HC Deb 05 June 1868 vol 192 cc1212-20

Order for Second Reading read.

THE CHANCELLOR OF THE EXCHEQUER

reminded the House that advances for metropolitan improvements had been sanctioned by three separate Acts — the first, in 1862, authorizing the Northern Embankment; the second, in 1863, authorizing the Southern Embankment; and the third, in the same year, having for its object the improvement of Mansion House Street. The original gross estimate for the first work was, in round numbers, £2,500,000; for the second, a little over £1,000,000; and for the third, £1,300,000 —the total being £4,935,000. A great part of that sum was expected to be recouped by the sale of lands; and in 1864 an Act was passed guaranteeing a loan to the amount of £2,480,000, the net sum which it was thought would be required. The responsibility for the estimate for the first work rested with the Office of Works, the Bill being in charge of the First Commissioner, but the execution of the improvement being intrusted to the Metropolitan Board of Works. It was decided when the Bill was in Committee that nearly all the reclaimed land should be devoted to public purposes, part of the expected assets being thus sacrificed. The compensations for water frontages had far exceeded the original estimate; and with regard to the Southern Embankment, whereas the Metropolitan Board asked for borrowing powers for £700,000, the House reduced the sum to £480,000; while, with regard to the Mansion House Street improvement, the Board had purchased additional lands in order to avoid claims for compensation, and the estimate had thus been exceeded. The present estimate for the three works was £5,568,000, showing an excess of £633,000, half that amount being attributed to the additional purchases of land in Mansion House Street, which were regarded as a profitable investment, and the other half to the excess in compensation for water frontages. The Board had received £3,729,000, nearly all which had been expended, with the exception of £157,000, and the sum required to complete the works, in addi- tion to the assets already available, was £1,839,000. Now, the Bill proposed that the Metropolitan Board should have power to raise £1,850,000 under a Treasury guarantee, and, with the exception of a slight addition with regard to the approaches, the works to be executed under this loan were those for which the original guarantee was given. The House would expect to be satisfied that the Government had a proper security, and this consisted in four different sources of revenue. The first was the surplus of the proceeds of the Coal and Wine duties up to July 5, 1882, after satisfying the existing claims upon that fund. The surplus was £15,000 to July, 1867. The income from this source was continually increasing, the annual growth being at the rate of £7,000 or £8,000 a year, and the surplus to July of the present year being estimated at about £22,000. The second security was the metropolitan rates; the third was the whole of the Coal and Wine duties from July, 1882, to July, 1888. This was in the nature of a deferred annuity, because up to 1882 they would have to satisfy the existing claims of those who had lent money to the Metropolitan Board of Works. These claims would be satisfied by July, 1882, and after that period these duties would be available as security for the present Vote. The House had passed a Bill for the continuance of the Coal and Wine duties until 1889; but for the last year of that term they would be applicable towards the buying up of certain bridge rights. The proceeds of the Coal and Wine duties amounted in 1867 to £200,000, so that this might be taken as an annuity for six years deferred for fourteen years of, say £220,000, at a moderate calculation of the growth of these duties. The present value of this at £3¾ per cent was £690,000. The Government would have additional security in the property abutting on the new Mansion House Street, upon which the loan was to be a fair charge. The fair value of this property might be put at £1,500,000; but, in order to be quite safe, be took it at £1,300,000. If he took the value of the deferred annuity of the Coal and Wine duties at £600,000, which was considerably within the mark, and the value of the Mansion House Street property at £1,300,000, the Government would be perfectly safe as to the capitalization of the loan. These calculations were far below the estimates of the Metropolitan Board of Works. The annual interest on the sum at £¾ per cent would be £69,375, to meet which there would be the surplus of the Corn and Wine duties. But although the Government proposed to guarantee the whole of this loan, it would not all be required at once The sum of £750,000 would be required for the first year; £600,000 for the second year; and £500,000 for the third year. Some of the property in the new street might be more speedily realized; but it was calculated that a halfpenny rate for three years would be sufficient. If any of the property in the bauds of the Metropolitan Board of Works should find purchasers, it might be possible to dispense with any increase of the rates. He trusted he had said enough to justify the Government in having acceded to the proposal to guarantee this loan. The Board of Works considered that if the securities in their hands were capitalized they would amount to a sum of £5,662,000. The expenditure would be £5,568,000, so that a balance of £94,000 would be found in their favour. He had given the House all the facts bearing on the case, and he had now to ask the House to assent to a guarantee on the part of the Government of the loan of £1,850,000.

Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Chancellor of the Exchequer.)

MR. HARVEY LEWIS

said, that the proposal of the right lion. Gentleman would be very advantageous to the ratepayers of the metropolis, because the money required by the Metropolitan Board of Works would be borrowed at a much easier rate of interest on the security of the Government. But, however agreeable this process of obtaining a Government guarantee might be, he thought it well the public and Board should understand it was one that must not be too often resorted to. He wished to know whether the right hon. Gentleman had any objection so to amend the Bill as to define the object for which the £650,000 was to be borrowed, to cause the £350,000 to be re-paid which had already been borrowed, and also to cause the remaining portion of the money which was to be guaranteed under the Bill to be faithfully applied to the completion of the works in Mansion House Street. He understood the Secretary to the Treasury to have undertaken to bring up a clause to that effect.

MB, GOSCHEN

said, he did not rise to oppose the Bill introduced by the Government; on the contrary, he was prepared to support it. Considering the extent of these works, and that they were of an Imperial as well as a local character, the State might fairly step in to aid the metropolis by guaranteeing a portion of the funds required for their execution. A Return had been placed in their hands that morning upon the Motion of the Secretary to the Treasury, which professed to show the position of the Thames Embankment and the Metropolis Improvement Funds. The original estimate for these works was professedly given in that Return, with further particulars of the total expenditure up to 1868, and also their present total estimated cost. He presumed that that Return being dated from Spring Gardens, represented the opinions of the Metropolitan Board of Works on the subject, and that the Board was responsible for the statement signed by their own accountant. Now he wanted to know from what documents the original estimates for these works given in the Return to which he had referred had been taken. Having read through the Reports of the Metropolitan Board of Works, and the evidence laid before Select Committees, he was unable to find that the original estimates for these works were in any one case that which that Return represented them to be. The original estimates there stated amounted to £4,900,000, whereas the real original estimates previously submitted to Parliament were not more than £2,500,000. The total estimate at this moment was £5,500,000, or far more than double the real original estimate for the works, which included the Northern and the Southern Embankments, and Mansion House Street. What he complained of was that the original estimates as now given were not really the original estimates which had been laid before Parliament, and which amounted to £2,480,000. [The CHANCELLOR of the EXCHEQUER was here understood to say that in the one case the net estimates, and in the other the gross estimates were stated.] That distinction as to net estimates was now introduced for the first time in the Return, and in the Reports of the Metropolitan Board of Works, and it was now so introduced because the Coal and Wine duties had been continued. Before the Coal and Wine duties were continued the Board had an interest in making themselves out to be as poor as possible. In none of their Reports had he seen any mention of their £1,500,000 of assets. True, the House now had the gross estimates put before it; but why had not an opportunity been afforded it of comparing the gross with the net; estimates. The estimate originally laid before Parliament was £2,480,000, because it was believed that £2,480,000 was the gross sum which would be wanted. If that was a gross estimate why had Parliament been called upon to guarantee the whole of this amount instead of the net sum required? He was glad to hear that a great portion of the debt would be paid off very soon, and that it was hoped the property would become available in a short time for that purpose. But this was the first time that Parliament had been informed of the fact. In none of the accounts issued by the Metropolitan Board of Works hitherto had any distinct balance sheet been given, showing on the one hand what were their liabilities, and on the other what were their assets. It was for the interest even of the Board itself that the public should know what property it had at its disposal. Hitherto the Board had debited itself with the cost of the purchase of land, and the charges for compensation j but it had never shown any item to its credit for the amount of property it had thus acquired. It was, of course, difficult to estimate what the value of that property was; but, at all events, it ought to figure in any budget which it put forth, so that the ratepayers might have the means of knowing what the financial position of the Board was. The Chancellor of the Exchequer gave a list of the securities of the Metropolitan Board, and he was sorry to see that those securities included the general rates. Even a rate of only a halfpenny in the pound was a considerable addition to rates that were already insupportable, and in time the halfpence became pence, and so the rates ran up. He admitted that there was no danger to the Exchequer in the transaction proposed, for the risk was amply covered; and, indeed, the Board had shown that they scarcely needed the security of the Coal and Wine duties at all, for the value of their property was estimated at £1,500,000 or £2,000,000. When the Government were asked to continue the Coal and Wine duties, no mention was made of these assets on which money could be borrowed, and which were not shown in the accounts of the Board. In those presented pursuant to Act of Parlia- ment during the last two or three years, he could find no mention made, either in receipts or payments, of the coal and wine duties devoted to the extinction of the loans taken up by the Board and guaranteed by the Government; and the reason was, the money was paid over to the Commissioner of the Government and stood in his name, so that the receipts and the expenditure were not accounted for at all, To supply this deficiency, he moved for a Return in 1866; but it ought not to be necessary to have recourse to this mode of obtaining information. With reference to the cost of the Embankment, Sir John Thwaites stated before the Select Committee of 1866, in answer to Question 104, that its first estimated cost was £1,000,000, which included the approaches. He was asked about the cost of the approaches, and said they were not deemed sufficient; and therefore power had been obtained for more important and useful approaches, and they were included in the estimate of £1,290,000 ns the sum required to complete the work, which would "cost nearly twice its original estimate." The matter was not clearly explained in either the accounts or the Return; and the fact of a difference between a gross and a net estimate was spoken of now for the first time. These things rendered it impossible for the ratepayers to follow the accounts. The Government were right in giving this guarantee, and the £285,000 required for the Chelsea Embankment should also be included. It was a bad system of finance to deal piecemeal with every separate loan, and the placing of one after another led to endless complication, and prevented the Board borrowing on the favourable terms they might do, if a more comprehensive system were adopted. If every shilling of money borrowed on security went to pay the principal and interest of prior charges, the interest of the money borrowed must, in the meantime, come from the rates; and out of an income of £200,000 the Board spent £80,000 in paying interest upon loans for past improvements.

MR. TITE

said, he entirely agreed with the right hon. Gentleman who had just spoken that the item of £285,000 should be added to the same guarantee, as it. would enable the Board to borrow the money without difficulty, and at a low rate of interest. He had endeavoured to induce the Government to consent to this, but had failed, because the Chan- cellor of the Exchequer thought it an improper thing to give the guarantee of Government funds to works of this kind. He did not quarrel with them on the broad principle; but he regretted the application of it to a small matter like this. The right hon. Gentleman spoke of the difference in the estimates. But this was no more than occurred in the case of any public work, say a railway, where the cost was estimated at £2,000,000 and the return in a few years at £1,000,000, the net estimate would then be £1,000,000, and the former would be the sum they would borrow. That was the case with the Metropolitan Board; the cost of the Embankments and the new streets was known, but the return from the value of the property, though equally certain, was not so well known as to its amount; and the difference between the estimate of the Chancellor of the Exchequer and that of the Board was that while the Chancellor of the Exchequer estimated the value of the land at the modest sum of twenty-two years' purchase, the Board had estimated it at twenty-five years' purchase, and he was happy to say that all the land they had yet sold had brought, on the average, twenty-eight and three-quarters years' purchase. The nature of the accounts had been complained of, but the accounts were audited annually by a Government officer, and stated very clearly every outlay, lie was sure that if any improved mode of keeping the accounts could be pointed out the Board would be quite willing to adopt it. With regard to those estimates that had been exceeded, he would remind the House that they were not the estimates of the Board at all. In fact the Board was called upon to carry out a plan that was not theirs, upon estimates that were not theirs, and the only advantage they had was the guarantee of the Government. The Thames Embankment was a scheme of the Government and not of the Board; and the cost at the outset was estimated at £500,000, and the cost of the new street at Blackfriars was also estimated at £500,000, making £1,000,000 in all; but such an estimate for a great work cutting through a mass of valuable property appeared perfectly absurd. He did not put himself forward as the apologist of the Metropolitan Board; but he was quite sure that they were actuated by a desire to benefit the public, and he thought that they had effected their purpose very worthily and honestly. When the great works in Paris, carried out by M. Hausmann at an expenditure of £30,000,000, were contrasted with the operations of the Metropolitan Board, the comparison would be found very much in favour of the latter body. They had paid off £400,000 of the debt which at one time pressed so heavily on the old Sewerage Board, and he believed from the natural growth of London that the rates imposed upon the citizens would come to an end some years sooner than the period of thirty or forty years for which they were imposed. Without a Government guarantee the Board would experience much difficulty in attempting to raise money to effect this improvement, as the Chancellor of the Exchequer had observed. If the Board had estimated too highly the value of the surplus property, any deficiency could be made up by levying a rate. But unless there was a necessity the Board would certainly not do so, for being ratepayers themselves they were equally interested with the other ratepayers in opposing unnecessary taxation.

MR. AYRTON

said, that nearly two years ago he called the attention of the late Government to the great confusion into which the finances of the Metropolitan Board had fallen, and a Committee of that House was appointed to inquire into the subject. The members of the Committee were struck with the great recklessness which bad been exhibited in preparing estimates for works, the cost in some instances being double the amount calculated on. It was also found that since the establishment of the Board various other local duties had been imposed upon them, and that the Board in its present constitution was unfit for the discharge of its various duties. The Committee reported, and when an attempt was made to carry their Report into effect they were met by the objection, fairly enough, he was willing to admit, that they had proposed to deal with the finances of the Board, and not with the Board itself. The Committee proceeded to consider how the Board could be re-constituted so as to gain the confidence of the metropolis, and a scheme was proposed by which there might be brought into it men of a higher scale of intelligence and character. That Report might also have engaged the attention of the Government; but, considering the great questions in hand last Session, it was not, perhaps, to be expected that they could undertake a measure for the metro- polis which would require great time and give rise to much discussion in that House. They found themselves, therefore, in this dilemma—that they could not reform the finance of the Board because they could not reform the Board itself, and they could not reform the Board because its finance was in a most deplorable condition. What, then, could they do? They could not now apply themselves to the whole question. The Board bad this Session given evidence of great neglect of the interests they had undertaken to protect. Nothing was more important than that the metropolis should he well supplied with gas. The City of London had in this respect secured for its inhabitants all they could reasonably desire; but the Board had refused to pay attention to the recommendation of the Committee, and left nine-tenths of the metropolis, so far as the supply of gas was concerned, in the same condition they were in before. Nothing was more extraordinary than that, dealing with this great metropolis and its vast resources, they should be going on from hand to mouth, just as some ordinary joint-stock company went on—find expedients for raising money for this work and that, without any general scheme or system. By the Bill before them it was proposed to obtain money by way of deferred annuities, and superadding one loan to another. That was not the way in which the exigency of the present times could be met. The system was at once oppressive and ruinous. It was necessary to take a survey of the whole question. Works like the Thames Embankment were in the nature of permanent improvements. They would last for centuries; and it was most injurious and unjust to throw the burden of them on the occupiers of property while the owners entirely escaped. Still more extravagant and absurd was it to concentrate the expenses within a few years. The whole subject required a Government that would grapple with it; they had now only a provisional or temporary Bill, which might be said to be a reflection of the condition of the Government. He would now simply enter his protest, and express a hope that after the present state of political turmoil had come to an end, the Government in power would be able to frame and carry out a scheme which should permanently settle the question.

Notice taken, that 40 Members were not present; House counted, and 40 Members not being present,

House adjourned at a quarter before Ten o'clock till Monday next.