THE FINANCIAL STATEMENT.

HC Deb 03 May 1866 vol 183 cc365-421

Order for Committee read.

Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."

WAYS AND MEANS considered in Committee.

(In the Committee.)

THE CHANCELLOR OF THE EXCHEQUER

Mr. Dodson—After the warm debates and the sharp crisis of last week it is with great relief and satisfaction that the Government, and that I individually, come to deal with important public business of a nature which we hope and think can involve no subject likely to lead to angry controversy. It will, indeed, be my duty to enter upon points, in the course of the remarks I have to make, which, as I think, possess an interest for all in this House, and especially for those who are connected with the land and fixed property of the country. I hope, however, from the nature of the proposals I have to make, and indeed I feel convinced upon the matter, that it can only be through my own negligence or inadvertence if anything which falls from me should possibly come into conflict with the feelings or opinions of any hon. Gentleman opposite, and I would beg, if it be permitted to me, to apologize in advance for any such error should it occur.

Sir, I have not to-night to announce to the House the existence of a surplus revenue for the year which has recently expired upon a scale such as those which we have had for the last three years at our disposal. During the last three years it has been my duty to ask the House to make arrangements relating to no less a sum annually on the average than £3,500,000, and although we move within more contracted limits in the fiscal affairs of the present year, yet I shall have proposals to make which will not be without their own interest and importance.

My first duty is, as usual, to lay before the House the particulars of the expenditure of the year which expired on the 31st March. That expenditure, as estimated on the 27th of April, was £66,139,000, and as finally sanctioned by the Appropriation Act it was very nearly the same, the amount standing at £66,147,000. The actual expenditure was £65,914,000, or less than the estimate by £233,000. As regards the chief items of this expenditure, there were voted for the army £14,348,000, and there were spent £13,804,000. For the navy there were voted £10,456,000, and there were spent £10,260,000. But it will be in the recollection of the House that towards the close of the financial year we took a considerable supplementary Vote for the purpose of the New Zealand war. No less a sum than £764,000 was voted for that purpose, and the Vote enabled us to rectify the accounts of the army and navy by assigning to their proper heads sums which had been paid in advance for the purposes of the war, and included provisionally in the ordinary accounts of the army and navy services. When the whole of the figures are put together, therefore, the result is to bring the actual nearly into agreement with the estimated expenditure of the year, under these two great heads of charge.

To the sum total of our expenditure for the year should perhaps be added an item which it is not very easy to deal with, inasmuch as the peculiar arrangement, under which it appears before us, leaves it uncertain whether it should he regarded as part of the annual expenditure or as an addition to the Public Debt. I refer to the sum of £560,000 on account of the fortifications, which has to be added to the figures I previously gave, and which brings the gross expenditure of 1866 up to £66,474,000. There is, however, a sum of above £1,000,000 for Indian and other charges, which, appearing on both sides of the account, cannot be said to form any portion of the expenditure; so that the true total of the expenditure may be taken as being £65,424,000 for the financial year which has just expired.

If I look for the means of a comparison of this sum with the expenditure of former years, I find that the expenditure of 1859–60, when duly charged with all that belongs to it, amounted to £69,762,000; but in that amount were included large sums on account of annuities which expired in 1860; much larger sums than the aggregate of the annuities since created. The amount of annuities which expired at that period was £2,149,000, and those created since amount to £710,000, showing a difference of £1,439,000, partly for interest and partly available towards the extinction of the public debt, which was provided in the former year, and has not been provided in the years just passed. If, therefore, deducting this sum of £1,439,000 we take the expenditure of 1859–60, for the purposes of comparison, at £68,323,000, that of 1865–6 standing at £65,424,000, we find there has been a real decrease of expenditure in 1865–6, as compared with 1859–60, of £2,900,000. But the year 1859–60 was the year in which the most important changes in the scale of our expenditure were made. If I go back to 1858–9, the year before those changes, and compare the expenditure of that year with the expenditure of the year just expired, rectifying both according to the rules which I have stated, I find that the expenditure of 1858–9 was only £63,225,000, showing an increase in 1865–6, as compared with 1858–9, of £2,200,000. That may be taken as a fair and accurate statement of the condition of our expenditure at the present moment, as compared with what it was some seven years ago.

Next, Sir, if I look to the heads of expenditure I find they stand thus: The debt costs us £26,233,000; our defences, military and naval, cost £24,829,000; our civil government, in which I include the Miscellaneous Estimates, the Consolidated Fund charges, and the Packet Estimates, costs £10,250,000; and the collection of the Revenue is attended with a charge of £4,602,000. As the charge for the collection of the Revenue, however, ought really to be divided between the other heads of expenditure, not being itself an independent, but only a subsidiary and auxiliary description of expenditure, I will treat it in that manner. Dividing the sum of £4,602,000, then, between the debt, the military or defence charges, and the civil charges, I find these to be the percentages—the debt costs us 43 per cent of the whole expenditure; the defences 40 per cent, and the civil charges, defined in the manner I have stated, absorb the remaining 17 per cent. The figures I have now given may also be taken as an accurate statement, subject to this qualification, that in the total sum charged during the year for the expenses of the National Debt there is included a sum, not insignificant, which is really not a charge for the interest of debt, but a charge in re-payment of the capital of the debt through the medium of Terminable Annuities.

If I compare the expenditure with the revenue of the year it stands as follows: The expenditure up to March 31, according to the Exchequer account laid upon the table, was £65,914,000; the revenue, according to the same Exchequer account, was £67,812,000, showing a surplus of revenue over expenditure of £1,898,000. If I were to treat the accounts for fortifications as part of the expenditure of the year, that surplus would be reduced to £1,338,000; but I shall, in preference, and in stricter conformity, I think, with the intentions of Parliament, take notice of them when I come to consider our engagements in connection with the National Debt, under which head they ought more properly to be placed. The surplus, then, for the year stands at £1,898,000.

Now, it is a matter of some interest to compare the natural outturn of the revenue at the end of the year with the Estimate framed at the commencement of the year. The estimated revenue at the commencement of the year was £66,392,000, and the actual receipt has been £67,812,000, showing a surplus receipt beyond the estimated amount of £1,420,000. This surplus runs very much through the different branches of the revenue. I need not trouble the Committee with the totals of the figures as to each particular branch, but the actual revenue from the Customs has exceeded the Estimate by the sum of £369,000; the actual receipt from the Excise has exceeded the Estimate by the large amount of £758,000; the actual receipt from Stamps has exceeded the Estimate by £270,000; the yield of the Income Tax also went beyond the Estimate by the sum of £240,000. The branch of revenue from the Post Office has produced precisely what it was estimated to produce; and the Crown lands have yielded the same as the Estimate with a small excess of £5,000. But the miscellaneous revenue and the receipt from the China compensation fell short of what had been estimated by the sum of £224,000; an amount which, in order to estimate the real growth of the revenue, ought to be added to the surplus I have formerly named, inasmuch as those two heads indicate a diminution merely on certain heads of re-payment, and have nothing to do with the question of the real resources and elasticity of the revenue of the country.

In the same way, if I proceed to compare the revenue of the past year with that of the preceding year, I find that it stands as follows. On the whole of the nine heads of the public revenue, the receipts in the year 1864–5 were £70,313,000. In the year 1865–6 they were £67,812,000, showing an actual decrease of £2,501,000, in lieu of a decrease, which I had, estimated in the financial statement of last year, of £3,921,000. But if I strike out those two heads of Miscellaneous Receipt and China Compensation, which have no real relation to the subject, I find the actual loss was £2,386,000, in lieu of an estimated loss of £4,028,000. So that the rate of growth of the revenue, which I stated last year, on an average of the six years preceding, to be about £1,780,000 per annum, amounted almost precisely to that sum. It may be stated that, for the year 1865–6, the revenue of the country, proceeding from the same sources, and excluding all legislative measures of change which tend in any way to affect those sources, has grown by the sum of a million and three-quarters. It would probably have grown by a somewhat larger amount if the circumstances of the harvest had been more favourable. But whereas in 1864 the harvest was a fine one, and the price of wheat between October and December was 38s. 5d. per quarter; during the same period in 1865, when the harvest was below the average, the price of wheat rose to 44s. 10d. per quarter, and the price of wheat, on the whole, is a very good inverse test of the general condition of the country, and of the capacity of the people to consume those commodities which yield the principal part of the revenue.

If I look now, Sir, to the branches of the revenue of last year as they were specially affected by the changes of 1864–5, they stand as follows. The estimated loss upon tea came singularly near to the actual loss. The estimated amount of that loss was £1,868,000, and the actual loss was £1,871,000. We might naturally have expected a more favourable result. We have generally found that, under favourable circumstances, the loss upon commodities of this kind, when they have been subjected to a reduction of duty, is less than had been previously estimated. But in this particular instance I am inclined to think that a Motion to which this House, or rather the House which preceded it, was induced to accede for postponing the operation of the reduced duty on tea—although I do not believe we shall ultimately be found to have lost much by such a Motion—has had an unfavourable effect upon the revenue from tea. What, however, is more important is that the stocks have been less than at a former period, and that the short price of the commodity has risen. The price of tea in bond on the 1st of April, 1865, was 16d. per lb., and on the 1st of April, 1866, it had risen to 19d. per lb. A reduction of 6d. per lb. in the duty on tea was made; and as 3d. out of that 6d. per lb. was virtually neutralized by the increase on the price paid in bond, I think, on the whole, we may be rather well satisfied that the loss on this item of receipt has not been greater than was originally calculated upon.

The revenue from the Income Tax also shows a somewhat smaller loss than was expected. The loss upon that head was estimated at £1,650,000, and the actual loss has amounted to £1,568,000. I have again to announce to the Committee that there is one fixed estimate which fluctuates in a singularly satisfactory and agreeable manner, now almost from year to year, and that is the value of a penny upon the income tax. It has grown within our recollection from between £700,000 and £800,000 until it now amounts to no less a sum than £1,400,000. At that sum I am able to estimate it for the year which has now begun.

Next, I come to the subject of fire insurance, in which the House feels a deep interest, and with regard to which the hon Member for Dudley (Mr. Sheridan) recently, in conformity, as I think, with the general wish of the House, forbore to make a special Motion antecedentedly to the financial statement for the year. The change which was made in the year 1864–5 has now been in operation for a year and a half. That was the change which related to the duty on the insurance of stock-in-trade against fire. We have, therefore, had the effect of that change for more than a full year. The change which was made last year with respect to the larger portion of the duty—namely, the duty upon everything except stock-in-trade, upon buildings and furniture of all kinds, has been in actual operation for only six months. For this is a change the operation of which, owing to the arrangements for charging and paying the duty, necessarily takes effect at a period of half a year after it has been ordered by Parliament. We have thus, up to the present time, only half a year's experience of that alteration, and the result is as I will now describe. First, it may, perhaps, be remembered by the House that I have at all times declined to follow hon. Gentlemen—Gentlemen, I am bound to say, very numerous and of great anthority—who have at all times held out to us sanguine prospects of some such large increase upon the amount of property insured, in consequence of the reduction of the duty, as would tend to replace in a considerable degree the revenue surrendered. I have not been, and I am not, at all insensible to the great benefits and advantages, in other points of view, which may attend the reduction of this duty; but I believe, and always have believed, that it would be a mistake on the part of the House if they were to expect that any such large expansion as I have described in the amount of property insured would follow upon the reduction of the duty. I therefore estimated an increase at the rate of only 10 per cent; and I made even that estimate—I mean that I placed the probable increase of insurance at that figure—rather in deference to the opinions of others, more or less accepted apparently in the House, than because it was precisely the amount that I should myself have chosen. However, that rate of increase, such as it was, has not been realized. Comparing the two duties, and comparing the value, or the amount, of property insured for the six months, for which alone we have the figures, I find that, as regards the loss of revenue for the year 1865–6,I estimated that loss at £260,000. Its actual amount has been £272,000. And, as respects the increase in the amount of property insured, the case stands thus. The amount of property insured between October 1, 1864, and March 31, 1865—the six months to which alone the comparison can apply—was £580,000,000 in value; while from the 1st of October, 1865, to the 31st of March, 1866, the total value of the property insured was £627,000,000, showing an increase of £47,000,000, or about 8 per cent. But, then, there is a regular standing increment in the value of the property insured from year to year, which is not due to a reduction of the duty, but to the growing wealth of the country. That usual increment is on an average £17,000,000, for the six months. If I deduct this sum of £17,000,000, which is due to the ordinary growth of the wealth of the country, from the £47,000,000 which forms the gross total of the increase, I find that the increased growth in the amount of property insured, the growth traceable to the reduction of the duty, is £30,000,000, or about 5 per cent of the whole amount. I have no reason to suppose that there will be any material variation when we come to know the figures of the receipt for the whole of the first year; but it is possible that the figures for the following year may be higher. Yet, I still hold to the belief—although, of course, without presuming to dogmatize upon the subject—that if the House intend again to deal with this duty at any future period, I think it would be premature to say anything about it on the present occasion, when the change has not been yet one full year in operation—but if the fire insurance duty is to be dealt with hereafter with a view to a further remission, I frankly own that I believe it would be necessary to abandon the idea of hereafter making use of this duty as a considerable source of revenue. In fact, I incline conditionally to the view indicated by the terms of the Amendment suggested by the hon. Member for Buckingham (Mr. Hubbard)—namely, that it is not wise and politic to raise any large revenue from this source—that this duty ought to be regarded as a tax upon property, that its remission is a remission upon property, and that if it is dealt with again it ought to be by a charge on property that an equivalent for it should be found, should such equivalent be needed. The condition that I should be disposed to attach is that property should, in some other and better form, supply such an equivalent; for I do not think, considering the very large re- ductions we have made, in other forms, of the burdens borne by property, that we should act quite justly by the community in giving to property rather than to industry and labour the benefit of this further remission.

Sir, there are two other commodities that I would mention with reference to duties. The revenue from malt has for the year past been a very considerable revenue. The receipt had risen in the year 1864–5 to a point previously quite unprecedented; and in estimating it for the year 1865–6, we were so far cautious that we anticipated a small diminution. I believe it is a common characteristic of this head of revenue that it runs favourably for two years together. It certainly has been so in the present instance; for, under the circumstances I have named, we estimated the revenue from malt at £5,850,000, and it has produced no less a sum than £6,410,000; showing the very considerable excess of £560,000. I come next to the revenue from spirits; and the state of that revenue likewise, if we are to consider an increase of it as satisfactory, is satisfactory. The receipt upon British spirits which was estimated at £10,300,000 has proved to be £10,450,000; the receipt upon colonial and foreign spirits, which was estimated at £3,295,000, has produced £3,505,000. So that our receipt upon spirits has been no less than £13,955,000, or, in round numbers, £14,000,000, which, I think, is possibly the largest sum ever raised in any country, or at any period of history, by a tax on the consumption of any one single commodity.

That, Sir, is the whole of the review which it is necessary for me now to take of the transactions and experience of the last year; except that I ought to state, in conformity with the usual practice, that the Exchequer balance has been reduced in the course of the year, in consequence of the application of a somewhat unusual amount to the liquidation of public debt. The Exchequer Balance stood on March 31, 1865, at £7,691,000. On the same day, in 1866, it was reduced to £5,851,000. During the same twelve months, the advances on new loans made by the Exchequer amounted to £1,635,000: the repayments of advances previously made came to £1,817,000, showing a balance to credit of £182,000. I will now give the Committee the estimate we have formed of the revenue and expenditure for the current year, or 1866–7. The charge on the funded and unfunded debt under the provisions of the law as they now exist, and with a small allowance for the additional charge brought upon it through the conversion of perpetual to Terminable Annuities, sanctioned by the House at an earlier period of the present year, is £26,140,000; the Consolidated Fund charges are £1,880,000; the Estimates for the army, £14,095,000; for the navy, £10,400,000; for the collection of the revenue, £5,003,000; for the packet service, £821,000; and for the Miscellaneous Estimates, £7,886,000; giving a total of £66,225,000, The total of the Estimates of last year was £66,147,000, so that there is an actual increase upon the Estimates of the present year compared with those of last year, though it does not amount to a large sum; it is £78,000.

I ought to explain to the Committee in what manner it is that this increase, though a small one, has arisen; because, though certainly it would have been more satisfactory, had it been practicable, to present both a nominal and a real decrease in our expenditure, yet I do not think it will be said upon a fair examination of the figures that they indicate any real increase in the permanent expenditure; I should rather say there are signs, though of no great extent, of the reverse operation. The Army Estimates for the year show a decrease of £253,000; but the Indian and other repayments also show a decrease of £246,000. The Committee is aware that the Indian Army is composed of regiments supplied from this country, and that all charges incurred in this country on account of those regiments, and all non-effective charges, are borne on our Estimates, and then replaced by a payment at so much per man from the resources of India. But the Indian Government reduces its establishment at its own discretion from time to time. It being thus at liberty, under an arrangement very favourable to it in that respect, to throw back upon us any regiments it can spare without a moment's notice, the effect of that undoubtedly is that a reduction in the Indian establishment, which entails an instant reduction in the Indian repayments, cannot be followed as rapidly by a reduction in the amounts charged in the Estimates for the British Army at home.

Moreover, Sir, it is important to call the attention of the House to the very heavy charges—and I think that they are charges sustained by sufficient authority —which we are undergoing for works in certain Departments; and first for the navy. In 1865–6 the navy charge for work amounted to £528,000; but for 1856–7 they amount to £893,000. The principal part of that augmentation, however, is due to the great extension of dock accommodation which was the subject beforehand of debate in this House, and with an express, I might almost say, an eager, sanction from a Committee of this House, appointed to consider it. The Post Office Department has also a large increase in expenditure under this head. Its works last year were estimated at £70,000, but they are estimated this year at £349,000. The object is to effect a great enlargement both of site and building in the General Post Office. I mention that item with more satisfaction in the view that I am now taking, because I think we may confidently regard the Post Office expenditure as partaking of the nature of reproductive expenditure. The Miscellaneous Estimates likewise have undergone an increase of £165,000, rising from £829,000 to £994,000. That increase is due to the circumstance that for several years our Votes for public buildings, especially those connected with the national collections, have been more or less in arrear; but I do not think there is anything unwarrantable or excessive in the proposals that are now made. The upshot of them, however, is that the total demand for works for the navy, the revenue departments, and Miscellaneous Estimates has arisen from £1,427,000 to £2,236,000, showing an increase of no less than £809,000, and accounting for the increase in estimated expenditure many times over. I now come to the estimate of the revenue for the year. We take the Customs at £21,400,000; the Excise at £19,750,000; the stamps at £9,450,000; and here I may observe that there is hardly any branch of the revenue the growth of which is more steady and satisfactory. The estimate for assessed taxes and land taxes is £3,400,000; and for Income Tax £5,700,000. I pause for a moment to state that, the Income Tax being 4d. in the pound, we have £1,400,000 as the estimate of what a penny in the pound will produce, the additional £100,000 being accounted for principally by taxes in arrear. The Post Office stands at £4,450,000, showing a probable increase of £200,000 upon the receipts of last year, and thus at once overtaking a large portion of the heavy charge that we are about to incur for Post Office enlargements in London. The miscellaneous receipts, including the China indemnity, will stand at £3,100,000. This miscellaneous receipt is materially affected by the considerable sum of £500,000 which comes into it this year as the proceeds of debentures sent from New Zealand in liquidation of a portion of the debt of the colony to the mother country, which debentures it will be our duty to ask the House to guarantee. This guarantee we shall not ask Parliament to give by way of entering into any new engagement on behalf of the colony. It will have no effect as between the colony and its creditors, but only as between the Exchequer and those to whom these debentures may be transferred. On the other hand, the China indemnity is a branch of receipt which is sinking, and must be expected to sink more. I think the estimate of it last year, if I remember right, was £450,000, but this year it is only £250,000, and it must very shortly expire altogether. The total estimated income of the year is £67,575,000, and the estimated charge of the year is £66,225,000; so that the probable surplus of income over charge for 1866–7 is £1,350,000.

There is no cause to be disappointed, I think, in this state of things; we may well consider the circumstances of the country to be upon the whole favourable, with the apparent promise of such a surplus as this, because it must be borne in mind that, when I say that the estimated income of the year is £67,575,000 we have had already cut off from that income no less a sum than £1,417,000, which was disposed of by the legislation of last year, although it only tells upon the balance for 1866–7. Of that sum £950,000 is on account of the Income Tax, £260,000 is owing to the reduction on fire insurance duties, and £207,000 is attributed to the reduction of duty on tea, which did not operate for the whole of the year just expired, but which will be, this year, in operation for the whole twelve months. If we add these sums together, it would appear that but for the legislation of last year we should have had to dispose of a sum of between £2,700,000 and £2,800,000.

We now come, Sir, to consider of the disposal of this money; and here I shall have, under several heads, to trespass for some little time on the attention of the Committee. The Committee is aware how important the subject of commercial treaties has become in the view of the commercial classes of this country. The Chambers of Commerce in all our commercial towns have intimated the greatest anxiety that such treaties should be formed. Those treaties, as far as have been contracted of late years, hare been adjusted in such a manner as to involve none of the objections, either in principle or in practice, which undoubtedly applied to our earlier attempts at the formation of commercial treaties. We have no haggling about certain benefits which might be conferred upon our own country, but which we will not confer unless the State with which we are dealing will confer certain other distinct and independent benefits on its subjects. The character in which we appear in these negotiations, as far as they have ever involved changes in our own tariff, is simply this. We have been content to become in more than one instance auxiliaries to the Government of a foreign State, to enable it more easily to overcome the prejudices and to enlighten the ignorance of its own people by exhibiting to them the advantages to be derived from the fulfilment of promises which we hold to them, the fulfilment of those promises being at the same time most beneficial to ourselves. We have used these arrangements as means of securing a double benefit; but we have never made, or professed to make, the adoption of changes in our own law, in themselves beneficial, contingent upon any steps to be taken by the other contracting Power, in the sense of meaning to withhold them unless such steps were taken.

Now, I will not weary the Committee on the subject of the French Treaty as far as respects that portion of it which has been sufficiently explained on former occasions—namely, its effect upon England. But I should like to state, and the Committee will not be sorry to hear, the effect that treaty has had upon the export trade of France herself, because all remember the dread, the horror with which that treaty was received by considerable and influential portions of the French nation. If ever, however, there was an emphatic disappointment in the best sense of unfavourable auguries, it is that which is now presented by the remarkable results of the treaty in question upon French trade. No elaborate demonstration is necessary to prove that if the export trade of France in French commodities has increased, the business of the home market connot possibly have fallen off. For no trader can supply customers at a distance without being in a condition also, and more easily, to supply customers at his own door. I am in a position to state what are the exports of France in tissues of all kinds: of cotton goods, linen goods, woollen goods, and yarns of all the three descriptions. And the general history of the matter—taking the year 1860, the year before the operation of the treaty, as a standard—I will present to the Committee. In the year 1861, just as it happened to some extent with ourselves, the effect of the treaty, through panic, was in every instance to produce a considerable diminution in trade. In 1862 all began to rise again; and I will now give the House the figures as compared with 1860. I shall state them in millions of francs. In cotton goods, France exported 69,500,000f. in 1860, and 93,750,000f. in 1864. In linen goods, France exported 15,500,000f. in 1860, and 24,500,000f. in 1864. In woollen goods, France exported 229,250,000f. in 1860, and 356,000,000f. in 1864. In yarns of all the three descriptions, France exported 12,500,000f. in 1860, and 43,000,000f. in 1864. The total amount of these goods exported from France in 1860, immediately before the treaty, was 327,000,000f., and after the end of four years the amount had risen to 517,000,000f. The exports to England increased in a greater and, if possible, in a still more remarkable degree. In order to spare the time of the House I will not give minute details; but these are the exports to England of the very commodities with respect to which great alarm prevailed in France, extending even to an expectation that her producers would lose the home market. The exports to England of woollens, linens, cottons, yarns, metal goods, earthenware, salt, glass, and fish amounted in value to 58,500,000f. in 1859, before the treaty, and in 1864 they had risen to no less than 141,000,000f.

Since the treaty with France we have concluded through the energy of the departments of the Government and the able assistants who have been employed (I include, especially, members of the diplomatic service, as well as the permanent Civil Service at home), many other conventions relating to commerce. There is an advantageous treaty with Turkey, which admits of a small increase of import duties to a uniform 8 per cent, but stipulates for a liberal reduction of the old rate of export duty, and a further reduction of the transit duties. We also made a Treaty with Belgium in 1862, which insures to us all the advantages previously given by that State to France, together with a deduction from the former standard of pilotage, tonnage, and navigation dues. The Treaty with Italy in 1863 secured to us the reductions given to France by means of what is termed the favoured nation clause, and a similar Treaty with the Zollverein in 1864 gave to us the reductions given to France. A treaty of a more notable description has recently been concluded with Austria. That Empire was of all other countries, perhaps, the most rigid in the preservation of the protective system. I know not whether Russia could successfully compete with her in that respect. Certainly those two countries might be regarded as the last strongholds of the pure protective system; but Austria has entirely abandoned by an agreement with us her tenacious adherence to that system. While we own that that abandonment is beneficial to us, we justly maintain that it is in a far greater degree beneficial to herself. In effecting this result, the Chambers of Commerce in the north-east of England took an active part; and Mr. Alhuson of Newcastle, I believe, did much to spread sound ideas among the people of Austria and to make them sensible how cruelly they were impoverishing themselves by a rigid system of protection. The able agents of the Foreign Office and the Board of Trade, Mr. Morier and Mr. Mallet, by the knowledge and skill which they brought to bear on the discussion of the matter, greatly contributed to the settlement of the question; and I am glad to mention a name, which I would still more gladly mention if the bearer of it were now present in the House—Mr. Somerset Beaumont—who felt, not a personal, but a public and a most keen interest in the prosecution of this subject, and took a very active and beneficial part in promoting the proceedings connected with the Austrian Treaty. My right hon. Friend the Member for Gateshead (Sir William Hutt) also laboured with Mr. Beaumont in the same cause. No man could more ably or consistently be enlisted in such a cause, and I cordially congratulate him on the result which has been achieved.

The general effect, Sir, of the Austrian Treaty on the Austrian side is, that the French standard has been adopted, and the rate of Customs duty in Austria, after an early date, is not to exceed 25 per cent ad valorem on any description of British goods. That amount of 25 per cent in France and elsewhere is still a very serious obstacle to freedom of intercourse; and I think the time has well nigh arrived, after the experience she has had, when we may begin to ask ourselves whether or not our powerful neighbour France might not safely consider the policy of taking a further onward step. I am persuaded that matters will not rest here. We have found the proportionate benefit of the reduction of small duties to be fully equivalent to the reduction of great duties. Therefore, I speak of this rate of 25 per cent with satisfaction only in reference to what has gone before, and not in reference to what will follow.

And here, Sir, I have to mention two changes which we propose should be made in our tariff, and which we were the more readily induced (subject, of course, to the pleasure of Parliament) to promise, because they greatly assisted the Austrian Government in bringing to a satisfactory issue the important national engagement entered into. We propose to abolish the duty on timber; and to equalize the duty on wine in bottle with the duty on wine in wood. The duty on timber is a very low duty, and that is the best and only thing that can be stated in its favour. In any other point of view the duty on timber is as had a duty as it can be. It is a protective duty on a raw material of which this country stands in great want; which is of vast bulk, and thus in any case made costly by carriage. The imposition of the duty, which has the effect of greatly increasing this cost, and which also as far as it goes has a protective character, is the very essence and quintessence of political folly.

The consumption of timber in this country is remarkable. In 1811 the consumption of timber amounted to 417,000 loads. At that time the duties were augmented, and in 1814 the consumption fell so low as 218,000 loads. However, the growing wealth of the country brought about a gradual increase; and I will pass over the long period of years to 1841, from which time the House will observe that every reduction of duty has been answered by more than a corresponding increase in the use of this essential material. In 1841 the total consumption was 829,000 loads. In 1842 the duty on foreign timber was reduced from 56s. 6d. to 31s. 6d., and on colonial timber from l1s. 6d. to 1s. The re- duction only took effect in October, 1842. In 1843 the consumption was 1,298,000 loads. In 1850 the consumption was 1,723,000 loads. In that year the duty on foreign timber was further reduced from 15s. to 7s. 6d., and on deals from 20s. to 10s. The consequence was that, from a consumption of 1,723,000 loads in 1850, the consumption rose until, in 1859, it reached 2,408,000 loads. In 1860 we went to work again, and further reduced the duty from 10s. to 2s., and from 7s. 6d. to 1s. At that time, a highly respectable gentleman from the colonies, who represented Launceston (Mr. Haliburton), predicted that ruin would sweep down upon the timber industry of New Brunswick; but the consumption of all kinds, which in 1859 was 2,408,000 loads, actually had increased in 1865 to 3,700,000 loads, or to sixteen times the consumption of 1814. Of this augmentation the British colonies have no reason to be discontented with their share.

The whole revenue from timber is as follows for the entire year:—£300,000 from the general descriptions of wood goods, and £7,000 from wood manufactured into the form of ships, being a total of £307,000. I shall reckon the whole of this amount as loss for the year 1866–7, because we propose that the repeal should date buck from the 1st of April, 1866.

With respect to wines in bottle—the other subject I have to touch on in connection with the Austrian Treaty—the case stands thus. At present, we charge for wine in wood by one of two rates, supposing it is real wine, and does not exceed a certain strength,for if it does it is charged as spirits. The two rates are adjusted as follows:—if it is under twenty-six degrees the charge is 1s. a gallon, and over twenty-six degrees 2s. 6d. per gallon. When the alcoholic test was first adopted, it was required to be applied in great frequency and to every parcel of goods, and thus great injury would have been entailed on such an article as wine in bottle. Wines imported in bottle being for the most part of a more expensive character, it was therefore thought best, when these duties were fixed a few years ago, to levy a duty of 2s. 6d. upon all bottled wines, while wines in wood were charged according to their strength. Now, however, we are able to work the system with much greater accuracy and security, and the alcoholic test is much more rarely applied. Representations have been addressed to us by the Austrian Government, and I am bound to say by the French Government also. One piece of evidence, indeed, of a kind almost peculiar in history, has been forwarded—a document addressed to myself by a large number of Burgundian winegrowers, a document which I received with very great pleasure, as a sign of the increasing sense that is felt of the common interest of the two countries in matters of this kind. From these statements we find, and there is no reason to doubt their substantial accuracy, that there is a great deal of wine which may be imported safely in bottle, but which it is very difficult to import in wood without injury to its quality. This, I believe, is the case with many Hungarian, as well as with many Burgundian wines; and therefore, according to the request of the Austrian Government, we propose to equalize the duties on wines in bottle with those which are now paid upon wines in wood. That is to say, they will be charged according to their strength, 2s. 6d. per gallon if over twenty-six degrees of alcohol, and Is, if they do not exceed that standard. The effect of such a change would be a total loss of £71,000, without any allowance for recovery; or with some allowance for recovery and also for the portion of the year that has passed, a loss of £58,000. This I have to add to the debtor side of the account, to be set against the surplus.

I have now done, Sir, with the subject of treaties for the present; and there are three changes which I propose to make, quite apart from any obligations under treaty. We propose to remove the duty on pepper. The fate of pepper might well excite the commiseration of any humane man. The duty, which it is very difficult to defend, has often been in the list of duties fit to be abolished, but when it has come to the last moment there has always been some more bulky and important neighbour to thrust it out of the way, and the consideration of the subject has thus lain over till this year, when there happens to be a moderate surplus, which does not admit of our proceeding to deal with any great branch of the revenue. The present, therefore, appears to be a good occasion when, without exciting feelings of jealousy in the agriculturist or any other class of the community, we can afford to do justice to pepper. The case is a hard one, and for this reason; all the spices and condiments in which the wealthier classes have an exclusive interest have been long ago set free from duty. But pepper is a condiment common to all classes of the community; and though I cannot say whether this is so or not, I am told that it is largely consumed in Ireland. It is a commodity that can well be dispensed with by the wealthy classes, and even by those portions of the labouring community that partake largely of animal food, but is really, I believe, not only very useful, but very necessary to those whose diet consists in a much larger degree of vegetable food. Another very strong reason for the abolition of the duty is that pepper is abominably adulterated. Adulteration of food, I am afraid, is, in a very special manner and degree, an English vice, I doubt whether in any other country in the world the same amount of adulteration of food takes place as in this country; but the proportion of that adulteration is violently stimulated whenever the rate of duty, proportioned to the short price of the article, is very high. Now, the duty on pepper is little less than 200 per cent—that is to say, the duty stood at 6d. when the price was 3d.3¼d., or 3½d. The revenue from the article of pepper is £124,000, and deducting £12,000 for the tenth of the financial year, I find the net loss to be £112,000, which is to be added to the items I have already mentioned.

Next, Sir, I come to a subject which I am unwilling to leave wholly untouched, but which, at the same time, neither the state of our financial resources nor other considerations enable us at the moment to deal with in that conclusive and effectual manner which, I hope, some day may be brought within our power—I mean a portion of the duties upon locomotion. I do not hesitate to say that I think in principle—although I admit that some difficulties might present themselves in its application to practice—a great distinction should be drawn between the locomotion of luxury and pleasure, and that which is of necessity. I do not enter into the question of how far we can distinguish between them, but to a considerable extent our system, as it now stands, does actually distinguish between them. The House, perhaps, will be surprised to know that the revenue which we derive from locomotion in all its forms is not less than £1,600,000. Of that sum one moiety, or £852,000, is the portion of assessed taxes which I consider fairly due to locomotion; that is to say, the portion derived from taxes upon horses, taxes upon carriages, and taxes upon the pro- portion of men-servants estimated to be employed upon them. With that amount of £852,000, and also with the revenue of £459,000 derivable from railways, I do not propose in any manner to interfere. The first arises from a description of charge that may, I think, fairly be retained on our statute book, at any rate for the present; and the revenue derived from railways is, in my judgment, a revenue which Parliament would never think of surrendering, unless it were in connection with some comprehensive arrangement for securing benefits to the public. This, it is quite plain, we are not at present in a condition to entertain. The House is aware that a Commission composed of very able and very distinguished men, was appointed more than a twelvemonth ago to examine into the general condition of the railway system, and how far it might be possible, by such means as were defined in the instrument appointing the Commission, to improve our railway system in the direction of general accommodation of the public, and particularly of goods traffic. It is plain that we must adjourn any examination of that subject until the Commission has concluded its labours, which I hope, and am given to understand, will be in the course of the present year.

There are, however, subjects similar in character which I think may well engage our attention, and upon which such slight remissions of duty as we are in a position to make will be attended with a considerable amount of advantage. We derive from post horses and carriages, including all descriptions of carriages in London and elsewhere, £266,000; and from public conveyances £142,000, including all descriptions of such conveyances, whether stage coaches, waggons supposed to travel under four miles an hour in the country, or omnibuses which form so conspicuous a feature in the streets of London, and which are becoming from year to year instruments of almost indispensable use to the enormous number not only of the middle and lower middle, but even in the strictest sense, of the labouring classes of the community. The proposals, therefore, which I have to make relatively to the tax on omnibuses and all public stage carriages will not only bear materially on the comfort and advantage of the labouring classes in great towns, but in another point of view will tend to diminish the very injurious effect which the severity of this duty exercises in restricting rural accommodation, more particularly such accommodation in connection with the railway stations of secondary consequence. The present tax is estimated to amount to no less than from 9 to 11 per cent on the gross receipts of the London General Omnibus Company and other companies of a like description. And when one considers the relation which gross receipts hear to net, and what a very large proportion of gross receipts is swallowed up in payment of necessary expenses, it must be admitted that such a duty imposes a very heavy burden on this description of trade. I do not dwell on what relates to the railway stations, because every gentleman who resides in the country will, I am sure, be familiar with that matter from personal experience. It seems pro bable that in many cases the duty not only limits the number of conveyances but at particular points prevents their existence altogether. But the manner in which the working classes in the large towns are affected may be sketched as follows—A continuous process is going on, unobserved, but steadily from day to day, by which the value of land in the limited areas about the centre of great cities is rising with a rapidity hardly credible, though at the same time proved by experience. The statistics, if produced, would astonish those who have never attended to the point; and the result is this—a continual transfer of premises in central situations from residential purposes to purposes of business. The wealthier class of residents, thus dispossessed, disappear, for their pleasure; while the labouring classes—and that in a considerable proportion—cannot afford to pay the increased rents, and (where they do not become lodgers instead of householders) in many cases go out to live at greater distances from town. It is absolutely necessary, however, that their labour should still be performed in town, and accordingly it is of the greatest importance that they should have cheap conveyance. Hence the tax on locomotion, considered as a tax on the labouring part of the community, is in the severest and crudest sense a tax of the raw material of industry. For nothing more exactly corresponds with the idea of a tax on the raw material of industry than a tax affecting the sinews and muscles of the labouring man; and if he is obliged to spend those sinews and muscles in travelling to and fro between his home and the area in which he works, he spends them upon that which brings him in no wages, instead of spending them in reproductive labour. I hope I have satisfied the House that it is right to deal with these questions. I will now state the mode. We propose to leave the licences on these carriages as at present. We cannot offer a thoroughly searching solution of the whole question at present; but we think we can greatly relieve the burdensome part of the duty which is calculated on a mileage. The present duty is 1d. per mile, and that we propose to reduce to one farthing per mile. There would be considerable difficulty in abolishing it altogether at this time. The House will please to recollect that though there are, as I have described, strong reasons for modifying this duty, it cannot be separated altogether from other duties—from the duty on hackney carriages for instance, which we are not able, consistently with the general plans of the Government, to relieve; again, it cannot be separated from the consideration that in a very great number of cases these carriages are in direct competition with the short local traffic of railways in the neighbourhood of largo towns, on which we levy, as to a large part of it, a tax of 5 per cent on their gross receipts, which receipts include the interest on the capital employed in making the road. The total income from this source, with full duty, would be £130,000 for the year. The duty can only be reduced on the 2nd of July next, when the arrangements are made for the quarter, and new licences are issued. The reduction will not, according to usage, in this case take place from the date of the Resolutions passed by the House; an Act of Parliament will be necessary for that purpose, and it will not have passed, probably, till some day in June. I have said that I do not propose to interfere with the hackney carriage duty, because the receipts from that tax are of a peculiar character, and may be considered as some compensation made by the metropolis for a great outlay, on the part of the State, in the matter of its comfort and advantage. But the post-horse duty applies all over the country. The duties are now regulated by a scale varying with the number of horses and carriages possessed, and are so framed as to bear hardly on the smaller as compared with the larger proprietors. One horse or one carriage pays per annum £7 10s.; two horses or two carriages just double that amount; four horses or three carriages, £20; eight horse or six carriages, £30 If you will compare £7 10s. for one horse or one carriage with £30 for eight horses or six carriages, you will see how the scale is framed to hear heavily on the small as compared with the large proprietor. I propose to reduce the rates below the £30 rate so as to correspond as nearly as possible with the higher rates. That is to say, one horse or one carriage will be charged £5; three horses or two carriages will be charged £10, and so upwards, in such a manner that the small owner, the man who drives his own fly, will be placed, as nearly as the nature of things will admit, on an equality with the larger capitalists, with whom he competes. The estimated loss from that source (with allowance of 10 per cent for increase in traffic) will be £20,000; or £16,000 in 1866–7 and £4,000 in 1867–8. The Committee will see that we have now disposed of about £562,000 out of £1,350,000.

I now pass to a subject of an entirely different description from those on which I have thus far touched; a subject having this only in common with them, that it would dispose of a large portion of the remainder of the surplus available for the present year, and that in itself it is undoubtedly an important financial arrangement. Before, however, proceeding to that subject, I should state that I shall submit Resolutions to give effect to all the changes which I have mentioned; as also for renewing the Income Tax at 4d. in the pound sterling, and for continuing the tea duty for a period of twelve months.

But the proposal which I have now to make, and which I hope will receive the sanction of the House, will most conveniently and naturally form the subject of a separate measure; though it is one which I am anxious to prosecute as speedily as may be found practicable, with a due regard to the claims of other business yet more pressing. The question, Sir, to which I am about to call the attention of the House is connected with the one great item which I omitted from the retrospective part of my statement. It relates to the condition and movement of our National Debt. I will first give to the Committee what has actually been done with respect to the reduction of the National Debt within the year that has just passed. The amount paid off in the year 1865–6 consisted of the following sums:—

1.	Exchequer Bonds to the extent of were exchanged by reissue.		£1,000,000
2.	Exchequer Bills paid in for Revenue	£783,000	£2,555,000
	Purchased with surplus revenue	877,000
	Sent in at the exchanges	895,000
3.	Cancelled by Land Tax		59,000
4.	Stock purchased with surplus revenue		1,395,000
5.	Capital redeemed in Terminable Annuities		1,620,000
	Total		£5,629,000

A sum, however, of £450,000 was raised for fortifications, and therefore the effective reduction of the National Debt in 1865–6 was £5,179,000.

The next portion of the statement I have to make to the Committee relates to the Unfunded Debt. Great changes have taken place in recent years with regard to our Unfunded Debt. One portion of it consists of Exchequer Bonds; a security not liable to be suddenly or very seriously affected by the extraordinarily rapid and frequent fluctuations which, under the present, I think, wise administration of its affairs by the Bank of England, continually attend the conditions of the money market. But the case is different as to Exchequer Bills; and, as the Committee will readily perceive in a country and at a period where the current rate of interest on commercial paper for short terms with ninety or 120 days to run, or perhaps six months, is running up and down two, or three, possibly even four, or five times a year, from 3 to 8 or 9 per cent, it is almost impossible to make any large portion of these Government securities returnable as they are for cash after twelve months currency, and receivable for revenue after six, live in the market, unless we choose to adopt a course which I think unwise—to give a high rate of interest on them, and a rate of interest which, within a few weeks after it had been granted, might be found excessive with reference to the actual state of the money market. That would be a very wasteful proceeding, and the alternative which has been adopted has been to encourage a gradual absorption of them.

I will now show how far this absorption has proceeded. The total Unfunded Debt of the United Kingdom in 181516 was £44,727,000. Just before the Russian War, on the 5th of January, 1854, it had declined to £16,024,000; on the 31st of March, 1857, it was £27,989,000; in 1859, it stood at £18,277,000; but that reduction was brought about by funding, and one object of reduction by a gradual process is to get rid of the necessity of funding, which is a very expensive operation, performed as it generally is at unfavourable periods. In 1866, the Unfunded Debt, which in 1859 was £18,277,000, was reduced to £8,267,000, consisting of about two-thirds, or £5,887,000, in Bills, and one-third, or £2,300,000, in Bonds. This secondary branch of the Debt has therefore been brought within manageable compass during the last few years, without incurring the cost of funding: and as the £6,000,000 of Exchequer Bills are divided nearly into moieties, payable the one in March and the other in June, it is plain that they are not likely hereafter to place us in any serious financial difficulty.

Now, with respect to the grave and serious subject of the National Debt at large. I hope the Committee will not think I take an undue liberty in calling their serious attention to it. It is a subject as to which it may be difficult to say why it should be introduced to the notice of the House at one moment rather than another; but undoubtedly I am convinced, with my now rather long experience of the financial department, that the time has come when, to say the least, it is fitting that Parliament should bestow a greater degree of attention than has hitherto been bestowed on the question of the state and movement of the National Debt. I entirely concur in the opinion expressed by the hon. Member for Westminster—whose absence on this occasion I deeply regret, arising as I understand that it does from severe indisposition—I entirely concur in the doctrine he has laid down, that the first duty of Parliament, now some twenty-five years ago, was to direct its attention to the thoroughly unsound and ill-adjusted state of our fiscal system, and to its injurious effect in restricting industry and in retarding the growth of wealth. It would at that period have been a great mistake if, instead of relieving industry and the springs of commerce by the remission of duties so mischievous as those which then abounded in our law, we had made it a general rule to apply our resources to the reduction of the National Debt. But now we have got through a great part of that most necessary work. There are taxes which still remain, which we are desirous to reduce, nay, which urgently call for reduction, or even for removal; but, now that we have advanced so far in the work of reform in our system of taxation, I think the time has come for some modification of our rule of action; the time at any rate when we ought seriously to consider the state and movement of the National Debt.

Besides the recent speech of my hon. Friend there have been other indications of opinion which I, for one, have noticed with great satisfaction, and which tend, I think, to show that I am not speaking lightly or gratuitously when I submit to the Committee that the time has arrived for dealing with this question. Many positive reasons, too, may be given for such a course. Why, Sir, the condition of the public credit, as measured by the price of the funds, is in itself a matter which might well attract the attention of Parliament. It is not that the public credit, properly understood, is weaker than it ever was; on the contrary, I believe there never was a period when it was stronger; but the rising rates of profit upon money must necessarily raise, and I think have already raised, considerably, but not immoderately, the rate of interest, and have in proportion diminished the value of the public credit, as represented by the price of the funds. Considering the high price of money which now rules, I, for one, am well pleased that the funds have not fallen more heavily. At the same time, I believe it will be wise and politic on the part of Parliament, with a view to exigencies which are not perhaps likely or proximate, but which are possible, to consider the present state of the public credit as measured by the state of the funds, and to consider what would be our position if, under any overruling circumstances of honour or duty, we were obliged to go into the market as borrowers.

Again, Sir, there are several reasons which lead me to think that this is a most proper time to open the question. One is that during the next year, 1867, we are to receive another large or at least considerable relief by the falling in of Terminable Annuities. Nearly £600,000 of those Annuities will lapse: and I think it well becomes Parliament to consider what substitute it will provide for that annual charge, with the view of furthering the beneficial process of operating upon the debt. And this, be it observed, not with a view of extending the old scale of action through Terminable Annuities upon the debt, but simply to prevent another great contraction of that scale. Nor can I fail to mention that some journals, which are among the most powerful organs of opinion, with no possible object, it seems to me, but that of an enlighteued zeal for the public good, have been labouring to draw the attention of the public mind to this great subject, and have, I think, materially prepared the way for the Government to submit to Parliament a proposal respecting it.

Now, Sir, of course the general movement of the National Debt can easily he set forth in the most intelligible form to the community. That debt consists of three items; but for the present purpose it is not necessary that I should distinguish one from the other, which would only perplex that view of the total to which I wish to fasten the attention of the Committee. I will, however, mention that those three principal heads or items are; first of all the Funded or Permanent Debt, including the debt to the Bank of England, though that it is not precisely a funded debt, but is simply and invariably represented by its capital sum; secondly, the Unfunded Debt, of which I have already sufficiently spoken; and thirdly, the outstanding capital value involved in Terminable Annuities that may still be running. Placing these three items of debt together, the total of the National Debt, which is commonly supposed at the close of the great war of the French Revolution to have been £800,000,000, when we come to include all these items, had turned £900,000,000 of money, the actual figures being £902,264,000. Of course, I do not include in that amount any allowance for the Sinking Fund, which I exclude altogether, as I speak only of the real obligations of the country. In 1830, the total of £902,000,000 had been brought down to £842,405,000. A good deal bad been done in that interval, as will be seen, for the reduction of the debt; but very little in comparison had been done by Parliament for the liberation of the industry of the country. A beginning had indeed been made, much to the honour of those who under such difficulties were brave enough to make it, but if it was commenced it was a commencement only. In 1840 the debt had fallen to £837,848,000 or by a very small sum—namely, £4,500,000; but it must be recollected that during that interval of ten years, a loan of £20,000,000 had been contracted for the emancipation of the ne- groes in the West Indies. Virtually, therefore, the reduction upon the War Debt effected in that period had amounted to nearly £25,000,000. The lowest point, however, of any touched upon the present year, was reached on the 5th of January, 1854. It then stood at £800,515,000. Then came the Russian War; when Parliament, most wisely as I think, resolved to meet the expenses of that war in great part by taxes immediately imposed on the people. In consequence of this Resolution, the increase of debt was much less rapid than it would otherwise have been, and much less rapid than it must undoubtedly be if ever unfortunately this country should become involved in a prolonged war. On the 31st of March, 1857, the debt had risen to £831,722,000; on the 31st of March, 1859, it was £823,934,000; and on the 31st of March, 1866, it was £798,909,000. That is nominally a point somewhat lower than it has stood at before; but it must be remembered that we have cancelled two minor sinking fund stocks which formerly formed part of the nominal capital, so that, in fact, we may say with substantial accuracy, for it is not necessary to be particular to £1,000,000 or £1,500,000, it has now just reached the point at which we have effaced the results of a Crimean War, and the debt thus stands at the very place which it occupied at the commencement of the year 1854; that point being one lower by £100,000,000 than the sum at which the debt stood when the long war of the French Revolution terminated. The total sums applied, in all forms, to liquidation since 1815, have probably been little short of £180,000,000; the difference between the gross and the net reduction being accounted for by the sums borrowed for the Crimean War, for the West Indian Compensation, for the Irish Famine, and for minor purposes.

It is hardly necessary to observe that there are several sums not very material in themselves—of which I have in this explanation taken no account. We are indebted to the savings banks in the sum of about £3,000,000, and on the other hand we have monies lent on perfectly good security on bonds to Drainage Commissioners and other bodies, that amount to about £10,000,000; but that is not an amount that we need take into view in dealing with this enormous accumulation of the national obligations. £799,000,000, then, or in round numbers, £800,000,000 form the present capital debt. Now let us observe the rates at which during different periods we have operated upon the debt. From 1815 to 1854 there were nearly forty years of the most profound tranquillity ever known to this country, and that, therefore, was the very period in which it was most desirable for us to deal efficiently with this debt, if we were to place ourselves in a position to look war in the face again when the necessity for it might arise. Well, Sir, I have stated the sum of what was then done. The rate of decrease per annum during that period was £2,609,000—undoubtedly a very trivial sum when we consider the enormous amount of what remains to be achieved. In the three years and a quarter from the 5th of January, 1854, to the 31st of March, 1857, the rate of increase was nearly £10,000,000 per annum; in more exact figures, £9,602,000. From 1857 to 1866 the annual rate of decrease under all heads has been somewhat better, but still far below what it ought to have been; it has been £3,646,000. Now, I wish to call the attention of the Committee to this, that what we must expect is, that whereas £2,000,000 or £3,000,000 a year have represented the average of our operations in time of peace—I do not believe if we take the whole years of peace since 1815 that the average reduction would reach £3,000,000—if ever we should become involved in any great and protracted war, we must expect, not immediately, but after a year or two of war, to see the debt grow at about ten times the annual rate by which we reduce it in time of peace.

Now, Sir, the next question I come to consider is whether this is a satisfactory state of things for the country. But I cannot proceed further on that subject without asking the Committee to observe the remarkable course and tendency of affairs with respect to the accumulation of public debts in other countries. The chapter of National Debts is assuming, I think, a painful and a baleful prominence as a social and political fact of modern experience. I do not know whether the House is aware to what extent this mischievous and injurious process is going on. But I will refer first to what I do not hesitate to declare I contemplate with the least anxiety, and that is the debt of the United States. The debt of the United States is in itself something wonderful—wonderful as the creation of four years, strictly of four years, and no more, and yet amounting to nearly 3,000,000,000 dollars, or £600,000,000, and the rate of growth of the debt in the last year exceeded, I think, £200,000,000. That is a debt on a gigantic scale, and its charge is enormous. It is not possible, in the present state of the financial arrangements of that country, to ascertain the figures with perfect precision, but I believe I am not wrong in saying that the charge of that debt must be considerably heavier than our own, although the capital is less. The smallest sum at which I can estimate the charge is £31,000,000 or £32,000,000 sterling; and if upon the back of that sum we lay the necessary cost of raising the revenue, which in America is much heavier than it is here, I do not think the effective amount of taxation incumbent upon the people of the United States at this time in consequence of the Northern debt (I do not include one farthing for the Southern debt) can be taken at less than some £35,000,000 sterling per annum. Well now, looking at these figures, a man would at a first glance be struck with something like despair. But if we look at the position of the country which has to bear the burden, I must confess that I think the future of America, as far as finance is concerned—political problems are not now in question—will probably not on this score be beset with any serious or vital danger. I do not believe that that debt need constitute any difficulty for the American people. I am confident that if they show with respect to finance any portion of that extraordinary resolution which on both sides alike they manifested during the war, and of that equally remarkable resolution with which, on the return of peace, they have brought their monstrous and gigantic establishments within moderate bounds, I will not say that this debt, according to an expression which was once fashionable in this country, will be a fleabite, but we may then anticipate that in a moderate time it will be brought within very narrow limits, and it is even possible, though we may not venture to judge how far likely that it may even within the lifetime of persons now born, be effaced altogether. At this moment America is, I believe, paying all her war taxes, and the amount of the revenue of the United States is not less, I apprehend, than £80,000,000 and upwards, the largest sum ever raised in any country or at any period for the purposes of a central Government. The estimated surplus above expenditure is from £20,000,000 to £30,000,000 sterling a year, and I believe at present only about £10,000,000 sterling of all this huge taxation are menaced by the natural impatience of the people to continue under the burden of some of the taxes that have been imposed. Mr. M'Culloch, the Finance Minister of that country, strongly urges the policy of reducing the debt, and I am quite certain that from this side of the water we shall send him a hearty expression of good wishes for his success, both on account of our interest in the well-being of a friendly and kindred nation, and because it may be hoped that the example of America will react beneficially on this country, and on Europe at large.

But have gentlemen who sit here paid attention to the stealthy manner in which the practice of borrowing, in order to meet the ordinary charges of government, is becoming the standing vice of almost every Government in Europe? I do not speak now with regard to that uneasy state of things in which the Continent is at this moment apparently liable to be involved. We hope that neither unrestrained ambition in any one quarter nor neglect of the rules of prudence in any other, may be permitted by a merciful Providence to deprive Europe of the inestimable blessings of peace. But I ask the House to consider how enormously important the common practice of the Governments of Europe with regard to the contraction of debt has of late years become. I have here the National Debts of nine countries in Europe, estimated from the most trustworthy data I have been able to obtain. I find that, with the exception of Holland, there is not one of these debts that has not been virtually contracted in the last half century, while by far the larger part of them has been contracted during the last twenty years—that is to say, during a time of very general peace; for if there has been any war expenditure added to them during that time it is insignificant in amount, as I believe, with reference to the total. Holland, I find, acts prudently, and reduces her debt apparently from time to time, by the aid of her colonial resources from Java, while the finances of Prussia, whatever may be said of that kingdom in some other respects, are believed to be a model of good administration; for the Prussian debt stands at £43,000,000, and that of Holland at £85,000,000. The Russian debt is estimated at £279,000,000, and that of Austria at £316,000,000. The debt of France is not, as formally stated, a capital debt, and it is difficult to estimate it with accuracy. It is made up of Rentes or Annuities which are sold for so many years' purchase; and, perhaps I may, without the risk of great error, take its various denominations in the aggregate at twenty-five years' purchase. Upon this footing, the French debt in Rentes, together with the Unfunded Debt, will be found probably to amount to £400,000,000. It is the largest of these public debts of Europe; yet, because of the immense resources of the country, and the energy, thriftiness, and wonderful talent of its people, one need, perhaps, feel less anxiety for its future security and strength than for the stability of almost any other Continental Government. In Italy the debt stands at £152,000,000; and it is increasing with portentous rapidity from year to year. The debt of Spain amounts to £145,000,000; that of Portugal is estimated at £33,000,000; and the debt of Turkey, which I believe to be entirely a modern institution, indeed principally created since the Crimean War, amounts to £51,000,000. The great bulk of these debts, which amount altogether to no less than £1,500,000,000, has been accumulated in a time of peace, and has not been thrown upon the several countries during a struggle of life and death.

I will not trouble the Committee with many details of their rate of increase; but, omitting Holland, which has diminished its debt, and omitting Prussia, which does not habitually increase it, and omitting Spain also, which seems to keep its debt nearly at an equilibrium, we have six of the nine countries I have named that have recently managed to increase their debts during a time of peace at the annual rate of £61,000,000 sterling. And this is a growing mischief, for, like other bad habits, debt-making has a tendency to spread. Europe should therefore really bethink herself of this portentous increase, and should look at it from the right point of view. This practice should be considered both in itself and in connection with the future. It is spending in a time of peace the resources of war; it is as if in a year of good harvest the world, instead of keeping a reserve for bad years, spent the whole of that good harvest, and half another harvest beside; and it should be remembered that even if peace be preserved in Europe for the rest of the century, the debts of these nine countries at the present rates of increase would then amount to nearly £4,000,000,000. These are really pro digious gums and portentous circumstances, It is not merely the amount of money engagements which we should take into view; that is comparatively a matter of limited importance. It is not only a very great mischief that £60,000,000 or £70,000,000 should he drawn away from useful and profitable purposes for what is even worse than purely unproductive expenditure, but it is an enormous political and social difficulty which is being gradually heaped up by this most improvident course of policy. There is nothing so insidious, at least we know in public affairs of nothing so insidious, as financial difficulty, It approaches you in the first moment with smiles and caresses. The expedient of borrowing appears at the first temptation to be open to no objection whatever; the burden is so small, the relief so immediate and so great. It is like what the poet described in the lines relating to Fame— Parva metu primo; mox sese attollit in auras, Ingrediturque solo,et caput inter nubila condit. Perhaps it yet more recalls a noble passage in one of the tragedies of Æschylus, when he describes the cub of the lioness, incautiously taken in its infancy by the hunter to his home, reared with his dogs and petted by his children; it fawns upon young and old as long as it remains a cub, but when it has grown to the strength of mature age it forgets its seeming meekness, and manifesting with an awful suddenness the ferocity of its nature, it deluges the whole house with the gore of its victims. And thus it is with financial difficulty. It begins with the most insinuating access, and grows up gradually with changes imperceptible from day to day, so beguiling men that they still and still postpone the evil day of reckoning; but nevertheless the time will come when it must at length be confronted, only in all likelihood that will also be the time when, having grown to gigantic size it can no longer be resisted or subdued.

So much, Sir, for other countries, and now let us look at our own. I must ask you to bear with me while I endeavour to point out what I take to be the true state of our own case. I address my request to the whole Committee; but, in a certain sense, especially to Gentlemen opposite, and to those who say, and say truly, that they are deeply interested in the land and fixed property of the country; because I apprehend that if there be any special interest concerned in the subject I am about to consider it is the interest of landed property and of our fixed property in general.

In the first place, then, let it be remembered that we are living in a commercial era, the prospects of which, from their magnitude, it is almost impossible to appreciate. Every five years, it may almost be said, we seem to have almost a new era; the rate of increase in our foreign commerce is continually shifting, and always shifting upwards. The liberation of industry, the progress of invention, the steady investigations of science, the improvement of social habits, are all combining together to induce the conclusion that in the days of our childhood, when we thought the commerce of England was a wonderful thing, and that the commerce of the world was wonderful; and when we had an idea that a century's development had brought about almost a miracle of transformation, the result was, in point of fact, only in its embryo; the commerce of the world was no more than an infant in the cradle. But it was an infant Hercules, that has ever since been straining and bursting one by one its bonds; and, depend upon it, great as is the extension to which it has now reached, in all likelihood it will go on extending still, and perhaps yet more wonderfully, in the future. We are not prophets in this assembly. But it is our duty, although we must refrain from dogmatizing, to estimate probabilities as well as we are able, and, like wise men, we should permit ourselves to be guided by the balance of probability. During the next twenty, or thirty, or fifty years, then, or perhaps more, for I cannot pretend to name a time, we are to look for a still further development and extension of the commerce of this country, which is even now in the aggregate, I apprehend, at least three-fold what it was five-and-twenty years ago. Well, the population of the country during that period has been increasing at a rate less than 25 per cent, while our commerce has been multiplied three times. And this we must fairly presume will continue for some time. The demand for our productions is likely to grow as long as we have the same relative means, which we possess at present, for affording a cheap supply.

Now, the great agents of production are three; first, we have land and fixed capital; secondly, we have movable or trans- ferable capital; and thirdly, we have labour. Let us consider, for it is most important, the relative positions of these three powerful agents. A race is going on between nations in industry and enterprize, and no doubt can exist upon the question what nation is at this moment foremost in the race. The people of the United Kingdom are by far the foremost. Their external commerce is, I apprehend, as great as that of the two countries which come next in order to it; the United Kingdom, with its 30,000,000 people, is as great in commerce as France and America, the second and third as to foreign commerce of the nations of the world, with their 70,000,000 of population. That is an extraordinary fact. We have undoubtedly got the start in the race, and it behoves us to inquire what special cause has given it us. Doubtless we have not only great but varied advantages; our geographical position is a great advantage, so also is the character of the people. But both our geographical position and the character of our people are the same as they were a century ago; and England then did not lead the trade of Europe. What, then, has given us the commanding position that we hold? Of course there is an increasing cause in our huge masses, accumulated capital, the fruit, the sign, and the reward of labours achieved; but the chief cause is the possession of our mineral treasures. The fact, not merely of the possession of coal, but of the possession of vast stores of coal under such circumstances that we can raise it to the surface at a lower price than any other country in the world; besides these we possess unequalled facilities for its circulation. Now, Sir, it is most important to bear in mind that it is not the quantity of coal, but its production at a low price which has given us the start, and has caused the enormously rapid progress of the country. From many other points of view, Great Britain might have been expected to make less rapid progress than it has actually made; because, after all, the second very great treasure of nations—namely, their unoccupied, that is unopened, land—is a treasure which we possess, in our three kingdoms, in a much smaller relative degree than almost any other European country. It is, then, our possession of coal under such circumstances as I have described and in immediate conjunction with the raw material of the metal manufactures, especially of the gigantic business of the iron trade, that has given us this extraordinary pre-eminence in commercial and industrial pursuits.

Now, Sir, it has often been a subject of very interesting discussion as to whether we may look upon our stores of coals as being practically inexhaustible. And in the condition in which our commerce was twenty or thirty years ago it would have been perfectly reasonable to answer that question in the affirmative and assume that our coal was inexhaustible. But circumstances have greatly changed. The rate of increase in our production and consumption of coal is continually progressing, the export demand grows with an immense rapidity. The consumption has become such that the minds of some of the greatest among our scientific authorities have been turned to the question, and the inquiry has been raised, what will be the influence upon our supply if our consumption shall continue to increase in a ratio such as that which it has recently attained, and I venture to express the opinion that more probably than otherwise it will so continue. But for the purposes of the present argument, I need ask you to consider no more than this—assuming for the moment that we shall not be able to continue for many generations to produce coal at prices cheaper than those of all other countries, what will happen? It is not enough to say that the expenses incurred in maintaining ventilation, keeping down the temperature, increasing the depth, and all such matters, will be economized by new inventions and contrivances, those new inventions and contrivances there may be; but they will not give us a pre-eminence over other countries, because other countries will be able to make use of them as well as ourselves. In the same way, there is no use in urging that a substitute will be found for coal. No doubt there are men of high authority who think that such a substitute may probably be found, though the matter is one on which there appears to be great difference of opinion. But supposing that a substitute shall be found, it will not be peculiar to England. It would remove or lessen our relative disadvantage, it could not enable us to maintain our pre-eminence. I think it is clear that at whatever time—whether fifty or 100 or any other number of years hence—we may cease to be able to raise coal at a lower price than other countries, our relative position towards other nations must be seriously injured.

Now, Sir, as respects the question of coal against coal, as measured by quantity, there can be no doubt how the case stands. There is another country, not only as rich in mineral wealth as ourselves, but with a coal-surface thirty-seven times greater than the coal-surface of this country; I allude to the United States of America; and though a large portion of the coal there contains so great an amount of anthracite that it is not considered to be conveniently fitted for steam or for smelting purposes, to domestic purposes it is capable of being adapted. But besides the store of anthracite coal, the United States have a supply of bituminum coal, not indeed ascertained with any precision, but believed to be enormous. Suppose, then, that pre-eminence in the cheap production of coal should be carried from us away across the Atlantic, what will happen in that event? There will, probably, be a decline of rents, a decline of profits, a decline of wages. There will be precisely the reverse of that which we have all seen taking place within our time—an increase of rents, an increase of profits, an increase of wages. And when rents, profits, and wages decline, what will those interested in them do? Those who receive wages, finding that wages are lower here than across the Atlantic, will do in a still greater degree what they even now do somewhat extensively under the attraction of increased and more certain gains, will migrate; and the holders of movable property, finding that there is a wider and more profitable field for the employment of their capital elsewhere, will send their capital abroad. What will the owners of rents do? It appears pretty plain that they cannot migrate. Personally they may do so, but that from which they derive their income cannot migrate: it is rooted in the soil. The upshot will be that the charge of the National Debt, which is now borne in full on property, profits, and rents, and in a very liberal proportion by the two latter, will remain as a permanent mortgage in its full force, on the lands, houses, and works of the country. The property of the country will have to bear a greater share of public burdens due to the obligations contracted in former times. I wish I could convey to the House the impression which the consideration of this subject makes on my own mind; and trust I take no extravagant view of it. Statistics can only be used in this question by way of general and conjectural illustration. But all that I have said is more than supported by the results arrived at by able and skilful staticians who, under the au- thority of the Government, have made inquiries into the matter. Their views must not be taken as demonstrated, but they deserve attention. Mr. Hull estimates the quantity of coal in the United Kingdom within 4,000 feet of the surface at 83,000,000,000 tons. He states that in 1854 the consumption was 64,000,000; in 1861 it was 86,000,000. Based on these numbers the computed annual rate of growth in the consumption is 3.7 per cent. Now, not taking it at so much as 3.7, but taking it 3.5 per cent, this would give the annual consumption in 1961 as 2,607,000,000 tons; and by 1970, 104 years from this time, the consumption will have reached 130,000,000,000 tons, or a greater quantity than all the coal now known to be available in Great Britain within 4,000 feet of the surface. I believe that long before we reach that consumption the causes will be found in operation from which an increase in price will follow. Mr. Jevons, whose statistics my hon. Friend the Member for Westminster has quoted, has gone very fully and carefully into the facts, and he holds a similar opinion in respect of our coal supply to that which I have just stated. Hon. Members remember the statement made two years ago by Sir William Armstrong. Sir John Herschel agreed with Mr. Jevons, as I believe does Dr. Percy also. I myself have had an opportunity of communicating with my distinguished friend Sir Roderick Murchison on the subject. He for years has believed the matter to be one of the very gravest order, and one demanding our most earnest consideration. I disbelieve and disapprove entirely of all attempts to limit by law the consumption of coal; in vain would it be to think of stopping the consumption of coal in this country; in vain would it be to think of diminishing that consumption by the imposition of a tax; and it would be more vain still to think of prohibiting its exportation. [An hon. MEMBER expressed dissent.] I am only giving my own opinion; I shall not enter into that matter now; I merely wish to remark that, even could we limit the consumption of coal, I think the matter may fairly be stated thus: there is a considerable likelihood that we cannot continue to supply coal in unlimited quantities at the present low prices for an unlimited time—or say, for one or two centuries. Now the certainty of an alteration in our position is not required to be shown. That it may happen within reasonable bounds of expectation is enough. In the face of such a state of things in the future we ought to make preparations for it, and the way to do that is by using moderate and reasonable efforts to rid ourselves of our encumbrances. As those who are to come after us may have to encounter difficulties of which we have no practical knowledge, we ought not to hand down to them in their worst form difficulties which it is in our power to alleviate. The practical question to put is this. Should we not now, in the time of our wealth and prosperity, reduce our great mortgage debt? I will tell the House how I propose we should set about this task to the extent, and it is a very moderate extent, up to which it is rendered practicable by the means at our command during the present year.

There are two modes—and, as far as I know, practically, only two—of operating permanently on this great mass of debt. First, you can do it by the application of surpluses from year to year, when there is a surplus upon the receipt over the expenditure. But though by the favour of Providence those surpluses have come to us more liberally of late than they had usually done, we cannot depend on them, either in respect of amount or of their existence in a particular year. Another mode of operating on the debt with a view to its reduction is by including in the estimate of expenditure and making provision by taxation for sums which are to be applied in liquidation of debt. This is a principle and method fully embodied in our present law. It takes effect by the conversion of Perpetual into Terminable Annuities. Now, nothing happens with me more frequently than to receive—sometimes from skilled and competent persons—recommendations to introduce a scheme of this kind founded on some very broad basis. But the difficulty of such a scheme is this—there are no purchasers of terminable annuities in the market. If we go into the City to sell Terminable Annuities in the open market, we must be prepared to part with them at a low price, or to say the same thing in different terms, we borrow on behalf of the public at a high rate of interest. Consequently, as a large waste is involved in that business, no Minister has ever recommended it as a means of reducing debt in time of peace. But we have resources which open for us a new field; resources which we ob- tain through the medium of the funds we hold in deposit. These it is in our power to deal with and turn over as we please. We at present hold near £45,000,000 in all the different kinds of deposits, and this amount may most probably be increased in future years. A sum of £10,000,000 of these deposits has already been dealt with in the manner I now have in view—namely, by conversion into Terminable Annuities. There is a further sum of £24,000,000 which stands in what is called the State Deposit Account as due to the trustees of the old savings banks. Now, what the trustees of the savings banks have to expect from us is payment of every farthing we receive, with interest on it. They have nothing to do with the £24,000,000 as far as any mode of investment is concerned. If we lost every farthing of it, we should have to pay them, nevertheless; and if we make a good investment of it, that would be our affair, not theirs. With respect to all these deposits, we are bankers, and bankers only.

In point of fact, the state of the account is this. The assets of the National Debt Commissioners, who hold this money, are not equal in value to the amount of their obligations to the trustees. They fall short of it to the extent of a sum varying with the price of securities in the market, but one which may be roughly taken at about £3,000,000. Now, by converting the £24,000,000 into cash in the form of a Terminable Annuity, we shall pay up the £3,000,000 that is wanting, and completely square our account with the savings banks' trustees. If we do so, that amount will no longer be a part of the national obligations. This payment will of course be in reality, though not in form, the liquidation of so much of Public Debt.

I will now, Sir, proceed to state, though it must be done succinctly, the nature of the measure which, as part of the financial arrangements of the year, we recommend to Parliament. We propose a double operation, which I think I shall be able to make intelligible to the House. I will call the two operations A and B, for the purpose of more clearly distinguishing them. Operation A will be this. We take the £24,000,000 that now stand on the State deposit account, and which now cost us £720,000 a year. This sum of £720,000 is already provided for in the estimate of revenue and expenditure which I have submitted. We convert the £24,000,000 into annuities of 1885; and we thus increase the charge from £720,000 to £1,725,000; that is to say, we add in round numbers £1,005,000 to the present standing annual charge. That is the first operation. And I will now state the immediate financial effect, assuming it to be adopted by the House. In 1866–7, if the plan be adopted, we should pay one half-year's dividend upon the capital of £24,000,000; that is, £360,000; and two quarterly dividends on the annuities, or £862,000, making a total charge of £1,222,000 in lieu of the present interest of £720,000; thus imposing upon the year 1866–7 an additional burden of £502,000. But this would not represent the full effect of the change. In 1867–8 we should impose an additional burden, because while there would be no interest on stock paid for all the four quarters there would have to be paid the dividends upon the Terminable Annuity in that and in the following years. But it must be borne in mind that in 1867–8 expires what is called the dead weight annuities, amounting to £586,000 a year, and one-half of the relief from its cessation, or £293,000, would immediately become available, so that, in fact, the additional charge upon the year 1867–8 would be insignificant in amount. It may be stated in round numbers at about £200,000. The total charge undertaken by this change will, therefore, be £1,005,000; and in 1866–7 we shall have to bear £502,000 of it, in 1867–8 somewhat more than £700,000. In all the subsequent years, from the £1,000,000 £586,000 of relief will be deducted, leaving a net augmentation of charge of £419,000. If we are to operate in this way at all, that is not an immoderate burden. But I have still to state the nature of the second operation, which I have called operation B. Gentlemen will perhaps have the goodness to bear in mind, for it is a vital consideration in its bearing upon any plan of this nature, that we must look strictly to the effect of the plan upon the savings banks funds, and to their commercial use on good banking principles, as well as to the objects we may contemplate with respect to the National Debt. The fund available to meet the claims of savings banks would, as we have seen, be placed in receipt of £1,725,000 a year, and the question arises is this or is it not a thing desirable for the due discharge of the banking functions of the Commissioners for the reduction of the National Debt? The demands of the trustees have recently been very large, and, if it should happen that the price of money should continue as high as it is now, I have no doubt that these demands will continue large, and that a very considerable portion of the additional £1,005,000 which will go annually to the credit of the National Debt Commissioners, will be absorbed in meeting the demands of the trustees. But the demands of the trustees have not hitherto reached that amount. I do not mean when I say that they have not hitherto reached that amount to deny that they have done so under the influence of an extraordinary panic, but normally their demands are not so great as to absorb the sum now proposed to be provided. It is probable that a portion may be required, and that the remainder may be left free for reinvestment, and the second part of the operation I propose is this. With respect to the dividends of the annuity now to be created, so much of these dividends as is not required to meet the demands of the savings banks shall be reinvested from year to year. This is the course uniformly taken with respect to all receipts in deposits which go beyond the balance we require to keep in hand. The modes of investment are specified by the existing provisions of the law. What I now ask is, power to reconvert any of the public stocks which may thus be purchased into another description of Terminable Annuity. The extent of that portion so to be reinvested and the amount of burden to be entailed by it, will differ very much according to the assumption we may make concerning the demands of the savings banks. This is, of necessity, quite uncertain. For the sake of argument, I will assume that it may amount to one-half, and will state the financial result, but I do so upon the supposition that you adopt the two operations, first the conversion of the £24,000,000, and secondly the reinvestment and reconversion of spare dividends, and on the assumption, of course, that you will have that £500,000 to spare. Upon these suppositions, and likewise if the whole sum available shall be employed in purchasing stock, the annual charge, which begins at £419,000, would gradually mount, until it reaches in 1885 the sum of £1,444,000, and the amount of public debt cancelled by that time would be about £37,000,000. I do not say that that will be the precise effect, but it is more convenient, with regard to these large amounts, to use round numbers, which will express the general effect with sufficient accuracy, and which are more easily understood. I may add, for the information of those who desire to be informed upon the point, that the calculation is based on the assumption that the Stock will, on an average, be purchased at 88.

By a measure such as this, Sir, we should, I think, as far as the measure goes, be acting prudently, wisely, and seriously in our treatment of the National Debt, and the obligation which is imposed upon us for its reduction. I am far from saying that this is the only measure which we can employ for reducing the National Debt; but the reduction is as great as we should be justified in making at the present moment under the present circumstances. While completely fulfilling our obligations towards the trustees of the savings banks, we shall be making provisions which will tend to prevent any risk of our having to come into the market as sellers of funds. And we shall in this way pursue a course which tends powerfully to fortify and sustain the public credit. Independently, too, of large surpluses in our revenue, we shall most probably be able to come into the market year by year as buyers of stock. I commend the plan alike on the ground of its advantage in sustaining public credit, its efficacy for supporting our banking operations, and its quiet and gradual, but not unimportant action on the capital of the Public Debt.

I have nothing left me now, Sir, but to give the sum of those operations which I have already stated in detail. The amount of the surplus is £1,350,000. The remissions proposed are as follows—on wood, £307,000; on wine, £58,000; on pepper, £112,000; and on stage carriages and post horses, £85,000; reaching a total of £562,000. To this has to be added £502,000 which we propose to apply to the conversation of debt, swelling the total of the monies prospectively disposed of to £1,064,000 and reducing the surplus to £286,000. The additional burden imposed by these changes in the year 1867–8 will amount to less than £250,000; and about this I feel no scruple of conscience whatever, because there has been no recent year in which, however bad the harvest, or however unfavourable the circumstances, the natural growth of the revenue has not amounted to a considerably larger sum.

As regards the course of business, Sir, I would propose to proceed as follows—to take the Resolutions concerning the changes in the duties, if, as I rather sanguinely anticipate, they do not excite objection, on Monday next. I purpose also to take the preliminary Resolution relating to the Debt conversion on Monday next, on the assumption that it so far meets with the general approval of the House, as not to tend to a long discussion at that preliminary stage. If there is a desire for discussion on the preliminary Resolution, I should not think of going on with it on Monday. And now, Sir, I have to apologize to the House for the length of time during which I have occupied its attention. It did appear to us that the time had arrived when it had become obviously proper that a consideration of the general state of our pecuniary obligations as a state might be naturally and properly associated with the financial arrangements of the year. I hope that I have not been unwittingly led to prophesy, or to do anything more than to give such sketches of the future as will appear probable and present a fair and reasonable claim upon the attention of prudent men. Regarding the statements I have made I would not say more than this:—The facts which I have laid before the House are grave and, indeed, within certain limits urgent facts. Although, undoubtedly the ordinary duty and purpose of these occasions is to announce the financial proposals of the year, it did seem right to us, actuated as we believed by grave and reasonable causes, that from time to time we should cast our glances forward into futurity and endeavour in some degree to meet and provide for its demands and its interests, instead of absolutely restraining ourselves to the arrangements exacted by the necessities of the hour. We pursue this course, Sir, in the hope that when we who occupy this Bench, we, all or most of us, who now form the British Parliament, shall have ceased to ply our arduous task, those who come after us may have reason to confess that in the provisions made for our own time and need, we have taken some thought for them, and that our conduct has not been such as to draw forth from them either regret or condemnation.

Sir, I now place in your hands the first of the Resolutions which we shall submit to the House in order to give effect to the financial measures of the year.

Motion made, and Question proposed, That the Duties of Customs chargeable upon the goods hereinafter mentioned, upon their importation into Great Britain and Ireland, shall cease and determine: viz. Wood and Timber, Foreign and Colonial, as denominated in the Tariff; and that power be granted to the Commissioners of Her Majesty's Treasury to remit the Duty on all such Wood and Timber as shall hare been landed, under Bond for security of Duty, on and after the 26th day of March 1866.

[In order to present a complete view of the Chancellor of the Exchequer's Financial Plan, the Resolutions which he had given notice to move in Committee of Ways and Means are here added as they stood on the Notice Paper.]

Abolishing the Duty of Customs on Wood and Timber.

1.That the Duties of Customs chargeable upon the goods hereinafter mentioned, upon their importation into Great Britain and Ireland, shall cease and determine: viz.

Wood and Timber, Foreign and Colonial, as denominated in the Tariff;

and that power be granted to the Commissioners of Her Majesty's Treasury to remit the Duty on all such Wood and Timber as shall have been landed, under Bond for security of Duty, on and after the 26th day of March 1866.

[This was proposed on Thursday 3rd May, and Progress reported thereon.]

Abolishing the Drawback on Wood and Timber.

2.That the Drawback of Customs Duties now paid and allowed on the exportation of Foreign or Colonial Wood and Timber from Great Britain and Ireland shall cease to be paid and allowed on Wood and Timber exported on and after the ninth day of May 1866.

Abolishing the Duty of Customs on Ships built of Wood.

3. That the Duty of Customs chargeable upon the goods hereinafter mentioned shall cease and determine: viz.

Ships, with their Tackle, Apparel, and Furniture: viz.

Foreign, built of Wood, and Ships built of Wood in any of Her Majesty's Possessions Abroad, on the Registration thereof as British Ships at any Port or place for the Registry of British Ships in Great Britain and Ireland, for every ton of the gross registered Tonnage, without any deduction in respect of Engine Room or otherwise.

Altering the Duty of Customs on Wine Imported in Bottles.

4 That, in lieu of the Duties of Customs now charged on Wine, the following Duties of Customs shall be charged thereon, on Importation into Great Britain and Ireland: viz.

	Containing less than the following Rates of Proof Spirit, verified by Sykes' Hydrometer, viz.
26 Degrees.	42 Degrees.
	s.	d.	s.	d.
Red Wine the gal.	1	0	2	6
White Wine the gal.	1	0	2	6
Lees of such Wine the gal.	1	0	2	6

and for every degree of strength beyond the highest above specified, an additional Duty of 3d. per gallon.

Ten per Cent, of Proof Spirit may be used in the fortifying of any Wine in Bond, provided that the Wine so fortified be not raised to a greater degree of strength than 40 per Cent, of such Proof Spirit, if for Home Consumption.

Abolishing the Duty of Customs on Pepper.

5. That the Duties of Customs chargeable upon the goods hereinafter mentioned, upon their importation into Great Britain and Ireland, shall cease and determine: viz.

Pepper, of all sorts.

Continuing the Duty of Customs on Tea for another year from 1st August 1866.

6. That, towards raising the Supply granted to Her Majesty, the Duty of Customs now charged on Tea shall continue to be levied and charged on and after the 1st day of August 1866 until the 1st day of August 1867 on the importation thereof into Great Britain and Ireland: viz.

	£	s.	d.
Tea the lb.	0	0	6

Mileage Duty on Stage Carriages.

7. That, towards raising the Supply granted to Her Majesty, there shall be charged and paid on and after the 2nd day of July 1866, the following reduced Duty on Stage Carriages in Great Britain in lieu of the Mileage Duty now payable thereon (that is to say).

For and in respect of every Mile which any Stage Carriage shall be licensed to travel, the Excise Duty of One Farthing.

Duty on Horses let for Hire.

8. That, towards raising the Supply granted to Her Majesty, there shall be granted and paid, on and after the 6th day of July 1666, the following reduced Duties on Licences to be taken out yearly by persons who shall let any Horse or Horses for hire in Great Britain as hereinafter mentioned:

	£	s.	d.
Where the person taking out such Licence shall keep at one and the same time to let for hire one Horse or one Carriage only.	5	0	0
And where such person shall keep as aforesaid any greater number of Horses or Carriages—
Not exceeding three Horses or two Carriages	10	0	0
Not exceeding four Horses or three Carriages	15	0	0
Not exceeding five Horses or four Carriages	20	0	0
Not exceeding six Horses or five Carriages	25	0	0

Income Tax.

9. That, towards raising the C apply granted to Her Majesty, there shall be charged, collected, and paid for one year, commencing on the 6th day of April 1866, for and in respect of all Property, Profits, and Gains mentioned or described as chargeable in the Act passed in the 16th and 17th years of Her Majesty's reign, chapter 34, for granting to Her Majesty Duties on Profits arising from Property, Professions, Trades, and Offices, the following Rates and Duties (that is to say):

For every twenty shillings of the annual value or amount of all such Property, Profits, and Gains (except those chargeable under Schedule (B) of the said Act), the Rate or Duty of Four pence.

And for and in respect of the occupation of Lands, Tenements, Hereditaments and Heritages chargeable under Schedule (B) of the said Act, for every Twenty shillings of the annual value thereof,

In England, the Rate or Duty of Two pence, and

In Scotland and Ireland respectively, the Rate or Duty of One penny halfpenny.

Subject to the provisions contained in Section 3 of the Act 26th Victoria, chapter 22, for the exemption of persons whose Income from every source is under One Hundred pounds a year, and relief to those whose Income is under Two Hundred pounds a year.

In answer to Sir JOHN PAKINGTON,

THE CHANCELLOR OF THE EXCHEQUER

said, that he should propose to proceed with these Resolutions on Monday, unless there should be a desire for extended discussion, in which case he would postpone them. The first thing on Monday would be to consider the Re-distribution of Seats Bill and the Reform Bills for Scotland and Ireland. He begged to move that the Chairman report Progress.

MR. WALDEGRAVE-LESLIE

wished to know whether the Chancellor of the Exchequer intended to do anything with the tax on dogs?

THE CHANCELLOR OF THE EXCHEQUER

said, he did not propose to apportion any of the surplus to this purpose. His hon. Friend the Secretary to the Treasury (Mr. Childers) would, however, take the matter in hand, and he would, he hoped, be able to mature a measure which would satisfy the very reasonable wishes entertained on this subject.

MR. WARNER

trusted that the Chancellor of the Exchequer would reconsider the existing duty upon omnibuses. Less than £30,000 would enable him to take off the duty altogether. This tax was nothing more than a protective duty in favour of railways. Every one knew the extreme difficulty of getting conveyances from country railway stations, and nothing would more conduce to the advantage of railways themselves than that the vehicles which were their feeders should be untaxed.

MR. ALDERMAN SALOMONS

wished to know when the Return for which he had moved upon Terminable Annuities would be presented.

MR. CHILDERS

said, the Return was ready, and he would make inquiry why it had not been presented.

MR. WATKIN

believed that the railway interest would not regard it as the smallest grievance if the Chancellor of the Exchequer took off the remaining farthing of duty from omnibuses. He regretted that the right hon. Gentleman had said nothing about the enormous charge for collecting the revenue, which was above £5,000,000 sterling, or very nearly 7½ per cent, on the whole amount levied on the people of this country. The Chancellor of the Exchequer had abolished several important Customs duties, and they had a right to expect that the staff employed in the collection of these duties would be proportionately reduced. He had hoped to hear of a reduction of £500,000 or £1,000,000 in the charge of collection. As the Chancellor of the Exchequer seemed disposed to put an end to impediments to locomotion, might he appeal to him in regard to international travelling between this country and the Continent, so that passengers between France and England might not be subject to the delay and inquisitorial examination of their baggage. A lady's luggage was now pulled about to discover whether she carried tea, tobacco, or spirits—the only three articles in which the Customs officers feared that smuggling would be much practised. The journey between Paris and London had been reduced to ten or ten hours and a half; but the moment the traveller arrived in London, his baggage was taken to be examined, and he lost one hour or 10 per cent of the whole time taken up in the journey. Some modification of the present system was more than ever important, now that we were approaching the time when the great French Exhibition would be opened, and he hoped that this period would be chosen for removing that relic of barbarism that still attached to the system of travelling between this country and the Continent, especially as the amount of revenue which would be lost by passengers smuggling could not possibly equal the amount of the salaries of the officers.

MR. NEVILLE-GRENVILLE

reminded the Chancellor of the Exchequer of the immense amount of damage inflicted by untaxed dogs upon the agricultural communities. He wished to inquire whether the right hon. Gentleman was satisfied with the operation he had performed some years ago upon the shooting licences? He reduced the duty upon those licences in the hope that they would increase so much in number that the country would not loss by the reduction. Was the right hon. Gentleman satisfied with the change, or did he contemplate any alteration?

MR. WYLD

said, that in some districts of the country a large portion of the labouring population made use of vans which were not allowed to travel more than four miles an hour. The right hon. Gentleman would be doing a great service to the lower classes if he would entirely abolish the duties on these vehicles.

MR. HUBBARD

said, he desired to be informed whether there was any idea that the amount of deposits in the Post Office savings banks and the general savings banks would be a diminishing amount? The Chancellor of the Exchequer appeared to him to contemplate the possibility of a portion of those deposits being withdrawn, Another question had reference to the income tax. The right hon. Gentleman had remarked with perfect truth that Terminable Annuities were now quite unsaleable in the market; but he did not remark that the only reason was because the whole capital involved in the purchase of a terminable annuity was by the law of Income Tax subjected to confiscation. As the Chancellor of the Exchequer was proposing a very large operation, he wished to ask him, whether he intended to leave the Income Tax as it was, or to introduce any Reform in the incidence of the tax, or the process of its collection? On these two points would greatly depend the success of his operations. With regard to the Income Tax, he thought that the moment the Government made up their minds that the Income Tax should be a permanent tax, they ought to consider the mode in which it operated. There could be no doubt that it operated now in a way to cause much unnecessary inconvenience to the public and disadvantage to the State. The whole process pursued since 1842 had been of a rough, clumsy, and unartificial character, and unbecoming the continuance of a permanent tax. He wished also to remark that as the Re-distribution of Seats Bill was fixed for Monday, he saw no possibility of discussing both that and the question of Terminable Annuities on the same evening.

MR. SAMUDA

thought that the proposed operation might be carried to a much greater extent if the duration of the Terminable Annuities was lengthened. It appeared to him (Mr. Samuda) that if the right hon. Gentleman were to substitute for the Permanent Annuities existing at that amount bearing an interest of 3½ per cent Terminable Annuities for 100 years, bearing an interest of 3¾ per cent, that £8,000,000 or £8,500,000 of such Annuities would wipe away at the end of that time £100,000,000 of the National Debt. And so on in proportion.

LORD STANLEY

I confess I do not quite understand how the right hon. Gentleman calculated the capitalized value of the Public Debt. The Chancellor of the Exchequer estimated that debt at £779,000,000 and some odd thousands. It is made up of three different items—namely, the Terminable Annuities, the unfunded debt, and the funded debt. With regard to the Terminable Annuities, as I understand it, the principle enunciated by the right hon. Gentleman is an exceedingly valuable one. With reference to the unfunded debt, the difference between the real and nominal value is imperceptible; but the difference between the real and nominable value of the Public Debt is very great. If the Chancellor of the Exchequer adds the real value of the Terminable Annuities and the real value of the funded debt to the nominal value of the Public Debt, I do not see how it gives us a good basis of calculation as to the amount of that debt. When he endeavours to tell us the real amount of the national obligations at the present time, it appears to me he ought to take the present value of the stock in the market as the basis of his valuation.

MR. AYRTON

said, that having pressed upon the Chancellor of the Exchequer the expediency of abolishing the mileage duty, he must express his satisfaction that the right hon. Gentleman now proposed a reduction of that impost. While the right hon. Gentleman still retained the last farthing of the duty, it appeared that he reserved to himself the right of re-considering the subject on a future occasion, with a view to a final adjustment. With regard to Terminable Annuities, he thought the hon Gentleman opposite (Mr. Hubbard) had fallen under some misapprehension when he spoke of them as unsaleable. If they had lately been so, the reason was that they had had so few years to run that nobody could deal with them for practical purposes. When Terminable Annuities had a long period to run they had just as good a sale as Consols, and were much sought after by a large class of investors who wished to have a better income than the Funds would yield, and were yet prepared to incur the risk of their income lapsing at a definite time. If granted for a sufficiently lengthened period to meet the requirements of a large part of the community, Terminable Annuities would not only be perfectly saleable but would be much desired. Their predecessors had acted not unwisely in fixing upon sixty years as the proper time for these Annuities; and if it was now seriously intended to reduce the National Debt, it was a question whether a considerable portion of Consols might not be converted into Terminable Annuities of fifty or sixty years' duration. He understood the Chan- cellor of the Exchequer to propose to pay off £24,000,000 of debt due to the savings banks by converting it into Terminable Annuities, and to state that by that process they could pay off £40,000,000. Now, if they converted £24,000,000, it followed that at the end of the period for which the Annuities ran they would only have paid off £24,000,000. Perhaps the right hon. Gentleman would explain how they were likely to be able to discharge more of the debt than the sum to which the Terminable Annuities would be equivalent.

SIR FITZROY KELLY

expressed his great satisfaction at having heard the Chancellor of the Exchequer express his approval of the principle of taxing the manufactured article in preference to the raw material as shown by his proposition with regard to the timber duties. It was his (Sir FitzRoy Kelly's) intention upon a future evening to submit a question relating to this subject to the House, and he now asked his right hon. Friend to appoint a time that would be most convenient for such a discussion. Perhaps it would be more appropriate when the question of the malt duties would be under the consideration of the House. He should submit a Motion to the effect that it was expedient—if not at the present moment, at some other period more convenient—to substitute a duty upon beer instead of the duty upon malt.

COLONEL BARTTELOT

thought that if the hon. and learned Member who spoke last would move for a Committee to inquire into the pressure and operation of the malt tax, it would be of great advantage to the country. They would then see how that tax affected the working man, and also how it affected the agricultural interest. [Mr. AYRTON: Hear, hear!] The hon. Member for the Tower Hamlets understood most questions, but when he spoke the other night of meal versus malt it was clear he did not understand agricultural questions. If a Committee on the malt tax were moved for, it was to be hoped that the Chancellor of the Exchequer would grant it. His own impression was that if that tax must be retained, it would be better to place it upon beer rather than upon malt; but the information which the labours of a Select Committee would afford would enable them to judge more correctly upon that point. There was another impost which it was surprising the right hon. Gentleman had never mentioned in any of his Budgets— namely, the land tax, which pressed most unequally upon different districts of the country. Local circumstances had greatly changed since the land tax was first settled—in some districts it was 10 and 15 per emit greater than in others—and a fairer adjustment of the burden was now required in the various parts of the king dom.

MR. WHITE

said, that whilst reserving for another occasion the expression of his dissent from much which had fallen from the Chancellor of the Exchequer he would avail himself of this opportunity of declaring his approval of the abolition of the duty on pepper. The more so as, according to the last Report of the Inland Revenue Commissioners, "no article of sale subject to revenue duties is more sophisticated than pepper." The proposed lowering of the mileage duty on stage carriages from 1d. to one farthing per mile and the reduction of the annual license for keeping one horse and one carriage for hire from £7 10s. to £5, with the other suggested alterations to rectify the inequality of this tax were praiseworthy, and encouraged him to put in a plea for a numerous and deserving class in the town he had the honour to represent—namely, the flymen, who complained, and justly complained, of the irksomeness and hardship of being compelled to pay, in addition to a very onerous annual license duty, the occasional carriage license tax of 3s. per day for plying for hire when reviews, races, or other public celebrations occur. It was notorious that the flyman's calling was the reverse of remunerative, and the maintenance of this "occasional license tax" was alone justifiable by the mileage duty exacted from the owners of stage carriages. As three-fourths of that duty were now to be taken off, he (Mr. White) trusted the Chancellor of the Exchequer would deem it not only expedient but just to abolish this occasional license tax, seeing that a fly owner of but one horse and one carriage would still have to pay the very heavy license duty of £5 per annum for the privilege of plying for hire.

THE CHANCELLOR OF THE EXCHEQUER

said, in reply to the noble Lord the Member for King's Lynn, that he had taken the course which was invariably done in estimating the amount of the National Debt, by taking the current value of the funded debt. There were two considerations which it was required should be kept in view in order to arrive at any comparison, and one of them was, that if the Government bought in the market prices would rise. The greater portion of the present fund had been purchased at high prices from 1840 up to and during the Crimean War; but since then the prices had been more moderate. The condition upon which the public creditor lent his money was this:—In the case of the Three per Cent Stock the Government covenanted to pay him a perpetual annuity at the rate of 3 per cent, or else £100 for every hundred of the stock. He was much obliged to the hon. and learned Member for the Tower Hamlets (Mr. Ayrton) for the observations he had made with reference to the mileage duty and the retention of the licences. He did not look upon them as desirable as permanent sources of revenue; but the fact was he never had money enough to deal with the whole subject. He thought the tax a bad one, and he should be glad one day that they should be able to repeal it. The observations of the hon. Member for Stockport (Mr. Watkin), and also those of the hon. Member for Brighton (Mr. White), relative to taxes on locomotives, showed the manner in which these different kinds of trades touched each other. The hon. Member for Brighton wished to abolish occasional licences, because he said a cabman was unable to compete with a stage carriage proprietor in consequence. It would be impossible to abolish the occasional licences, whilst the present system continued, for if they did every man would interpret the daily use of his carriage as its occasional use, and thereby evade the duty. He should not be able to deal with the whole question of taxation on locomotives until after the Government had received the Report of the Commission on Railways. With regard to the collection of the revenue, he would remind the Committee that it was a question hardly germane to the discussion of the Budget; but he had no doubt that the Secretary to the Treasury would be happy to give every attention to the subject. He could assure the hon. Member that the Government was desirous of reducing these charges to a minimum. There was no doubt that the charge of collection was very large, but to understand the nature of the change the Post Office must be divided from the Customs and the Inland Revenue. The two latter were economically collected, and from his experience in that House he would advise hon. Members not to inquire too much into it, as it generally tended to increase rather than diminish the cost of collection. It was a perfect fallacy to compare the expense of the collection of the revenue properly so called of the Inland and Customs revenue with the Post Office. The latter was a great trading establishment, and as its revenue or business extended so must it extend its expenditure in proportion. He was unable to give the hon. Member for Somersetshire (Colonel Barttelot) an answer about the game licences. His impression was that they were working satisfactorily; but as he had not looked into the matter lately, if the hon. Member would favour him with the particulars upon which he required information it should be furnished to him. The land tax was the most difficult of all taxes to deal with. Those who had redeemed the tax might consider they had a claim on the Government for the repayment of a large portion of it; and even if they were to abolish the tax altogether he was afraid some other would have to be imposed in lieu of it. He would advise the hon. Gentleman not to raise the question, as he did not think the land had made a bad bargain with reference to it. He would be much surprised if the right hon. Gentleman the Member for Oxfordshire (Mr. Henley) encouraged the hon. Gentleman to interfere with the land tax, because if they made a clean sweep of it he could for see that when they wanted money there would be a proposal to lay a new tax on land, which might probably be a much more burdensome one than the present tax. It was an inheritable burden, and people had taken their land subject to it. With respect to malt, the Government would meet any proposition which the hon. and learned Gentleman the Member for Suffolk (Sir FitzRoy Kelly) might make it in the same spirit as on former occasions. It would be for the hon. and learned Gentleman to raise the question in the manner he thought best; but he (the Chancellor of the Exchequer) would suggest that it would be preferable to deal with it in the form of some general expression of the House, rather than on any stage of the measure to be proposed with reference to the Budget. He had now, he believed, replied to the questions which had been raised, but he wished to correct an error, and apologize for an omission he had made in his main statement. He had been reminded that he did not state correctly the amount of National Debt that would be cancelled in consequence of the operations which he had described. A more correct statement would be this. There would be two operations. Operation A was the conversion of a debt of £24,000,000 into an annuity expiring in 1885, or eighteen years and a half from the commencement of the annuity. Operation B was an arrangement under which it was proposed to take power to invest what he should call the spare dividends from operation A in the Terminable Annuities. But the omission which he made was this—he did not state that these annuities would last to 1905. He did not think it would be desirable to remove the matter from the view of Parliament for so long a period, nor indeed could that be done, and consequently he only proposed to take a power of making the investments up to 1885. Therefore at that period at least—though it might be much sooner—the whole question must come before Parliament, which then could review its position. The mistake he made was this—he assumed that half of the extra dividends over and above an amount specified would be capable of re-investment—that was a mere assumption, as he told the Committee—and his misstatement was, that the investment of half would extinguish the whole. The whole debt extinguished would be £39,000,000, and there would be another annuity to run for twenty years, beginning in 1885.

MR. HUBBARD

asked, whether the income tax was to be reproduced precisely as it was in point of incidence and of action?

THE CHANCELLOR OF THE EXCHEQUER

Yes; for this year.

MR. HENLEY

concurred in the opinion that it would be better not to discuss the financial condition of the country until they had the matter more in detail before them; but he must say he thought the statement of the right hon. Gentleman with regard to the future was somewhat alarming. If—he would not say the prophecies of the right hon. Gentleman, for he based them on calculation—but his speculations were realized, things should go very differently from what they had gone for the last twenty years. We were now, as it were, only "picking ourselves up," and it would be necessary to do great things if what the Chancellor of the Exchequer contemplated should be done. But the impression left upon his mind was that it was better to have something than nothing.

House resumed.

Committee report Progress; to sit again To-morrow.