HC Deb 13 August 1860 vol 160 cc1226-37

Order for Committee read.

House in Committee.

(In the Committee)

Clause 8 (Annuities payable and transferable at the Bank).

Clauses 1 to 7, inclusive, agreed to.

MR. HUBBARD

said, he rose to propose that the following words should he added to the clause:— The Commissioners of Her Majesty's Treasury shall append to the contract made with the contributors to this loan a schedule, wherein shall ' be separately stated the amounts of interest on; principal moneys unpaid, and of principal moneys I to be discharged, forming together the sums of the several half-yearly payments of the annuities to be by this Act created; and the Bank of England shall, in the half-yearly payment of the said annuities, describe on every dividend warrant the; amount of interest and the amount of principal moneys therein discharged. It was an objection to the present mode of paying annuities that there was no accurate statement of the public accounts, so that it was impossible to tell accurately what the national debt really amounted to, The last account made it £786,000,000, and the interest thereon £28,000,000; but of that £28,000,000, £4,000,000 were paid as annuities. Moreover the income tax was levied upon the portion of annuities, which was a repayment of capi- tal as well as of that which constituted interest. That was an injustice that ought not to be perpetuated, and when a new series of loans was about to be commenced it was a good opportunity of amending a system which entailed a considerable additional expense upon the country. He did not propose any Amendment touching the essential principle of the Bill—that the whole amount should be repaid in thirty years, but he asked the Committee to sanction a schedule by which the stockholder would every half-year find upon his dividend warrant the amount of capital that had been repaid and the amount of interest which he was receiving upon the balance. He would then be taxed only upon the interest, and not upon the repayment of capital. Upon the same principle the loan might be carried out by means of Exchequer bonds repayable at certain fixed periods; but there was an advantage in terminable annuities that capital and interest could not be severed. In one loan that was contracted upon annuities the terms were equal to £5 4s. per cent, while money could be borrowed upon Consols at £3 8s. The large difference was partly owing to the fears of capitalists concerning the income tax, and the present was a good time for altering the practice.

MR. W. WILLIAMS

said, the statement made by the hon. Gentleman (Mr. Hubbard) was merely a repetition of what he had urged on former occasions; and although it might be more convenient for the Bank of England to advance the money in the way proposed, yet he (Mr. W. Williams) should prefer having the money raised in the manner proposed by the Chancellor of the Exchequer—by terminable annuities.

MR. HANKEY

said, he thought the hon. Member for Lambeth had misunderstood the object of the hon. Member for Buckingham. That hon. Gentleman did not say anything that could lead the Committee to suppose that the Bank at all wished to make the loan a perpetual one. The effect of his hon. Friend's suggestion would be to relieve from income tax that portion of the annual payment which was a return of capital. That would open a very wide and very difficult question, and he did not think that it would he wise for the Chancellor of the Exchequer at that moment to change the principle upon which annuities had hitherto been charged as income. If a man purchased the goodwill of a business, the income which he derived from it was in part a repayment of the capital which he had expended, and he would have as much right to be exempted from income tax on that portion as had the annuitant. If the income tax was to be arranged upon such a principle its collection would be impossible, and as they were not prepared to abandon it they ought to take care not to clog it with such conditions as would render its collection more difficult than it already was. His hon. Friend had referred to the loan of £16,000,000, and he would state to the Committee some facts connected with the Irish famine loan, contracted about the year 1847, which would show that it was not always so economical to borrow by means of Consols as his hon. Friend supposed. That loan was issued in 3 per cent Consols at about 89½ per cent. During the following six years the Commissioners for the Reduction of the National Debt redeemed out of the surplus income of the country stock to the amount of rather more than £8,000,000, or the whole of that loan. The loan was contracted for at 89½, but the stock was repurchased at an average of 97 per cent. Thus, during six years the public had to pay 9 per cent more than they had received, or about 1½ per cent per annum. Adding this to the exact rate of interest paid—£3 7s., it appeared that this money was raised at not much under 5 per cent. That showed that the issue of Consols was not at that time, and under even favourable circumstances, an advantageous mode of raising money. His hon. Friend had said that one of the disadvantages of borrowing on terminable annuities was, that every contractor would necessarily allow such a margin in his bids as to secure him against the contingency of a high rate of income tax. As regarded the interest, this would apply equally to Consols; and the difficulty, therefore, only arose specially upon that part of the annuity which was a repayment of capital. He would not discuss the question what would probably be the average rate of income tax during the next thirty years, but he did not think that the uncertainty as to that would have such an effect upon the mind of the public as to render this mode of borrowing more disadvantageous than that which was adopted in the case of the loan of 1847. The termination of any amount of Government debt was a matter of so much importance that he must press the Chancellor of the Exchequer to follow the precedents, and to adhere to the proposition which he had made as to the method of raising of this money.

THE CHANCELLOR OF THE EXCHEQUER

said, he wished to call the attention of the Committee to the fact that though two subjects had been discussed in the conversation, only one of them was for any practical purpose before them. The question whether they ought to borrow on terminable annuities or on permanent annuities formed no part of the subject really before them. He must say, however, that his hon. Friend (Mr. Hubbard) was somewhat bold in his assumption when he said that the difference between borrowing on Consols in 1855 and borrowing on terminable annuities was as £3 8s. to £5 per cent. The difference was not as stated by his hon. Friend, as the hon. Member for Peterborough (Mr. Hankey) had shown in the clear and simple illustration which he had given, and he might add that the hon. Member for Peterborough had rather understated his case, as the period of six years which he tool; was not the maximum, but the minimum period on which he might have based his calculation. Further, his hon. Friend should recollect that the loan of 1855 was not two separate transactions, but one and the same loan, so that it must ever he matter of uncertainty what the lender gave for the perpetual sum and what for the terminable annuity.

With reference to the actual question before the Committee, his hon. Friend who moved the Amendment said the amount of the public debt did not distinguish between the payment of interest, and the repayment of capital. It did not do so, but really that was a matter of small importance. What the public wanted to know was the annual charge of the debt. The minute question how much was interest, and how much was capital, was a calculation which every man made for himself; but it was not of practical moment that it should he presented to the public in the annual statement of accounts. His hon. Friend did not put his case as the ground of defending the interest of the future proprietors of the terminable annuities. The truth was they were in no danger whatever, and his lion. Friend did not rest his case on that ground. The question as to the incidence of the income tax on such annuities had been raised long ago, but no income tax was in existence when terminable annuities were first introduced; and the whole groundwork of the argument against them, in its connection with the income tax, disappeared if the contract for the annuities was made at a time when the income tax was in force. It was, in his, estimation, impossible to adopt the system proposed by his hon. Friend and not endanger the whole foundation on which the income tax rested. Some people he know I wished to reconstruct the whole system of the income tax, and his hon. Friend was one of them. He now proposed to introduce the thin end of his scheme, but he hoped the Committee, before they adopted it, would seriously consider the consequences to which it would lead. His hon. Friend's argument as to the economy of his proposal was not so very clear as he seemed to suppose, he said it would lead to greater economy in future years; but the House of Commons did not give by the Bill before them any judgment whatever, either as to the precise amount they might raise in future years, or the manner in which that amount might be provided. It would be quite open for the House of Commons next year to borrow in Consols, or not to borrow at all, or make any other provision. What they had before them was a limited operation, and there was a clause in the Bill, the: 17th, which authorised the Treasury to bring the annuities now to be contracted into the category of the annuities of 1855, and, by placing them on the same footing as those annuities, enlarge the stock instead of creating new and limited stock. The creation of a multitude of new and limited stocks was inconvenient. It was better to have the stocks few and large. The annuities of 1855 had got twenty-five years to run, and the most expedient mode of action might be, to put out the new annuities in all respects in the same condition as the annuities of 1855, and the economy of making them part of existing stock might counterbalance any disadvantage they might have to encounter in the element of uncertainty. He believed that the Government had come to a right conclusion on this question, and therefore he trusted that the Committee would not give its sanction to the proposal submitted by his hon. Friend.

MR. HUBBARD

replied. The hon. Member (Mr. T. Hankey) had levelled his argument, not at what he had said to-day, but what he said last week. The hon. Member's illustration was the worst he could have used, for he had picked out the loan of 1847, when a panic prevailed, and when the Government borrowed at a disadvantage. If that loan, too, had resembled the present, the period of thirty years would not have expired, and the time would therefore not yet have come for repayment. There was no affinity whatever between the two cases. In the addition he proposed to the clause, he had not said a word about the income tax. He did no more than tell the truth, and he could not help thinking that a deplorable state of things had arrived when the Chancellor of the Exchequer deprecated telling the truth in a matter of finance, Such a shrinking from facts he could not help thinking was not worthy either of the House or the country.

Amendment negatived.

Clause agreed to, as were the remaining Clauses.

Schedule,

SIR FREDERIC SMITH

said, he rose to propose to reduce the sum for Portsmouth by £200,000. The whole sum proposed to be expended at Portsmouth was £1,920,000, of which it was intended to take £580,000 in the present year. The outlay was to be divided between the Needles, the Isle of Wight, Portsdown, and Gosport barracks. Opinions differed, however, as to the value of some of these defences. Sir John Burgoyne was against the construction of some of the proposed works at the present moment. The Commissioners, on the other hand, designed to erect the works without the protecting links, which would leave them very incomplete. It was a great mistake to execute works of such an extent as would require enormous garrisons to defend them. It would be far better to construct works on a more limited scale, but as strong as they pleased, provided they could well garrison them. Take the Chatham lines, for example. They were about a mile in extent, and would require from 8,000 to 10,000 men to defend them. Double their extent, and they would require 20,000 men. But if they strengthened the same works by making a covered way and raising the walls, 5,000 men would suffice to hold them. He had to complain that men like Sir Hew Ross, Admiral Chads, Admiral Richards, and Sir William Parker, had not been summoned to give evidence before the Commissioners. Lord Seaton and the gallant Member for Westminster—men who had commanded armies, and who could tell where we could place our forces in order to be able to meet an enemy—ought also to have been examined as witnesses. The proposed expenditure at Dover, like that at Portsdown Hill, would be money thrown away; while, on the other hand, the whole outlay for the defence of the Thames was to be £180,000, of which only £60,000 was to be expended in the first year. Why not take the whole £180,000 at once, and complete the works for the Thames without delay? We saw that the New Zealanders could throw up earthworks in a few days, and surely, with our advantages, we could execute field-works on the shortest notice. He hoped that the scheme for so greatly enlarging the works of Dover would be given up, and that the money asked for would not be applied to Portsdown Hill. There might be a hot fit just then, but a cold one would follow in another year, and the works at Portsdown Hill would not be finished.

Amendment proposed, in line 5, after "Portsmouth." to leave out "£580,000," and insert "£380,000."

SIR FRANCIS GOLDSMID

said, that a careful perusal of the Report induced him to support the Amendment of his hon. and gallant Friend. It was clear that, in order to show the expediency of sea defences, it was only necessary to point out the probability that an enemy's fleet, giving the slip to ours, might run in and bombard our docks, On the other hand, the demand for land fortifications must proceed upon the supposition that the enemy would think it worth while to incur the enormous risk of putting troops on shore in order to attack the docks from the land side. Now, he thought the Commissioners bad made out a good case for the establishment of sea defences; but they had made out no case for the fortifications on the land side which they recommended. They applied a magnifying glass to everything that could tend to facilitate the invasion of this country; and, on the other hand, they used the best optical instrument they could find to diminish the apparent size of objects when they came to look at our means of resistance. In the third paragraph of their Report they advanced the extraordinary proposition that if for a time our fleet lost the command of the Channel our insular position would be rather a disadvantage to us for defensive purposes, because it would enable the enemy to select any part of the coast they pleased to effect a landing; and they referred to the experience of the late Russian and Italian wars in support of this proposition. Now, in the first place, he thought there was no ground for the apprehension that the English fleet would ever lose the command of the Channel; and in the next it should be remembered that the Russian fleet never had the command of the sea, and the allied commanders were, therefore, able to lay their plans just as though the Russians had had no fleet whatever. Could even the Commissioners fancy there was any ground for supposing that the English fleet would ever be reduced to a similar position? The Commissioners treated somewhat contemptuously the facilities for defence afforded by our railroads and telegraph. But every other military authority considered these facilities, which the Russians did not possess in the Crimea, to be of the very highest importance. He submitted, therefore, that the Russian war had no bearing on the question. Neither could the landing of the French troops in Italy during the late war; for the French army landed at Genoa, one of the best ports in Europe, belonging to an active and zealous ally. What inference could be drawn from that, applicable to the lauding of an army in England, probably on an open beach, in the face of an opposing force, and certainly in the midst of an earnestly hostile people? Why, by the same process of reasoning he could prove that it was perfectly easy to take the fort of Ehrenbreitstein; for he had more than once entered that place, without the garrison daring to oppose him, when he had the permission of the commandant to view the fortifications. But without this permission a skilfully led army could probably not have entered. Yet it was in reliance on logic such as that of the Commissioners, inferring what can be done against energetic resistance, from what can be done when there is no opposition, that the House was about to impose heavy burdens on the taxpayers of the country. The improvements now making in gunnery threw additional doubt on the propriety and expediency of erecting these fortifications, and that doubt applied with greater force to land than to sea fortifications. It was already thought necessary to erect the sea defences on the points farthest seaward that it was possible to find; and even if further improvements took place in long range artillery, we could not be asked to build forts on places more seaward, because no such places could be found. On the other hand, if immediately after land defences should have been erected four or five miles from a dockyard, a future Whitworth should increase the range of artillery to seven or eight miles, we might be told that the forts just completed had become wholly useless, and it might be found necessary to carry those defences still further inland. He thought, therefore, that it was desirable that as far as possible our expenditure for the present should be confined to our sea defences, and as the Motion of his hon. Friend would only delay that part of the works as to the expediency of erecting which there was the greatest doubt, he hoped it would find favour with the Committee.

MR. SIDNEY HERBERT

said, he hoped the Committee would not be influenced by the authority of his lion, and gallant Friend, high as it was, to give their assent to the Motion. It was said they had not sufficient evidence on this subject. His hon. and gallant Friend had asked why they had not examined Sir Hew Ross. Why, if they had wished altogether to shelve the matter—to stave it off entirely—they could not have done better than go hunting about for men of reputation in the army and examine them; but the Commissioners had taken evidence at considerable length, and that evidence was of the most distinct and satisfactory character. With regard to Portsdown Hill, until he heard this discussion he could not have conceived that any body of men could be found to say that, in defending Portsmouth, of all places in the world, they should omit Portsdown Hill. [Mr. BERNAL OSBORNE: You could not take an army there.] Yes; let them fortify Portsmouth to the sea, to the east and to the west, and leave it open to the north, and they would find an army there. An enemy would not come and attack us where we were strong, or neglect to attack us where we were weak. They had been told a few nights before by the hon. Member for Brighton (Mr.White) that the strength of a chain was its weakest point. Now the Motion of his hon. and gallant Friend would purposely leave a weak point—the only weak point in which they could attack Portsmouth. What the Commission recommended was what every officer had proposed, except his hon. and gallant Friend, who had been commanding officer at Portsmouth. But a new state of things had since then arisen with the long range. General Shaw Kennedy had recommended Portsdown Hill for fortification works, and Sir William Napier agreed with him, General Shaw Kennedy had published a letter in the newspapers, in which he entirely agreed with the plan of the Commissioners, which he declared to be an ad- mirable plan if Government had only the courage to adopt it. Sir John Burgoyne, in November, 1858, before the Commission had given evidence confirmatory of these views. Last year the question of the long range arose. Sir John Burgoyne gave evidence before the Volunteer movement, and said he did not see where they could get troops; if they could get troops, he said, they should defend Portsdown Hill. Last year another document was signed by Sir John Burgoyne as to the means of defending Portsmouth now we had got the long range, and in that he expressed his opinion of the importance of fortifying Ports-down Hill, as the whole dockyard could otherwise be bombarded from it. Having got the Report of the Commission, it was submitted to a Committee, consisting of the noble Lord at the head of the Government, the First Lord of the Admiralty, and another Cabinet Minister, who were assisted by the Duke of Cambridge, the Commander-in-Chief, Sir John Burgoyne, Inspector-General of Fortifications, Sir Howard Douglas, and others. It was decided that the sea defences should be taken first, because they were of most importance, Accordingly they were now taking the sea defences, and were going to spend all the money they could on such limited works in one year. The land-works were regarded as only of secondary importance to complete the protection of the dockyard. They had for these fortifications the authority of Sir John Burgoyne, Sir Howard Douglas, Colonel Shaw Kennedy, and of the whole Commission. And yet they were told they had no authority! The gallant Officer (Sir Frederic Smith) talked of field-works on Portsdown Hill. It should be borne in mind that the hill was composed of hard chalk, that there was not a sod of any thickness on the top of it, and that field-works could not, therefore, be rapidly constructed upon it. Ours was not a military country. Was it wise, then, to postpone to the last moment works which, in the hour of need, would be of the greatest importance, and which it was acknowledged must be erected in the end? The gallant Officer owned that they must be made ultimately. Surely it would be far wiser to construct them in good time. Allusion had been made to the deficiency of barrack accomodation in England. Our barracks were how overcrowed to the extent of 25,000 men. But these forts would be barracks. There was no reason why we should not build barracks so as to form an element in our defences. It was asked why they did not take more money for the sea defences; but the reason simply was that they were advised by competent persons that the sum the had taken was as much as could be spent in the year. The truth was, we had gone on for years nibbling at this matter of fortifications. The persons engaged on the works did not believe they would be carried out so as to become solid and complete lines of defence, and the consequence had been a disposition to ''scamp" the work. Here, at last, was a complete and comprehensive plan, and immediately a demand was raised for the omission of a small but important part of it, all for the sake of showing superior acumen and powers of criticism. When they were about the work, why not do it thoroughly and completely at once? The object of the fortifications was not so much to resist as to deter attack; and as long as one weak point was left that object would not he secured. The enemy were as acute as ourselves, knew all our weak places, and the point against which they would direct their attack would be one of those places. He earnestly hoped that the Committee would not accede to the proposition of the hon. and gallant Member.

COLONEL DICKSON

supported the Amendment. These land defences were not necessary, as he believed it was utterly impossible, with the use of the commonest precaution, that a foreign army could invade our shores. We had not a sufficient army to man such places as Portsdown Hill, and it would be throwing money away to fortify that place, unless the army was increased. He thought the state of the militia was most unsatisfactory. In England, Scotland, and Ireland only 38,852 of the militia had been trained during the last year, and there was no security that the number would not be less next year. He thought that our money had better be devoted to an increase of the army and of the militia, than to the erection of these land defences, and had therefore great pleasure in supporting the Amendment of his hon. and gallant Friend.

MR. NEWDEGATE

said, that all the warnings which had been given of the insufficiency of our naval defences appeared to be totally forgotten in the Committee. It was admitted by the highest authorities, both naval and military, that our naval force was insufficient to guard our coast, and to say that invasion was impossible was therefore to contradict the evidence of the most competent witnesses. In the Russian war they all knew how readily an army was transported across a far wider sea than separated France and England, and disembarked with safety and rapidity on a foreign shore. It was essential to convince the people that the Government and the House were proceeding in a workmanlike manner. If he could believe that the works at Portsdown Hill were wholly unnecessary he would vote against them; but they were recommended by authority of such weight, that he would not accept the responsibility of doing so. There was, however, one proposal which he thought might very well be postponed, and that was for the central arsenal. The work was not included in the first Report of the Commissioners, and it was obvious that it could only be of use after the Metropolis was in the hands of an enemy, and the forces of this country were falling back towards the north of England. He was in favour of removing the military stores from Woolwich, but Weedon was a better site in every respect for an arsenal, except that it was not favourable for permanent fortification. The proposal was to make, not merely an arsenal, a central fortress, and it would render the whole scheme liable to misrepresentation. It would lay the Government open to the imputation that they sought such a fortress as a protection against the people of this country, and would damp the energies which were now directed towards making provision for the construction of defences which were really necessary.

MR. BAILLIE COCHRANE

said, he thought they were acting with great inconsistency towards the Emperor of the French, at one moment treating him as an ally in whom they had the greatest confidence, and the next as the representative of a power against whom they were to guard themselves at an enormous expense. He should support the Amendment.

Question put, "That £580,000 stand part of the Schedule."

The Committee divided:—Ayes 79; Noes 28: Majority 51.

Schedule agreed to.

House resumed.

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

House adjourned at half after Two o'clock.