pledges it gave to the public creditor. He therefore saw with regret the House invited to give—he would not say a pledge, but a sort of assurance, which might be differently construed by different persons, and which might lead a future Parliament, for fear they should be charged with a breach of public faith, to do that which they might not consider expedient at the time, or to incur some degree of odium by refusing to carry out the object of the clause, and vote 1,000,000l. annually for the reduction of the debt. The whole question had been so ably argued by the right hon. Gentleman the Member for the University of Oxford (Mr. Gladstone) that he would not waste the time of the House by attempting to repeat his statements; but he would again express a hope that the Chancellor of the Exchequer, seeing that the feeling of the House was against his clause, might consent to withdraw it from the Bill.

MR. T. BARING

said, he rose to express quite a contrary opinion from that of the right hon. Gentleman who had last addressed them. When a clause was brought forward which bore upon it the stamp of honesty, and which was proposed by the Government in the performance of their duty to the country, he trusted they would be bold enough to stand by it in the face of all opposition. The House had been told that the question had been admirably argued by the right hon. Gentleman the Member for the University of Oxford (Mr. Gladstone). He should say, pitting argument against arugment, that the argument of the right hon. Member for Oxfordshire was an answer to that of the right hon. Member for the University. Now, when it was considered that these 16,000,000l. were to be added to and amalgamated with some 600,000,000l. of previously existing Consols, it would be seen that the increas- ed value of the new loan in consequence of this clause could not be so considerable as the right hon. Gentleman (Mr. Henley) imagined. The right hon. Gentleman the Member for the University, on the other hand, said that if there were a surplus revenue the clause would be valueless, while, if there were none, the deficiency that would exist would have to be met from borrowed money. Now, the clause went to this extent, that in the annual Ways and Means a sum should be voted to discharge this 1,000,000l. per annum until the whole 16,000,000l. was repaid. The right hon. Member for Taunton (Mr. Labouchere) said that he would rather promise nothing, because it would be wrong to fetter the action of a future Parliament. Was it not the bounden duty of Government to promise that posterity, if possible, would reduce the national debt? The right hon. Gentleman said, in effect, "We may be perfectly honest ourselves, but our successors may not be so." That was a wrong sentiment to pronounce. It was tantamount to saying to futurity, "We never expect you to reduce the national debt." The clause had been brought forward with statesmanlike views, and it would be disgraceful to the country if they were to say, "We will not be sponsors for those who are to follow us, because we are not sure that they will be as honest as ourselves." Perhaps peace was not so far off as some of them feared, and he hoped, with the right hon. Member for the University of Oxford, that those who voted for the adoption of this clause would stand by their vote and support a reduction of the debt. The right hon. Gentleman had evidently an intention to swell the number of those who opposed the clause when he said that at some future period, when they were asked to vote the 1,000,000l. annually, they would have their constituencies against them, and would find it impossible to resist the cry for a reduction of taxation. All that the present Parliament could do was to walk in the path of honesty. They might be forced by an unforeseen pressure to deviate from their vote of that evening. It was impossible to guard against such a contingency; but do not let them anticipate the evil day, and, by throwing out this clause, tell those who were to follow them that they would only do what was expected of them when they refused to vote a farthing for the reduction of the debt. He hoped the right hon. Gentleman the Chancellor of the Exchequer would press the clause to a division, so that he might ascertain who were in favour of and who were against a wise and gradual reduction of the debt.

MR. J. L. RICARDO

said, that if the doctrines of the hon. Gentleman who had just resumed his seat were to be generally received in financial matters the sum of 1,000,000l. a year would seem to be a very small amount to vote for the reduction of the debt. The right hon. Member for the University of Oxford (Mr. Gladstone) did not object to a sinking fund for the redemption of the national debt. He did not object to the diminution of that debt when their means would enable them to reduce it; but what he said was, that they ought not to pledge themselves at a certain period to make a reduction of the debt when they did not know whether they should have the means in their hands for making that reduction. The hon. Member for Huntingdon (Mr. T. Baring) said they were sure to have the means, because the vote of 1,000,000l. would be included in the Ways and Means. But supposing such an arrangement had been made ten years ago, and they had been obliged this year to vote 1,000,000l. for the repayment of part of the national debt, what would be their present position? They would actually be borrowing money at something like 87¾ in order to pay off a portion of the debt at par. That appeared to him to be an erroneous financial system; and he would take this opportunity of saying that when he heard hon. Members talk of how desirable it would be to raise the loan by means of terminable annuities, he did not understand that principle of finance which established a forced sinking fund—for terminable annuities were nothing but a forced sinking fund—and required a certain portion of the debt to be paid off annually at par, whether or not they had means at their disposal, or even, in fact, whether they were obliged to borrow money at a high rate of interest. He hoped that the right hon. Gentleman the Chancellor of the Exchequer, who did not himself seem to he deeply fixed in his resolution to carry this clause, would not press it to a division, seeing that there was a very strong feeling against it.

THE CHANCELLOR OF THE EXCHEQUER

said, the hon. Gentleman had not correctly represented his feeling in the matter.

MR. J. L. RICARDO

said, he certainly understood the right hon. Gentleman not to have made up his mind as to the necessity of inserting the clause, and still hoped he would not press it to a division.

MR. WILSON

said, that if there had been one opinion expressed more strongly and decidedly than another by hon. Members on both sides of the House, it had been that loans should be created in the form of terminable annuities. Now, the principle of terminable annuities was analogous to that embodied in the clause before the House. It was quite clear that the setting apart of a certain sum of money annually for the repayment of the loan would have the same effect as if the loan had been created in terminable annuities. The right hon. Gentleman the Member for the University of Oxford said that, in the event of there being no surplus, and the Chancellor of the Exchequer being obliged to apply 1,000,000l. to the liquidation of stock, the money might return into the expenditure for the year. But the right hon. Gentleman was aware that if by the means he stated the Government were to borrow from the National Debt Commissioners upon deficiency bills, those bills must be repaid to the Commissioners from the produce of the same quarter; while, on the other hand, if the Government borrowed on Consolidated Fund bills, those bills would be repaid from the produce of the following quarter. The hon. Member for Stoke upon Trent (Mr. J. L. Ricardo) had made another objection to the clause; he said they were borrowing with one hand to pay with another. But that was scarcely a correct view of the operation. Surely, however, it was an advantage, if the Government could make such an arrangement as would enable the Commissioners for the National Debt to go into the market and purchase 1,000,000l. of stock at the price of the day. By that means they would have their stock, not at par, but at its value in the open market. When hon. Members talked of the folly of paying off debt while they were borrowing, they ought to observe that the clause would not come into operation until the conclusion of the war; and therefore the absurdity practised under the old sinking fund, of borrowing money to pay off debt, did not at all affect the provision now before the House. Again, when it was stated that future Governments would have difficulty in maintaining a surplus, he thought that ought to be the very reason why that House should now insist upon provision being made, for the repayment of this 1,000,000l. annually. Pass the clause, and future Governments would not have a choice as to the repayment of the loan. They must provide for it in the same way as for every charge placed upon the Consolidated Fund. It would not be a matter of option to them; and if they wanted to evade the payment of the 1,000,000l. annually, they would be obliged to come down and ask that House to repeal the Act. For these reasons he hoped the House would support the clause as it stood.

MR. DISRAELI

Sir, the observations of the hon. Gentleman the Secretary to the Treasury are not satisfactory. He says the House approves the principle of borrowing money upon terminable annuities; that the proposition contained in this clause is analogous to such a principle; and he therefore calls upon us to support it. But it is an assumption on the part of the hon. Gentleman to suppose that the House has sanctioned the principle of terminable annuities. If this House has sanctioned that principle, why has not the Government acted upon it? It is very true we have had observations made here—I have often thought without sufficient consideration—upon the admirable character of the terminable annuity system, and certainly for some short time those observations were made without criticism; but there has been no vote in this House in favour of borrowing money upon that system, and, therefore, I think the hon. Gentleman is not justified in assuming that the principle is one which has the sanction of Parliament. I, for one, entirely agree in the view which has been expressed in this House, and more particularly by the hon. Member for Stoke upon Trent (Mr. J. L. Ricardo), that such a mode of raising a loan is very questionable and suspicious. It may be popular among those who have not given due consideration to the subject, but go into the City, inquire among the capitalists and men of business. They know very well what a terminable annuity means; they know that it is, in fact, borrowing money to create a sinking fund, and they will ascertain in a moment the exact value of your offer, and the premium you are giving for raising money in this form. I trust the House will hesitate before it assents to this 22nd clause. What is it? It is neither more nor less than a recurrence to the system of creating an artificial sinking fund; and to my mind no principle can be more pernicious. The Chancellor of the Exchequer, who has to-night adverted to the experience which the country has of sinking funds, touched upon the period extending, I think, from 1822 to 1828, when a sinking fund of 5,000,000l. was obtained, and, comparatively speaking, a considerable reduction of the public debt was effected—the only time when such a reduction has been effected. That reduction amounted to something more than 30,000,000l. in the course of six years; but how did you create your 5,000,000l. per annum of sinking fund even at that time? By an increased taxation, the depressing effect of which upon the national industry and the national wealth was no doubt more injurious than the proportionate benefit you obtained by that reduction in the incumbrances of the country. I think there is also another objection to this course; it appears to me that it will interfere with the Sinking Fund Act which we now possess. To the principle of that Act, although it may certainly be modified and improved in some particulars, I am a firm adherent, believing, as I do, that it has worked with considerable advantage to the country and to the public debt. Now, by this clause, the House must recollect that they will be forced on the termination of the war, whatever may happen, to apply annually to the reduction of a particular branch of the public debt a sum of 1,000,000l. sterling. At a moment when you may be pressed hard with public liabilities you will have this claim upon your resources, and will have to provide for this artificial sinking fund. I think we ought not to sanction such a system. And, then, another objection also suggests itself—either this clause has a genuine purpose or it has not. It is very well to say the clause does not form part of the contract for the loan; that this is not an arrangement which at all affects the public creditor who lent you this money. Remember that at the very time you are raising the loan you publicly announce that you are making an arrangement to liquidate the liabilities which you are now incurring. Now, is it not open to great objection that, when you are borrowing money, you should infuse into the public mind a conviction that there is a facility for getting rid of the incumbrance? In such a case, instead of the public feeling that a loan is a resource which we ought to make use of only under circumstances of great pressure—instead of their feeling that in raising a loan they are incurring a liability which will press heavily upon them and those who follow after them—you have the Minister of Finance impressing the country with the idea that while they are borrowing this money they are at the same time establishing a certain machinery by which the incumbrance, after a certain time, may be got rid of. But there is not a man in this House who would peril any stake of importance upon the contingency that this will ever be a valid means of effecting the purpose you wish to accomplish; and I therefore hope the Chancellor of the Exchequer, seeing that the opinion of this House is not in favour of this clause, will not press it. I feel anxious that we should not unnecessarily divide upon this question; and, as the right hon. Gentleman has told us to-night that this clause forms no part of his contract, I think, therefore, he can have no difficulty in withdrawing it from the Bill. He can do that now with facility; but, if he allows it to remain, five years hence no Gentleman who fills his position will be able to get up and maintain successfully in this House that the clause does not form part of the public contract. It will be always maintained that this was a solemn engagement entered into by Parliament with the public creditor. For these reasons, if a division be taken, I certainly shall vote for the Amendment of my hon. and learned Friend (Sir F. Kelly).

MR. GLYN

said, he hoped that the right hon. Gentleman the Chancellor of the Exchequer would not accede to the advice given him by the right hon. Member for Buckinghamshire (Mr. Disraeli). His (Mr. Glyn's) only regret was that 20,000,000l. had not been taken at once. The very argument used by the right hon. Member for Buckinghamshire was the one that would induce him to take a view opposed to the view of that right hon. Gentleman. He looked upon the clause as an attempt authoritatively to give a decision of the House to the actual formation of a bonâ fide sinking fund. Had his hon. Friend the Member for Stoke upon Trent (Mr. J. L. Ricardo) considered the clause, he would have found that it did not come into operation till the arrival of a time of peace, when the surplus revenue of the country would give the means of supplying the 1,000,000l. required. He thought no House of Commons would come forward to repeal a pledge given in an Act of Parliament for a particular object, whereas in point of fact leaving a reduction of the national, debt as it now stood, merely upon a casual surplus revenue arising from time to time, seemed to him to be one of those unsatisfactory and unproductive measures which would never lead to any permanent result. He thought the right hon. Gentleman the Chancellor of the Exchequer was quite right in laying it down as a principle to be adopted in all future loans, that whenever the House went into the market to raise loans it should, at the same time, take care that the Chancellor of the Exchequer for the time being should find it necessary to keep up a surplus revenue for the ultimate wiping off of that loan. He thought there was no principle which contained so much as that did the germ of security for the finances of the country, and also for the proper administration of the national debt.

MR. JOHN MACGREGOR

said, he thought it would have been better to have raised 20,000,000l. at once than to have imposed additional taxation upon articles of primary necessity, such as tea, coffee, and sugar. He objected to Parliament pledging itself by the present clause to that which might place future Parliaments in an embarrassing position, and he regarded the proposition to pay off the debt by 1,000,000l. annually as a Pisgah view of a promised land.

MR. CARDWELL

said, he was desirous of making one observation in reply to the remarks of the hon. Member for Kendal (Mr. Glyn), who vindicated the clause upon a ground entirely inconsistent with the speech of the right hon. Gentleman the Chancellor of the Exchequer. That right hon. Gentleman had told the House that the clause formed no part of the contract, but might be deal with by the House as it pleased, and by future Houses as they pleased; but the hon. Member for Kendal not only treated it as obligatory in his argument, but hoped it would be made the foundation of an important precedent; and that in each succeeding year, if there should exist a necessity for contracting further loans, a similar clause would be inserted in every Loan Bill, and that all future loans should be redeemed at the rate of 1,000,000l. a year. But let the House suppose that at the commencement of the last war a similar clause had been inserted in the first Loan Bill, and according to the argument of his hon. Friend, had been made a precedent in each succeeding loan, in what position would the House of Commons have found itself at the end of the war? It would have found itself with a clause in all its Loan Bills compelling it to expend at the commencement of the peace a larger sum of money annually in liquidation of those loans than was expended in the year 1853 in all the services of all the Ways and Means that were voted in that year. Parliament would not have been prepared to fulfil those pledges, and such pledges, therefore, ought not to be given. He did not agree with the hon. Member for Kendal that the clause would be regarded as a pledge; and it was very undesirable that when debts were contracted they should afterwards hear it disputed whether a provision was or was not part of a contract. He sincerely regretted that he should be forced to vote against the proposal of his right hon. Friend the Chancellor of the Exchequer if the matter were pressed to a division, for he joined in the desire that they should give to the Government, as up to that time they had given, their cordial, unanimous, and undivided support.

VISCOUNT PALMERSTON

Sir, from the desire expressed on both sides of the House, I had hoped that this Bill would pass without a division; but at the same time I think the principle involved in the clause now under discussion so important that I for one have determined to take the sense of the House upon it. I think the principle of the Bill to be simply this—whether Parliament and the country, when obliged by circumstances to add to the public debt, shall or shall not make any effort whatever to reduce in future years the debt which is so incurred. Now, it is obvious that no country can face any great emergency arising from a war, for which great efforts are to be made, without providing means over and above the ordinary revenues of the country, over and above those additional means which may be provided by increased taxation. No war of any magnitude can be undertaken by any country whatever without loans raised upon honest principles, or if without loans, those forced contributions, contributions of war, by which in some cases armies may be supported during the brief progress of a campaign. Now, according to the argument of the right hon. Gentleman the Member for Buckinghamshire, the country ought never to make any endeavours whatever to reduce its debt, because the efforts made, and the taxation raised for that purpose, would deduct more from the springs of industry of the country than they did good by the reduction of the debt which might be incurred. In another part of his speech the right hon. gentleman praised that system by which the surplus income of the country is to be applied to the reduction of the debt. But how can a surplus income arise but from the produce of the taxation over and above the service of the particular year? I for one hold that it would be very desirable that this House should lay down as a principle—that which has been indeed already established as a principle—viz., that there should be in every year, if possible, a surplus income applicable to the reduction of the debt. It has been asserted by Gentlemen on this side of the House that we contended that the sanction of Parliament had been given to the principle of terminable annuities. Undoubtedly there is a great advantage in terminable annuities, arid fortunate would it have been for us if loans had been contracted in former years upon terminable annuities, for the country would then have been relieved from the pressure of that debt which now weighs so heavily upon the industry and resources of the country. But I am aware there are great difficulties in contracting a loan of any amount upon the principle of terminable annuities, and I am also ready to admit the truth of what is stated by the right hon. Gentleman the Member for Buckinghamshire, that it may be doubted whether it is an economical measure to provide for the reduction of your debt. There can be no doubt that the most economical method must be to raise your loan on that stock and in that way in which you can obtain it in the cheapest manner possible, and then apply in time of peace a surplus revenue for the purpose of buying up that debt upon the cheapest terms of the market. That is very much the principle of the proposal of my right hon. Friend the Chancellor of the Exchequer. He has negotiated a loan on those terms on which it was most advantageous at this moment to contract it, and he provides by this clause for the gradual redemption of it in time of peace. The arguments used by the opponents of that scheme resolve themselves into two classes. Some hon. Gentlemen have objected to this clause, because they say it is a mere nullity, that it contains a promise which will not be performed, that it gives no security for the reduction of the debt; and the right hon. Gentleman (Mr. Gladstone) objected, for he said, five years hence some future Chancellor of the Exchequer would find himself embarrassed by a pledge he would be unable to fly from. Therefore, while some gentlemen object because the clause is a nullity, others object because it is too stringent. I think this will be an obligation. It is my opinion that this will be, like all other Acts of Parliament, binding upon Parliament until repealed, and, therefore, that so long as this clause remains, Parliament will find the means of raising a revenue sufficient for the purposes of the Chancellor of the Exchequer. But if, unfortunately, circumstances should arise which would make it impossible for him to continue payment, it would be for the wisdom of the Parliament of that time to reconsider the question. I cannot admit that this would be a dangerous principle to adopt, or that it would not be considered by Parliament as an obligation to be fulfilled. But if the necessity arises to incur an addition to our debt, the application of real surplus revenue to the gradual payment of that debt has this advantage, that while on the one hand you add 16,000,000l. to the debt of the country, on the other hand you are holding out a prospect that, at the end of a certain period of years, you will, out of a bonâ fide surplus revenue, find the means of extinguishing that addition to our debt.

Question put, "That the words proposed to be left out stand part of the Bill."

The House divided:—Ayes 210; Noes 111: Majority 99.

List of the AYES.
Acton, J.	Brown, W.
Adair, R. A. S.	Bruce, Lord E.
Alcock, T.	Buckley, Gen.
Anderson, Sir J.	Burke, Sir T. J.
Bagshaw, J.	Butler, C. S.
Baines, rt. hon. M. T.	Byng, hon. G. H. C.
Baird, J.	Castlerosse, Visct.
Ball, J.	Caulfield, Col. J. M.
Baldock, E. H.	Cavendish, hon. C. C.
Baring, T.	Challis, Mr. Ald.
Barnes, T.	Chambers, M.
Barrow, W. H.	Chambers, T.
Beckett, W.	Cholmondeley, Lord H.
Bethell, Sir R.	Christy, S.
Biggs, W.	Clay, Sir W.
Bland, L. H.	Cobden, R.
Bonham-Carter, J.	Cockburn, Sir A. J. E.
Bouverie, hon. E. P.	Collier, R. P.
Bramston, T. W.	Coote, Sir C. H.
Brand, hon. H.	Cowan, C.
Bright, J.	Cowper, hon. W. F.
Brockman, E. D.	Crook, J.
Brotherton, J.	Crossley, F.

Dalrymple, Visct.	Lindsay, W. S.
Davies, D. A. S.	Mackie, J.
Davies, J. L.	Mackinnon, W. A.
Denison, E.	M'Cann, J.
Denison, J. E.	MacGregor, James
De Vere, S. E.	M'Taggart, Sir J.
Duncombe, hon. O.	Magan, W. H.
Dundas, F.	Mangles, R. D.
Dungarvan, Visct.	Marjoribanks, D. C.
Dunlop, A. M.	Martin, J.
East, Sir J. B.	Masterman, J.
Egerton, W. T.	Matheson, Sir J.
Egerton, E. C.	Milligan, R.
Euston, Earl of	Mills, T.
Ewart, W.	Milnes, R. M.
Ewart, J. C.	Mitchell, W.
Fagan, W.	Mitchell, T. A.
Farrer, J.	Moffatt, G.
Fielden, M. J.	Molesworth,rt.hn.SirW.
Fergus, J.	Monck, Visct.
Ferguson, Sir R.	Moncreiff, J.
Ferguson, J.	Monsell, W.
Fitzgerald, J. D.	Montgomery, Sir G.
Fitzroy, rt. hon. H.	Morgan, O.
Foley, J. H. H.	Morris, D.
Forster, C.	Mowatt, F.
Fortescue, C. S.	Mowbray, J. R.
Freestun, Col.	Mulgrave, Earl of
French, F.	Mullings, J. R.
Gibson, rt. hon. T. M.	Murrough, J. P.
Glyn, G. C.	Newark, Visct.
Goodman, Sir G.	Norreys, Sir D. J.
Gore, W. O.	North, F.
Grace, O. D. J.	O'Brien, P.
Gregson, S.	O'Brien, Sir T.
Grenfell, C. W.	O'Brien, C.
Grey, rt. hon. Sir G.	O'Connell, J.
Grey, R. W.	Oliveira, B.
Grosvenor, Earl	Osborne, R.
Hadfield, G.	Ossulston, Lord
Hall, Sir B.	Palmerston, Visct.
Hankey, T.	Pechell, Sir G. B.
Harcourt, G. G.	Peel, F.
Hastie, Alex.	Pellatt, A.
Hastie, Arch.	Phillimore, J. G.
Headlam, T. E.	Phillips, J. H.
Heathcote, Sir G. J.	Pigott, F.
Heathcote, G. H.	Pollard-Urquhart, W.
Herbert, H. A.	Portal, M.
Heyworth, L.	Portman, hon. W. H. B.
Higgins, G. G. O.	Power, N.
Holford, R. S.	Price, Sir R.
Horsfall, T. B.	Pritchard, J.
Horsman, rt. hon. E.	Pugh, D.
Hotham, Lord	Reed, J. H.
Hughes, W. B.	Repton, G. W. J.
Hutchins, E. J.	Ricardo, S.
Hutt, W.	Rice, E. R.
Johnstone, Sir J.	Rushout, G.
Keating, R.	Russell, Lord J.
Keogh, W.	Russell, F. C. H.
Kershaw, J.	Seymor, H. K.
Kinnaird, hon. A. F.	Seymour, H. D.
Knatchbull, W. F.	Seymour, W. D.
Knightley, R.	Shafto, R. D.
Lacon, Sir E.	Shelley, Sir J. V.
Langton, H. G.	Shirley, E. P.
Laslett, W.	Smith, J. A.
Lee, W.	Smith, J. B.
Lemon, Sir C.	Smyth, J. G.
Lewis, rt. hon. Sir G. C.	Smollett, A.
Liddell, H. G.	Somerville, rt. hn. Sir W.

Sotheron, T. H. S.	Vivian, H. H.
Stanley, hon. W. O.	Walmsley, Sir J.
Steel, J.	Whitman, J.
Strickland, Sir G.	Wickham, H. W.
Strutt, rt. hon. E.	Williams, M.
Sullivan, M.	Willoughby, Sir H.
Thompson, G.	Wilson, J.
Tomline, G.	Wood, rt. hon. Sir C.
Townshend, Capt.
Vane, Lord H.	TELLERS.
Vansittart, G. H.	Hayter, rt. hon. W. G.
Villiers, rt. hon. C. P.	Berkeley, C. L. G.

List of the NOES.
Adderley, C. B.	Knight, F. W.
Annesley, Earl of	Labouchere, rt. hon. H.
Antrobus, E.	Langston, J. H.
Ball, E.	Langton, W. G.
Baring, H. B.	Lowe, R.
Barrington, Visct.	Macartney, G.
Baxter, W. E.	MacGregor, John
Bective, Earl of	Maddock, Sir H.
Bell, J.	Malins, R.
Bennet, P.	Mandeville, Visct.
Bernard, Visct.	Manners, Lord G.
Bramley-Moore, J.	Massey, W. N.
Buck, L. W.	Maxwell, hon. J. P.
Cardwell, rt. hon. E.	Meux, Sir H.
Cecil, Lord R.	Miall, E.
Christopher, rt. hon. R. A.	Naas, Lord
Clifford, H. M.	Neeld, John
Corry, rt. hon. H. L.	Northcote, Sir S. H.
Craufurd, E. H. J.	Pakington, rt. hn. Sir J.
Dalkeith, Earl of	Palk, L.
Deedes, W.	Palmer, Rob.
Dillwyn, L. L.	Parker, R. T.
Disraeli, rt. hon. B.	Pennant, hon. Col.
Duckworth, Sir J. T. B.	Phillimore, R. J.
Duncan, G.	Pilkington, J.
Duncombe, hon. A.	Ricardo, J. L.
Dundas, G.	Ricardo, O.
Dunne, Col.	Robertson, P. F.
Ebrington, Visct.	Rolt, P.
Farnham, E. B.	Scobell, Capt.
Filmer, Sir E.	Sibthorp, Col.
Fitzgerald, W. R. S.	Smith, W. M.
Floyer, J.	Spooner, R.
Fox, W. J.	Stafford, A.
Galway, Visct.	Stanhope, J. B.
Gaskell, J. M.	Stanley, Lord
George, J.	Stirling, W.
Gladstone, rt. hon. W.	Stuart, W.
Gladstone, Capt.	Sutton, J. H. M.
Goderich, Visct.	Taylor, Col.
Gordon, hon. A.	Thornely, T.
Greaves, E.	Tyler, Sir G.
Grogan, E.	Vernon, G. E. H.
Gwyn, H.	Vyse, Col.
Hamilton, Lord C.	Waddington, D.
Heneage, G. H. W.	Waddington, H. S.
Henley, rt. hon. J. W.	Walcott, Adm.
Herbert, rt. hon. S.	Walpole, rt. hon. S. H.
Herbert, Sir T.	Walter, J.
Hervey, Lord A.	Wells, W.
Hildyard, R. C.	Whiteside, J.
Hill, Lord A. E.	Wilkinson, W. A.
Irton, S.	Wynn, Lt.-Col.
Jermyn, Earl	Wyvill, M.
Jolliffe, Sir W. G. H.	TELLERS.
Jones, Capt.	Kelly, Sir F.
King, J. K.	Butt, G. M.