COMMITTEE.

HC Deb 28 June 1858 vol 151 cc524-50

Order for Committee read.

Motion made and Question "That Mr. Speaker do now Chair."

MR. WILSON

said, he rose to move the Resolution on this subject of which he had given notice. In making the Motion he could assure the right hon. Gentleman opposite and the House that he was not actuated by party motives—his only object was to afford an opportunity of considering one of the most important questions of finance. He did not intend to avail himself of any argument as to breach of trust with the public creditor, though no doubt that argument might be urged fairly when the clauses which it was now proposed to repeal had been passed so recently. What he wished was to call attention to the impolicy of repealing these clauses, which, in point of fact, contained the only legal guarantee that there was now extant for the reduction of the national debt during the time of peace. He would draw attention to the frame of mind which prevailed at the commencement of the last war, in 1854, when his right hon. Friend the Member for the University of Oxford came down to the House to ask for supplies for the Russian war. On the 6th of March, in that year, his right hon. Friend induced the House to adopt the principle that in carrying on war it was the first duty of the House and the country to provide as much as possible for it without encumbering the resources of posterity. In accordance with that policy, the whole expenditure of 1854 was raised from taxes within the year. No doubt they did in that year issue £6,000,000 of bonds, but that was rather by way of anticipating taxes than of adding to the debt. It was contemplated that those bonds should be paid off by taxes that were considered as war taxes. In the following year the policy was laid down, and accepted by the House, that a portion of the war expenditure should be raised by taxation within the year and a portion by way of loan. He believed the proportions were nearly equal. A very general opinion prevailed, that in whatever way those loans were raised it should be on some principle that would include their early repayment after the conclusion of the war. One of the means to accomplish that object was by raising the loan by way of terminable annuities; but it would be remembered that when the attempt came to be made, his right hon. Friend the late Chancellor the Exchequer found that he could borrow in the most economical manner for the public by availing himself of what has been termed "the sweet simplicity of the Three per Cents." At the same time his right hon. Friend was not deterred from making an attempt to pay off the debt in time of peace in accordance with the recommendations of the Finance Committee of 1828, and he inserted a clause in his first Loan Bill rendering it incumbent on the country at the conclusion of the war to create a surplus of the Ways and Means of the year to the extent of a million, so as to provide for the liquidation of the debt. That principle the House then affirmed by the large majority of ninety-nine; but no sooner had the Act come into operation than the Government of the day came down to the House the other day and asked them not to postpone the operation of the Act, but to repeal the provisions of the Act. The total addition made to the funded and unfunded debt between the commencement and the close of the Russian war was twenty-nine millions. The obligations left upon the country by enactments passed during the war were—an obligation to pay off two millions of bonds in 1857, two millions more in 1858, two millions in 1859, and one million in 1860. There was a further obligation to pay a million and a half towards what was called the Sinking Fund. Last year we redeemed the bonds falling due, and paid £250,000 to the Sinking Fund. Now, he had no desire of disturbing the financial arrangements of the present year, nor was it his intention to reopen the discussion upon the Budget; but looking to the manner in which the provisions of the Act had been rashly laid aside, he would ask the House not lightly to commit itself to a policy of repudiating obligations entered into in time of war. This year the right hon. Gentleman opposite (Mr. Disraeli) postponed the payment of two millions of bonds for several years; and as to the £1,500,000 due to the Sinking Fund, he proposed not to postpone it. but absolutely and for ever to repeal the clauses which made it payable. In recommending that course, the right hon. Gentleman confounded the character of the provision made by his right hon. Friend the Member for Radnor (Sir G. C. Lewis) with that of the Sinking Fund as recommended by Lord Stanhope and Dr. Price, and adopted by Mr. Pitt. The principle upon which that Sinking Fund was established involved several fallacies and dangers. The first fallacy was, that as the payment was to be made under all circumstances, and whether we were at peace or at war, we might have to borrow money at a very high rate of interest, in order to redeem debts which had been contracted at a low rate. The next fallacy was, that the nation would profit by the accumulation of money at compound interest. Dr. Price had a curious theory founded upon his calculation, that if one penny had been invested at the period of the birth of Christ, by compound interest it would have swelled out to the dimension of several globes of gold by the present time. But it was altogether forgotten that the interest by which it was to accumulate must, like the principal, come out of the pocket of the taxpayer. The third fallacy, or rather danger, arose from keeping up a large fund which was really a portion of the national debt under another name, and which was entirely at the mercy of the Government of the day. In 1818 Dr. Hamilton called attention to these fallacies, and in 1823 the Government of the day abolished the old Sinking Fund, but provided instead for the raising by Ways and Means every year of a surplus of £3,000,000, which should be applied to the reduction of the national debt. To this they added what was called the dead weight—namely, two millions of annuities, making up the amount of the Sinking Fund to £5,000,000 per annum. The Committee which sat in 1828 condemned the portion of this scheme which referred to the annuities but recommended that the surplus of three millions should continue to be raised for the reduction of the debt; and the principle of that recommendation was supported by Mr. Goulbourn (then Chancellor of the Exchequer) and Mr. Huskisson in that House, and by the then First Minister, the Duke of Wellington, in the House of Lords. With the permission of the House he would give a brief history of the national debt, in order to show that at no previous period had, its aspect being so alarming as it is at present. It was erroneous to suppose that the national debt was of ancient origin. It was an engine of comparatively modern invention. The first public loan was contracted in 1690, and in 1792, at the commencement of the French war, the debt amounted to £261,000,000, with an annual charge of £9,500,000. During the next twenty-three years the debt was increased to £854,000,000, with a charge of £32,000,000 a year. Let them see what was accomplished by what was called a fallacious Sinking Fund in the following twelve years. During the period between 1816 and 1828 under various Governments, although in the face of much national suffering, the debt was reduced by £54,000,000, and the annual charge by £3,277,000. In 1828 the debt amounted to £800,000,000, and the annual charge to £29,179,000. What was the state of things at the present moment? Thirty years of great prosperity had passed over our heads, and yet the funded and unfunded debt now amounted to £808,000,000 with an annual charge of £28,500,000. so that, instead of having effected any reduction since 1828, we had, under the specious but deceptive principle of taking accidental surpluses, which no Chancellor of the Exchequer was ever allowed to retain, instead of a surplus provided by Ways and Means, added £8,000,000 to the national debt. That was not a very creditable or satisfactory result. It might be said, however, that since 1828 considerable additions had necessarily been made to the national debt. True, there had been a loan of £20,000,000 for the emancipation of our slaves, and a loan of £10,000,000 for the Irish famine, and loans of one kind or another, to the amount of £29,000,000, for the Russian war, but still it was discreditable to a great nation that during a period, of remarkable prosperity, in which there had been only two years of war, it should have added £8,000,000 to its national debt without making provision for repayment as soon as possible. What prospect had we under existing circumstances, of improving our financial position? We had in the present year postponed the payment of bonds that were due, and there was a Bill before the House to repeal those clauses in existing Acts which made it incumbent upon Parliament to provide a surplus for the reduction of the national debt. How we were to fare next year it was difficult to say. We had again £2,000,000 of bonds falling due next year, and our means would be less by £1,000,000 to pay them with, because the reduction of 2d. on the income tax would operate only to the extent of £1,000,000 in the present year, whereas it would deprive us of the entire £2,000,000 next year. Then we had to meet £2,000,000 of bonds in the succeeding year, and £1,000,000 in 1860. We were told that we should postpone all these engagements till 1860, because in that year terminable annuities would fall in to the extent of more than £2,000,C00. But these were not our only engagements for 1860. In addition of £7,000,000 of bonds postponed till that year, it was proposed to abolish the income tax entirely in 1860 when there would also be a reduction of the tea and sugar duties to the amount of £3,000,000. The anticipation of the public was, that what between the income tax and the tea and sugar duties there would be a reduction of taxation to the extent of £8,000,000 in 1860; but, if against that we could place a reduction of expenditure on account of the falling in of annuities to the extent of little more than £2,000,000, how, he asked, were the expectations of the country to be fulfilled? Was it wise for any Finance Minister to encourage such delusive hopes on the part of the public? He believed, for his own part, that the alleged unpopularity of the income tax had been greatly exaggerated in that House. All the best informed and most reflective people out of doors were in favour of maintaining the tax, and that in the great seats of industry, among those who wished to reform our taxation, and even among those affected by Schedule D. it would among admitted that it was a less injurious tax than any other existing. He believed that nothing would have been easier than for the Chancellor of the Exchequer to have maintained the 2d. which he had abandoned. In the discussion which took place the other night upon the paper duties the Chancellor of the Exchequer held out some prospect of the removal of those duties at no very distant time. Now, in the abstract he was free to confess that it was the worst tax that had ever been imposed; and, if it were to be a new tax, to be now put on, he believed it would be one of the most difficult to impose. He thought it would have been far better for the right hon. Gentleman to have repealed the paper duties than the income tax. But we were not in a condition to abolish duties of any kind, and indeed his object was to show that if we persevered in our present course we should not be able even to fulfil our obligations. The fact was, we had been burning our candle at both ends. On the one hand, they were in every possible way increasing the expenditure, and on the other, in every possible way they were pressing for a diminution of taxation. They were very properly repealing indirect taxes, but they failed to retain direct taxes. The only direct tax they seemed to have imposed of late years for the purpose of meeting the loss of the income tax was the succession duty, but the produce of the latter tax had caused disappointment, notwithstanding it was predicted at the time of the imposition of the succession duty that the tax would realize twice or three or four times the amount estimated. The estimate of his right hon. Friend (Mr. Gladstone) when he introduced that measure to the House was, that it would yield in the first year. £500,000; in the following year, £1,200,000; in the year after, £1,600,000; and in the succeeding years £2,000,000. Previous to the year 1863 the legacy duty was annually increasing at the rate of £50,000; but as that duty since then had been mixed up with this succession duty, it was difficult to calculates its produce. In the first year of the succession duty, or for the portion of that year (1853 and 1854) the sum realized by shall impost was only £3,587. In the next year it amounted to £150,000; in the following year, £320,000; and in the last year, only £148,000. So that, in point of fact, the money that had fallen into the Exchequer from this duty up to the present time was only £1,407,000, instead of £7,000,000, as estimated by the right hon. Gentleman. The Commissioners of Inland Revenue, moreover, had expressed themselves as wholly unable to account for this fact. If, then, the succession duty which they were told was to be a sort of sheet anchor when the income tax should be repealed, had disappointed expectation what were they to do with the various obligations crowding upon them? What were the objections which would be urged against his Resolution? He should be told no doubt, that it was unwise to anticipate the decision of Parliament, and to tie up the hands of the House of Commons in reference to the disposal of the finances of future years; but he replied, that they had tied up the hands of the House and created great obligations, and it was their duty now in time of peace to find Ways and Means to meet those obligations. He should be told that it was illusory to enact that a portion of debt should be annually paid unless they secured a surplus every year; but the object of his Resolution was to secure that annual surplus. The Chancellor of the Exchequer would, no doubt, say that the real Sinking Fund was the surplus at the end of the year; but what surplus had the right hon. Gentleman provided? He was afraid that the right hon. Gentleman had provided a deficit, because in the budget the right hon. Gentleman brought up the expenditure and income to a level by the addition of a spirit duty in Ireland; and then the right hon. Gentleman added that he would make a surplus of £300,000 by a penny duty on bankers' cheques. But on what basis was that calculated? The Army and Navy Estimates were reduced by £400,000, and the Miscellaneous Estimates by a similar sum, but he was afraid that that saving had vanished. The First Lord of the Admiralty had been obliged to trench upon one portion of the saving, and with respect to the Miscellaneous Estimates it turned out that the saving was more in name than in reality. Therefore, instead of a saving of £800,000 in the expenditure, the most that could be calculated on was about £200,000; and in the present state of the Session they were really in a deficiency of about £400,000. according to the budget. Therefore, they would be deluding the country if they refrained to make in time of peace any honest effort to pay the debts incurred in time of war. They had heard a great deal about the state of the national defences and the exposure of the coast; but let them consider the danger this country would be exposed to in any great contest by being burdened with an enormous taxation arising out of the amount of the national debt. The national debt of France amounted to only £321,000,000 against the £800,000,000 of the English national debt; and the United States defrayed in peace the debts they incurred in war; and up to the present time they had kept themselves almost free from national debt. For many years past this country bad been in an exceedigly advantageous and prosperous condition, and had almost monopolized the trade of the world. Was there, however, any security for the continuance of such a state of things? Positively, so far as this country itself was concerned, there could be little doubt of its continuance; but, relatively to other countries, he thought the extent to which we were losing our vantage ground was not understood. In 1847 the value of exports from France of articles produced and manufactured in that country was £28,000,000, last year it was £72,000,000. The value of British exports in 1847 was £58,000,000, and in 1856 £115,000,000; so that while our exports doubled in the interval, those of France had nearly trebled. There was no absolute guarantee for the continuance of the present satisfactory state of affairs, and he would ask, therefore, whether advantage should not be taken of the existing prosperity of the country to endeavour to reduce the national debt. He did not wish in any way to embarrass the Government, and the proposal he made was an extremely moderate one. He merely wished to assert a great principle which he desired to see reduced to practice—that it was the duty of Parliament in time of peace to make arrangements for providing out of surplus revenue for the diminution of the national debt which had necessarily been incurred during a period of war; and if the Chancellor of the Exchequer would consent to alter the Bill in accordance with his (Mr. Wilson's) suggestions, and to appoint a Committee in the next Session to consider the whole question of the finances of the country he would be quite satisfied with such an arrangement. He believed that the three great principles upon which alone the national finances could be safely managed were, that they should avoid, as far as possible, engaging in war; that they should, in case of a war, exercise the utmost possible economy in its conduct; and that in a time of peace they should make every effort in their power to repair the disasters which had occurred during war.

Amendment proposed— To leave out from the word "That" to the end of the Question, in order to add the words, "this House is of opinion that the extraordinary expenditure incurred during a war, beyond what is obtained from taxation, should be raised in the form of terminable loans, the redemption of which should be provided for within a specified period after the return of peace; or if, with a view to greater economy, it is raised by loans in the shape of permanent annuities, that a provision should be made for the liquidation of the same by moderate annual instalments after the war expenditure shall have ceased, from surplus revenue to be provided for that purpose," instead thereof.

THE CHANCELLOR OF THE EXCHEQUER

said, the Resolution involved several assertions which appeared to him to be of a very questionable character. In the first place the principle declared in the Resolution, that, "the extraordinary expenditure incurred during a war beyond What is obtained from taxation should he raised in the form of terminable loans, the redemption of which should be provided for within a specified period after the return of peace," had been acted upon during and since the occurrence of the late war. They had had a terminable loan both in the shape of terminable annuities and of Exchequer bonds; and he did not think, therefore, it was necessary for the House to endorse such a declaration with regard to the future. The second part of the Resolution declared that "if, with a view to greater economy, it is raised by loans in the shape of permanent annuities, that a provision should be made for the liquidation of the same by moderate annual instalments after the war expenditure shall have ceased, from surplus revenue to be provided for that purpose." Now, it was very difficult to understand what the hon. Gentleman meant by a moderate annual instalments." During the late war it was determined that the first loan should be repaid by a "moderate annual instalment" of £1,000,000. Another loan was raised, and the "moderate annual instalment" for its repayment was fixed at £1,250,000. A third loan was raised, and the "moderate annual instalment" for its liquidation took the shape of £1,500,000. Then Exchequer Bonds came into play, and Parliament engaged to pay them off by a "moderate annual instalment" of £2,500,000 in one year, and a "moderate annual instalment" of £3,500,000 in the succeeding year. It was, therefore, clearly impossible by such phraseology to lay down any rule which would provide for artificially paying off debts of this description. He thought, also, that the principle laid down in the Resolution. that arrangements for the liquidation of debts incurred during war should be made immediately upon the cessation of hostilities, must be taken with considerable qualification, for it was very often impossible at once to reduce expenditure upon the termination of a war. Then it was an error to suppose that extraordinary expenditure was only incurred in time of war. A potato famine might occur, which would lead to extraordinary expenditure. They might be obliged to increase their armaments even in a time of peace, owing to the peculiar conduct of other Powers, and that would lead to extraordinary expenditure. Domestic disquietudes, and even insurrection, might occur. Many disturbing causes entailing an extraordinary expenditure might arise in time of peace, and, therefore, to lay down a fixed rule, that because the country was not at war, an artificial system for the reduction of the debt should be rigidly pursued, would, in his opinion, be most injudicious. What, then, was the practical proposition which the hon. Member placed before them? He said—"When you pay off your Exchequer Bonds (which will not be for four years) then let us institute a Sinking Fund, and, in the meantime, let a Committee be appointed to consider the national finances and to lay down principles for their management. If, however, a Committee was to be appointed he (the Chancellor of the Exchequer) would suggest that the hon. Gentleman should postpone the appeal he had now made to the House until the result of the labours of such Committee was laid before Parliament. What would be the use of their passing a Resolution in favour of an artificial Sinking Fund to reduce our debt, which is not to come into operation till 1861 or 1862. He called it an artificial Sinking Fund, although Ways and Means might be supplied by taxation for the object which the hon. Gentleman had in view, namely, the reduction of our debt. The great objection which he (the Chancellor of the Exchequer) had to the reduction of the public debt by special taxes for that purpose, was a conviction that it was a mere theoretical arrangement, that it would never work, and that the only sound principle upon which our debt could be reduced was the principle of the Act of George IV., which had for a considerable period conduced to the reduction of the debt, though the hon. Gentleman seemed to think it had practically been abortive. But, said the hon. Gentleman, what with increased expenditure and a desire for reduced taxation, it was quite clear that unless we built up these artificial barriers no reduction of the public debt of this country could be secured. In truth, they could only secure a reduction of the public debt by a conviction in the public mind that it was wise to pursue a policy for its reduction; and if they could get public opinion to embrace that principle they would then be supported, not only in the taxation which1 was necessary for that object, but also in the reduction of the expenditure which was chiefly required to obtain it. If they had not that public opinion sufficient to support a Minister in a policy so wise and equitable they would find in practice that it would be totally impossible to observe those regulations which they made beforehand for the reduction of the debt, and which demanded from the pockets of the people taxes for that special object. It appeared to him that the fatal objection td the theory which the hon. Gentleman had recommended the House to adopt was that it could not be put in practice. It was quite possible that they might have a large surplus revenue, and might succeed with the aid of that surplus in diminishing the public debt; but notwithstanding the impatience of taxation of which they heard so much, notwithstanding there were still many taxes in our system which required to be modified and even to be diminished, he could not but believe that, in the long run, the finances of this country being in so healthy and prosperous a state as to produce a genuine surplus, Parliament would devote no inconsiderable portion of that surplus revenue to the reduction of the public debt. Nor could he agree with the hon. Gentleman that, even from the experience of the past, they were not justified in entertaining such a belief. There had been a considerable reduction in the public debt since the passing of the Act of George IV. In 1829 the surplus invested was, in round numbers, upwards of £1,200,000; in 1830, a little less than £2,000,000; in 1833, £792,000; in 1834, upwards of £1,700,000; in 1835, upwards of £500,000; in 1836, upwards of £1,200,000; in 1837, nearly £1,500,000. Then they came to very bad years, in which there was no surplus revenue. But why? Because they had then three bad harvests. Every department of industry in the country was then suffering, and would it have been wise in such circumstances—because they could not reduce the debt when the country was in a state of paralysis—to inflict extra taxes upon the working population of the country in order that they might be able to say they had reduced the public debt? Or could they adduce those five years as a proof that the Sinking Fund Act was a failure? But the moment that prosperity returned, and the country revived—in 1844, and in subsequent years—there were great reductions of taxation. In 1844 they again proceeded to reduce the debt. [Mr. J. WILSON here made a remark across the table which did not reach the gallery.] He did not see how that observation affected the argument in the least. Whatever might be the amount of public taxation the question to be decided was whether, with the revenue at the command of the Minister, he had the power of meeting fairly the demands of the year and of reducing the public debt. When the country had rallied again—in one year—(in 1845) the public debt was reduced by nearly £1,400,000. In 1846, after a still greater reduction of taxation than had been made in the preceding year, the debt was reduced by nearly £1,200,000. In 1847 there was a reduction of £628,000. In 1849 nothing was done; but in 1850 there was a reduction amounting to £2,321,000. In 1851 there was a reduction of nearly £3,000,000; in 1852 of more than £1,800,000; in 1853, upwards of £1,000,000. Could they say, in the face of such facts, that the Sinking Fund Act of George IV., founded, as he thought, on sound principles, was a failure, as the hon. Gentleman endeavoured to induce the House to believe? On the contrary, it was quite evident that tinder that Act large reductions of the public debt had taken place in many years. He had shown to the House that in the years referred to by the hon. Gentleman as those in which no reduction of the debt had taken place this country was suffering under a visitation of peculiar hardship—no less than three successive bad harvests. It suffered also from a great collapse in mercantile speculation, and from what took place in America. He, therefore, thought it would be most unwise in the House to depart in any way from the Act of 1829. But they would be departing from it if they recurred to a system of making artificial sinking funds by imposing special taxes for the purpose of creating a surplus. And, in his opinion, and he trusted the House would support him in it, they would take a most contradictory and conflicting course if, while they adhered to the law which regulated the distribution of the natural surplus in their revenue, they at the same time had a law founded on totally different principles, but aiming at the same end—namely, the reduction of the debt. The question which they had now to decide was simply this—would they maintain the Sinking Fund Act of 1829? That was the single issue before them, and he hoped the House would be firm in its resolve to support that law, founded upon the wisest principles. He had shown the House that in practice it had completely vindicated the objects of those who introduced it. It had considerably reduced the debt. It secured the devotion of the surplus revenue of this country to the great object of the reduction of the debt. It was quite evident from the facts which he had placed before the House that the natural surplus revenue did find that outlet which the advisers of that law contemplated, and had fulfilled its purposes. And if there were years, and even a series of years, in which no reduction of the debt took place, that want of power in the law arose from natural causes. Suppose that during these five dreary years—from 1837 to 1842—in which there was no reduction of the debt, they had by legislation secured a certain reduction of it— say, £1,000,000 or £1,500,000 each year—what additional suffering and hardship would they not have thereby inflicted upon the people of this country! It was under a feeling of that nature that Her Majesty's Government proposed their financial policy, which he was glad to say the House adopted. They could not decide upon these questions without referring to the condition of the country during the last autumn. It was impossible to forget that there was throughout all the ramifications of commerce in this country a state of considerable suffering and stagnation, mid was that a time for the Minister of Finance to come forward and say we are resolved each year, this being a time of peace, to reduce the amount of our national debt and to levy new taxes in order that we may pay off those engagements of a terminable character which we entered into during the war? That, he thought, would have been most unwise, nor did he think that any Minister would have the power of carrying a measure of that kind. It was a moment when it was expedient to treat with as much tenderness and indulgence as possible the industry of this country, and he thought the House showed great wisdom in supporting Her Majesty's Government in the course which they had recommended. The hon. Gentleman had entered into a very great eulogium of the income tax, which he said was a very popular tax. He would not now enter into any question of that kind, but the hon. Gentleman blamed him for having reduced that tax. He could not claim that merit, for the real fact was, that he had found the income tax reduced by operation of law, and if lie had proposed that it should be maintained during the present year at the same figure as last it would have been in point of fact to propose an increase of the tax. It was true that two new taxes had been imposed, but that was necessary in order to supply the deficiency which would arise from the reduction by law—and not by the act of the present Government—of the income tax. The hon. Gentleman had talked about the necessity of adhering to engagements. Now, he would not go into the old question whether what took place in 1853 was a compact or engagement, but certainly there was an understanding that the income tax should cease in 1860, and the Government had given due regard to that understanding. The case at issue was a very simple one, and that was, whether they would or would not adhere to the Sinking Fund Act of 1829, which, in his opinion, was founded upon sound financial principles, and which he maintained had, as regarded the intentions of its framers, completely succeeded. In prosperous times a large stun had always been contributed to the reduction of the debt; in times less prosperous a sum of a more moderate character had been contributed; and, when the country had been in a state of exhaustion, then the operation of the Act had been a faithful mirror of the condition of the public finances. He hoped, therefore, that the House would not support the Resolution of the hon. Gentleman. Apart from that greater consideration, even if its principles were sound, and did not clash with the Act of 1829, he thought it unwise and inexpedient that the House should lay down rules and regulations for a Sinking Fund that, according to the views of the hon. Gentleman, could not come into action for four years. For these reasons, because he thought it inexpedient, even if there were no Sinking Fund in operation, and because he thought the existing Sinking Fund Act was a wise and judicious measure, he should oppose the Resolution of the hon. Gentleman.

MR. W. WILLIAMS

stated that there was an express condition in the Act which authorized the raising of the £29,000,000 for the Russian war, that a million and a half should be paid off every year, and of that condition the Bill before the House was a direct repudiation. The right hon. Gentleman had referred to the years in which a reduction to a small amount had been made in the National Debt under the Sinking Fund Act of 1829, but he had said nothing of those years in which the debt had been increased. He (Mr. Williams) objected to the Bill as a violation of the engagement entered into with the fund-holder, and as a violation also of an important financial principle. He was not aware whether the engagement to pay off this money upon those conditions had not enabled the Government to raise the loan on more favourable terms.

THE CHANCELLOR OF THE EXCHEQUER

The condition was not in the contract.

MR. W. WILLIAMS

It was so understood.

THE CHANCELLOR OF THE EXCHEQUER

No.

MR. W. WILLIAMS

observed that the condition was referred to in the debate upon the Bill. He held it to be the duty of the present generation to pay the expense of its own wars, and not to saddle them upon posterity. The right hon. Gentleman claimed credit for having met a deficiency and reduced taxation. But he had done so by postponing the payment of £2,000,000 of Exchequer Bonds, and of £3,000,000 more which fell due next year, or the year after, till four years hence, when, if the right hon. Gentleman should still be Chancellor of the Exchequer, he (Mr. Williams) had no doubt the whole amount would be added to the permanent debt. He would support the Amendment.

MR. GLADSTONE

said, he thought that the doctrine of the hon. Gentleman (Mr. Williams) who had just sat down,—namely, that by voting in favour of this Bill they would practically be guilty of an act of repudiation, ought not to go forth uncontradicted. The hon. Gentleman held that the engagement to pay off a million or a million and a half annually was part of the contract entered into with the public creditor in regard to these loans. The right hon. Member for Radnor, who was Chancellor of the Exchequer, at the time, was certainly the highest authority in the House on that subject, but unless he was himself much mistaken, he recollected that the right hon. Gentleman, in answer to a question put to him on this very point when the loans were proposed, distinctly stating that no such condition formed any part of the engagement with the public creditor, or gave him any title to interfere with the free judgment of Parliament in dealing with this question in future. With regard to the proposition of the hon. Member for Devonport (Mr. Wilson) there were topics in the hon. Gentleman's speech to which he was glad the attention of Parliament had been directed. All that related to the doctrine of making effectual provision for the payment of the public debt, and all that related to the amount of the debt and the importance of reducing it, was important, and he was glad that the hon. Gentleman had brought it under consideration. But he could not vote for the Amendment. In the first place, he was sceptical as to the soundness of the hon. Member's principles. He agreed with the hon. Gentleman that there was a distinction between the Sinking Fund of 1855 which was now about to be done away, and that of Mr. Pitt; but he was by no means sure which was the better of the two. It appeared to him that the Sinking Fund of Mr. Pitt had some reason in it, in refer- ence to the circumstances in which it was established—inasmuch as it had a direct and powerful tendency to keep up the price of the public stocks during a period of war, and in that way conduce to economy, by enabling the estate to borrow money on better terms than it otherwise must have submitted to. Therefore the waste of public money involved in the principle of a Sinking Fund might have been in some degree redeemed by the plan of Mr. Pitt. But whether the comparison was in favour of the later or earlier form of Sinking Fund, he was not prepared to join in a vote, the apparent object of which, was to force upon Parliament and on the Government the recognition of a principle so doubtful as that which was involved in the hon. Gentleman's proposition. For to what did it amount? The hon. Gentleman said the Chancellor of the Exchequer had no surplus revenue for the present year. The hon. Gentleman said, "the budget puts before us not a surplus but a deficit." If so, why did not the hon. Gentleman make a Motion on that subject? If the Chancellor of the Exchequer had placed before them a scheme which showed an insufficient provision on the balance of income and expenditure for the wants of the year, he (Mr. Gladstone) did not hesitate to say that the right hon. Gentleman had done wrong in proposing such a scheme, and the House had done wrong in accepting it, and the hon. Member for Devenport would have been doing his duty only if he had called upon the House to reject it, and to provide by some means a surplus in the revenue of the year as compared with the expenditure. But the hon. Gentleman had done nothing of the sort, he had taken no issue upon the question. He asserted that there was a deficiency, but he took no step whatever to remedy that which, if it existed, was so gross and glaring an evil, He (Mr. Gladstone) had not followed the Estimates of the year as the hon. Gentleman said he had done, and could not say whether the hon. Gentleman was right or not; but if the hon. Gentleman thought that there were so many hundred thousand pounds short of what would be the actual expenditure, he would have done well to call their attention to that fact and propose some remedy for so glaring an evil. But he had made no such proposition, neither had he made any proposal for the repayment of the debt. He merely asked them to enter into one of those prospective and remote engagements by which, instead of doing something themselves to relieve the public embarrassments, they were, as far as they could, to pledge and bind a future Parliament to do something. And this in the teeth of all experience, which told them that when a future Parliament came to be a present one it would resent the attempt made to limit its liberty and discretion by antecedent votes on the part of those who, it might justly think, ought to have confined themselves to minding their own business. Therefore, because the principle of the hon. Gentleman's Motion was doubtful, and because it was strictly prospective and theoretical, and because it passed over the duty which was within arm's length in order to deal with matters that were in the clouds, he could not support the proposition. It appeared to him that the hon. Gentleman had omitted the principal point in the case—which was in the state of the expenditure and the disposition of the executive Government and the House of Commons with regard to the increase or diminution of that expenditure. The Act of 1829 was amply sufficient to secure the regular application of any surplus that might arise in time of peace to the reduction of the debt under all circumstances, except such as were of an extraordinary nature, provided the Finance Minister of the day did his duty, and the House of Commons supported him in the endeavour to keep the public expenditure within due bounds. But if the executive Government and Parliament were possessed with a spirit of extravagance, and there was a sort of rivalry between Governments, and upon every occasion it was endeavoured to show how much larger the views of the Government of the day were than those of their predecessors—if the House of Commons urged upon the Government, or the Government urged upon the House increased expenses and the Government met the extravagant views of the House with but a feeble resistance, or the House fell in without resistance to the extravagant views of the Government, they would go on from bad to worse, and to talk of providing a sinking fund was useless and absurd. The true secret of an effectual sinking fund lay in public economy—and the provisions of the Act of 1829 he maintained were amply sufficient to secure all that was necessary, provided the House of Commons and the Government continued to abide by an honest desire and a strenuous effort to bring the expenditure of the country within reasonable bounds, and to reduce the public burdens as far as possible. His hon. Friend had been able to show that in former years much had been done in the way of sinking fund, but that was not so much because of any technical provisions of the law, but because Parliament and the Executive had felt that extravagance was one of the most threatening public evils, and that it was their most sacred duty to the people of England to preserve a due balance between income and expenditure, and to restrict that expenditure to objects expedient and necessary for the national welfare. And he was bound to say, although, perhaps, he had misunderstood the right hon. Gentleman, that he could have wished to hear from the Chancellor of the Exchequer a somewhat stiffer and more rigid doctrine on the subject of surplus revenue. The sound doctrine he took to be this—that it was the duty of Parliament in time of peace to make such financial arrangements from year to year as should secure the application of a considerable sum to the reduction of debt. Nor was it enough to say, "In this year we had a bad harvest, and in that year there was commercial embarrassment;" that was no sufficient reason in his mind for making an addition to the public debt; for when they spoke of a deficiency it meant generally (provide for it as they might) an addition to the national debt. Looking to the Finance Minister as the oracle of sound doctrine in that House on that subject, he hoped he had misunderstood the right hon. Gentleman as implying that such incidents as bad harvests, large armaments, or commercial depression, are sufficient to prevent the provision of surplus revenue. Intending to vote with the right hon. Gentleman, and thinking that he was right in doing away with the sinking fund of 1855, he wished not to be misunderstood with regard to the doctrine which ought to be held on the question of surplus revenue, which appeared to him to have been laid down less stringently than the times required. He could not consent to regard the public debt as a matter to be looked at with indifference, much less as one of the incidents of the State to be borne with content and satisfaction. It was, in his view, a most serious and grievous evil, the pressure of which did not fall on the possessors of property, but was felt in the condition of the masses of the people. On them the burden fell. By the consumption of capital in war you raised the price of capital, and so eventually added to the burdens of the people. He should have been glad if the Chancellor of the Exchequer had felt himself in a position to make a bolder and larger provision for meeting the expenditure of the year, but under the circumstances he did not think that he was open to censure on that account. He trusted that the House would adhere to the principle which was established by the Act of 1829: but he was convinced that they made no advance towards the observance of that principle by endeavouring to impose on future Parliaments obligations which by their acts they showed that they were not themselves prepared to perform.

SIR GEORGE LEWIS

said, he was not prepared to support the Motion of his hon. Friend on the ground of contract, because he did not understand that the subscribers to these loans were, by the clauses in the Act of Parliament, entitled to any priority over the other national creditors. He was quite prepared to argue the question upon the ground chosen by the right hon. Gentleman opposite (the Chancellor of the Exchequer), who had, he thought, placed the question on the fair issue when he asked—did they prefer a natural Sinking Fund, a Sinking Fund resting on an annual surplus, or what he called an artificial Sinking Fund? What the right hon. Gentleman called a natural Sinking Fund was the surplus which, under the existing law, was applicable to the redemption of the debt after the whole of the expenditure of the year had been defrayed. At present the Finance Minister was not bound to make any provision for the reduction of debt beyond the interest of the terminable annuities. If there should be any surplus in the revenue beyond the expenditure of the year, then the Commissioners for the Reduction of the National Debt were bound, under the provisions of the Act of 1829, to apply it to the redemption of the debt. But the analogy between the income of an individual and that of the State, which had been suggested by the right hon. Gentleman when he spoke of a natural surplus, scarcely held good. The nation had no regular income—no income except what came to it by votes of Parliament made upon the proposal of the Minister; and if the Minister did not provide for a surplus, the natural surplus of which the right hon. Gentleman spoke could have no existence. The principle he had endeavoured to establish, and which was embodied in these clauses, went to the provision of a surplus for a particular purpose, which should not be dependent upon accident or upon the volition of the Finance Minister for the time being. The right hon. Gentleman might call that artificial; but it was artificial only in this sense, namely, that it rested upon positive enactment, and the Finance Minister would be bound, unless Parliament interfered to stay the operation of the Act, to provide the ways and means to meet it. Considering the pressure always brought to bear upon the Chancellor of the Exchequer to reduce expenditure, he confessed he thought that course was a wise one, and would lead to a more certain reduction of the National Debt than would arise if the matter were left to the chances of a voluntary and natural surplus. This view of the ease was confirmed by experience, because in the five years from 1823 to 1827 inclusive, when we had an artificial Sinking Fund, and were under an obligation to lay aside five millions a year, a surplus of more than that amount was provided, although 1825 and 1826 were years of great and peculiar distress. He must say that lie did not understand the Chancellor of the Exchequer to say that a bad harvest or commercial distress would be reasons for creating a deficit which should be met by loans, but only that when we suffered from such evils it would be unwise to make a surplus for the redemption of debt. To a certain extent he agreed with that doctrine, but it was a principle which ought to be laid down with great reserve, and he should doubt extremely its application to the circumstances of the present year. What his hon. Friend (Mr. Wilson) stated with regard to the income tax was, that the right hon. Gentleman (the Chancellor of the Exchequer) had allowed the existing rate, as it stood at the beginning of the year, to fall under the operation of the law, and made no effort to keep it up to that amount; and he (Sir G. C. Lewis) very much doubted whether the commercial distress of last November furnished any valid reason against the continuance of the tax at the sevenpenny rate, for let it be remembered that the reduction would only operate this year to the extent of a million, or a penny in the pound, which was the whole amount of the relief which would be afforded. He could not but think that an artificial Sinking Fund, founded as it was on the principle of making it imperative upon the Government to provide a certain amount every year towards the reduction of the debt, was sound and wise in principle. That which was now stigmatized as "artificial" was a principle that had always been acted upon by the House when they conferred powers of raising money upon subordinate bodies for local objects. When Parliament allowed corporations and other local bodies to borrow money upon the security of local taxation, they invariably imposed upon such bodies the condition of providing an artificial Sinking Fund, and required that a part of the debt should be paid off by that means every year, allowing twenty or twenty-five years, as the case might be, for the payment of the whole, and the same principle was followed by the Exchequer Loan Commissioners with regard to all loans made by them for carrying on public works. No doubt, with regard to the national expenditure and income, there were difficulties which did not exist in these subordinate bodies; but, nevertheless, he thought the principle was a sound one, and he regretted that the right hon. Gentleman, instead of postponing the payment of the Sinking Fund, should propose to repeal it; and that in laying down the doctrine of the equitable principle of providing in each year for some diminution of the public debt, he had made so little effort to carry it out.

MR. CARDWELL

said, he thought the House was indebted to the hon. Member for Devonport (Mr. Wilson) for a most interesting discussion, but he was afraid it would not be wise to adopt the Resolution which he had proposed. The adoption of that Resolution would only be, on the part of the House, a new prospective engagement with regard to the liquidation of debt. Now, nothing was easier than to make prospective engagements; the difficulty was to keep them. Let them consider whether they were in a position from their performances to enter into new voluntary engagements. They began this year with Parliamentary obligations to pay two debts—namely, £2,000,000 of Exchequer bonds and £1,500,000 in connection with the very Sinking Fund now under discussion. What did they do with regard to the bonds? By the almost unanimous consent of the House the time for their payment was postponed. It was in their power either to pay the £2,000,000 of bonds or to reduce the income tax by 2d., and they adopted the alternative, not of fulfilling their obligations, but of permitting a fall in our taxation. That certainly was not encouraging for them to enter into new verbal engagements. How stood the case with respect to the statutory Sinking Fund of 1855? The right hon. Member for Radnor had said that it was paid in the balance-sheet of last year. Yes, it was paid, but then the balance-sheet did not exhibit a surplus; on the contrary, it exhibited a deficiency greater than the sum charged on the other side for the Sinking Fund. If, therefore, even as regarded the last year, their performances were not so brilliant, what was the prospect for the present year? Why, the hon. Member himself did not propose that any payment should be made to the Sinking Fund in the present year. He accepted the Budget as an accomplished fact, and merely proposed that they should enter into obligations to renew their payments in some future year. Again, he said, their performances did not warrant their entering into any such engagement. The right hon. Member for Radnor had said that they always imposed conditions of this kind upon inferior bodies when they permitted them to borrow money. The difference between those bodies and Parliament was, however, very marked. Such bodies had no power to repeal their Acts of Parliament, and therefore it was not a verbal obligation, but a binding arrangement which was imposed upon them. But experience showed that the House of Commons having the power to repeal its Acts did repeal them; so that those Acts became practically inoperative, or, what was worse, had only the effect of inducing the Government to borrow more recklessly than they would do if they relied solely upon the ordinary and natural operation of their financial arrangements for the liquidation of debt. He agreed with the remarks which had been made with regard to what was a true Sinking Fund. Magnum vectigal est parsimonia; it must be accomplished by retrenchment of expenditure, by a jealous and vigilant economy, such as we had not seen of late years to the same extent as formerly. He trusted, moreover, that when by such means they had attained a surplus revenue, they would bear in mind the remark of the right hon. Member for Oxford University, that the chief burden of the debt fell upon the labouring classes, and in future remissions would not forget those indirect taxes which bore upon the working man and fettered the energies of trade. The abolition or reduction of duties of that description formed of itself an available Sinking Fund, for if they referred to the history of the past fifteen years, during which so large an amount of indirect taxes had been repealed, they would find, not only that the sources of revenue had produced far larger sums at a lower rate of taxation, thereby contributing more to the Treasury while bearing with less severity upon the people, but that in every year the result of that increase had outstripped the most sanguine anticipations of the Chancellor of the Exchequer, and that the surplus at the end of the year had always been far larger than he ventured to announce as probable at the beginning, and that a sum had thus appeared at every quarter day, which, under the statute of 1829, was applicable only to the liquidation of public debt.

SIR HENRY WILLOUGHBY

said, he quite agreed that the hon. Member for Devonport had done good service in calling attention to the public debt. He rose, however, for the purpose of directing attention to the fact that it was impossible to ascertain at any given period what was the exact amount of the public debt. It was quite possible that, without a single act on the part of that House, the funded debt might amount next year, not to £808,000,000 but to £816,000,000. During the war with Russia he believed a large amount of savings-bank stock had been applied to the purchase of Exchequer Bills. The amount so converted into unfunded debt was £7,600,000. By an odd construction of an Act of Parliament, if these were hereafter funded it must be at the average price of the quarter in which the bills were purchased. At that rate these bills would yield £8,624,000 of funded debt, and the Minister could fund that amount without any control of the House upon him. In fact the whole system of savings banks was an engine for increasing our funded debt, and unless some check were created it was impossible to say what might be the amount of it in any one year. The hon. Member for Devonport had pointed out the necessity of a Committee on the subject. One of the inquiries of such a Committee ought to be into the way in which the funded debt had been created. He agreed with the right hon. Gentleman the Member for Oxford that the true Sinking Fund was a rigid economy of the public expenditure. The right hon. Member for Radnor had departed from the principle laid down by the right hon. Member for Oxford, and had borrowed largely. He feared that it would be seen that monstrous extravagance had taken place in the expenditure of the public money. He could not vote for the Motion, because he had no faith in abstract Resolutions; but while he thought that, under all the circumstances of the case, Her Majesty's Government had taken a prudent course for the present year, he hoped that the next year's Estimates would be framed on a different scale.

LORD JOHN RUSSELL

said, it seemed to him that there were two questions raised by the very interesting speech of his hon. Friend the Member for Devonport. One was of an abstract nature, relating to the mode of treating the public debt and the endeavours which should be made to diminish it. The other, which under the circumstances his hon. Friend could not help calling attention to, was the subject of the financial arrangements of the year. As to the first point, he entirely differed from his hon. Friend. He remembered the old Sinking Fund and the defence which was made for it. That defence was, that in time of war, when they had to raise large sums, the Sinking Fund contributed to keep up the price of the funds. But the effect could not have been great, because, if the Government wanted a loan of fourteen millions, they had to make it twenty in order to enable them to keep up the payment to the Sinking Fund; and by so much it acted on the public securities. Whatever might be the advantage of being able in years of prosperity to apply any surplus that existed in the Sinking Fund in times of depression, the Chancellor of the Exchequer had to go into the market and create as much debt as he destroyed, or else the Sinking Fund was not applied to the public debt, for the Chancellor of the Exchequer never attempted in times of distress to lay on new taxes which would be oppressive to the people at a time when their burdens required to be lightened. He thought, therefore, that the old Sinking Fund was a bad thing, while he was of opinion that the measure of 1829, which provided that half the actual surplus should be applied to the extinction of the debt, was founded on sound principles, and effected a great improvement in the old practice. He did not regret, therefore, that they were going back to it. Another question had been raised, and that was the financial proceedings of the present year. He owned that while he thought it unwise to say that any fixed sum should be applied to the reduction of the National Debt, yet he believed it necessary to a sound system of finance to have a real surplus. Nothing but such an extreme of distress as made the revenue fall below the amount it might naturally be expected to produce should prevent our having a regular application of surplus revenue for the purpose of reducing the debt. Now, he could not say that the Chancellor of the Exchequer had this year made any provision for such a surplus. He did not think that the right hon. Gentleman was justified in saying that the country was in such distress as that the income tax could not have been retained at its existing rate; for it was during the first six months of the year that the income tax of 7d. in the pound was levied, and it was only during the commercial distress before Christmas that it was felt. He thought it was unwise to part with one million, for this two millions for the next year, which, if not absolutely required for other purposes, might have been uselessly employed in the reduction of the public debt. The Chancellor of the Exchequer had omitted to notice a statement of his hon. Friend, to which reference had been made by his right hon. Friend the Member for the University of Oxford. The Chancellor of the Exchequer in stating his budget had taken credit for a reduction of £800,000 in the Estimates, and his hon. Friend had said that the First Lord of the Admiralty had taken back a part of the £400,000 which had been part of the reduction in the Naval and Military Estimates. It was desirable that it should be known how much of that £400,000 had been so taken back. There was also another statement of his hon. Friend which required some answer in explanation, and that was with reference to £400,000 said to be reduced in the Civil Services Estimates. As to a great part of this sum, they knew that it was no reduction of expenditure in the present year, but a reduction of the Vote on the ground that the sums granted in the past year exceeded the money actually expended. The revenue would not be in excess by a single pound in consequence of that change. £800,000 was a considerable item to be looked to, with so small a surplus as the revenue expected front bankers' cheques; and it was desirable that the Chancellor of the Exchequer should have stated exactly how the matter stood. It was now some time since the budget had been brought forward, and the House ought to know if there was to be a surplus, and from what source it was to arise. It could not arise from the alleged reduction of £400,000 in the expenditure of the Army and Navy, and it must be small if it was to be derived from any other source. He thought it would be the duty of the right hon. Gentleman, on an early day, to make a statement on that subject. The right hon. Gentleman the Member for Oxford said that the best Sinking Fund should be made to arise from economy in expenditure. He regretted—although he did not blame the present Government for it—that such large sums had been voted in this and last year, and that the defences of the country were so inadequate to the money voted. The whole subject required revision. It must be most disappointing to the House and the country that there should be voted Estimates to such a large amount, and that when they spoke of our naval and military preparations they were checked on items which might be necessary for the defence of the country. The subject required the serious consideration of the House, and he hoped that next year they would have a more satisfactory prospect in that respect than they had at present.

MR. W. EWART

observed, that some articles of food were still the subjects of taxation, and if we intended to do justice to the industrial population of the country we must abolish those taxes. He could not support the Motion, but he thought the hon. Member's suggestion for the appointment of a Finance Committee a sound suggestion.

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

Bill considered in Committee.

House resumed.

Bill reported, without Amendment; to be read 3^o To-morrow.