HC Deb 08 June 1875 vol 224 cc1522-60

Order for Committee read.

Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—(Mr. Chancellor of the Exchequer.)


, in rising to move the Amendment of which he had given Notice, said: Mr. Speaker—In his Budget Speech the Chancellor of the Exchequer prefaced his introduction of the "National Debt Bill" with these words—" There is no great cry or urgent necessity for any great reform in our system of taxation." To that statement I offer my emphatic dissent. So long as our Revenue is partly raised by duties upon professions, upon the transfer of property, and upon locomotion, and, above all, by the unequal incidence of the income tax, it cannot possibly be said that no great reform is needed in our fiscal system. But apart from such a presumed justification, I am quite ready to concur in the expediency of making a serious and formal move towards the reduction of the National Debt. It is very conducive to the successful discussion of any subject that we should be agreed in our definitions of the terms we use; and I venture to suggest that the name "Sinking Fund" is inapplicable to the proposed legislative measure. The Chancellor of the Exchequer, in introducing the subject of this Bill, claimed for his measure an immunity from the evils attending the Sinking Fund of Dr. Price. It could not be necessary for my right hon. Friend to disclaim any participation in the absurdity of supposing that you could borrow for a term of years at simple interest and lend at the same time at compound interest, and at the same rate. Dr. Price was not the inventor of the Sinking Fund. The earliest known in this country was designed by Lord Stan-hope, and was constituted by Sir Robert Walpole in 1716. It lasted 11 years and then collapsed, the funds which it comprised having been applied to the satisfaction of State exigencies. It is important to note the character of that fund. In 1718, King George the First, in his Speech to Parliament, says— I have the pleasure to observe to you that the funds appropriated for sinking the Public Debt have answered above expectation. Again, in 1724, he says— It must be a very great satisfaction to all my faithful subjects, to see the Sinking Fund improved and augmented, and the Debt of the nation thereby put into a method of being so much the sooner gradually reduced and paid off."—[Parl. History, vol. 8, p. 374.] Sir Nathaniel Gould, an eminent merchant and a Director of the Bank, wrote, in his Essay on the Public Belts of the CountryThat the provision which had been made of the Sinking Fund was an expedient from which the full and effectual payment of the principal of the National Debt might, in a few years, with great assurance be expected. Dr. Price's Tracts were published in 1771 and 1774, and it was under his tuition that Pitt organized his Sinking Funds in 1786 and 1792, the first being the annual appropriation of £1,000,000, applicable, with its re-invested dividends, solely to the reduction of Debt, and the second being a Sinking Fund of 1 per cent on the capital of each loan contracted, and computed, with the aid of re-invested interest, to redeem the entire Debt in 45 years. In all these instances the characteristic of a Sinking Fund is found to be "a scheme for the entire redemption or sinking of the Debt to which it relates." Sinking Funds of this nature are part of the scheme under which loans, foreign or colonial, are negotiated in this country. The Sinking Fund may be a simple percentage, or a percentage improved by the interest upon the portion of the loan already redeemed; but, in any case, the creation of a Sinking Fund implies the absolute liquidation of the Debt. The Greek Loan of 1833, guaranteed by England, is an example of a Debt redeemed within 37 years through the progressive absorption of residue by a fixed percentage of the original loan. The passage from a speech of Lord Granville—which my right hon. Friend cited as a description of his own measure—fails to convey to my mind any confidence in its soundness. It begins— Possessing an effective and permanent surplus, a State may maintain a Sinking Fund even at compound interest without resorting to still further taxation. Permanent surplus! Certain future! Who has the gift of prophecy? Had Lord Granville? Has my right hon. Friend? And yet no knowledge, save that of prescience, can warrant the assumption of a permanent surplus. Have wars ceased? Is your expenditure limited for all time to its present amount Is your Revenue assured? "Will you always be able to levy an iniquitous income tax, and maintain in the form of stamps and licences burdens upon the liberty of labour and obstructions upon the transfer of property? Your Revenue must be raised upon a very different system from the present before it can be spoken of as yielding in the future a "permanent surplus." But, Sir, there are necessary limits to prophetic finance—there is the practical inability to bind the actions of our successors, and there is the ignorance of the future. The vice of Dr. Price's scheme was that it deferred the actual redemption of any portion of the Debt, and so left the Sinking Fund and its accumulations at the mercy of a needy financier. The scheme of the Chancellor of the Exchequer is different in character, and ought not, I think, to be called a Sinking Fund. It has no distinct relation to the "sinking" or entire redemption of the Debt; it is rather a Redemption Fund of a very extensive and ambitious description, and it is, in my judgment, open to insurmountable objections. Those objections are—firstly, the extent of the redemption aimed at; secondly, the hardship to the taxpayer doomed to continued and unmitigated taxation, while the Debt is being, through his self-denial, seriously diminished. In his Budget speech, the Chancellor of the Exchequer complained of the spasmodic action of the Terminable Annuities as a medium of redeeming Debt, and instanced the falling in of £4,500,000 in 1885, as constituting an inconvenience both to the Treasury and to the country. I quite agree with him in deprecating this spasmodic action—resulting, by the way, not from the use, but from the misuse of Terminable Annuities—but how does he guard against the inconvenience of an abrupt termination of a charge, not of £3,000,000 or £4,000,000, but of £13,000,000 or £14,000,000? Perhaps he contemplates an uninterrupted progress of this accumulating Redemption Fund? If so, I venture to offer my remonstrance. On the part of the taxpayer, I stipulate that in any scheme of redemption the annual charge shall be mitigated to the extent of the interest on the liquidated Debt. It would be impolitic and unjust to the present generation that they should bear not only the burden of their ancestors' extravagance, but that also which fairly falls upon their posterity, without even the satisfaction of feeling that they are bravely and patriotically doing their duty. And next, Sir, as to the amount of annual redemption. It should be limited by two considerations—the burden to the taxpayer, and the convenience and practicability of the actual redemption. Well, Sir, with both these considerations in my mind I cannot contemplate a higher amount of continuous annual redemption than £5,000,000. I mean that the Debt shall be yearly reduced by £5,000,000, but that the charge upon the country shall also diminish by some £ 150,000, the interest of the extinguished Debt. I deprecate, as highly inexpedient, an attempt to operate upon a larger scale. It would be easy to raise the Redemption Fund—the difficulty would be in purchasing the Stock to cancel. At present, the casual surplus of £2,000,000 or £3,000,000 is, by judicious management, invested in the purchase of the funded Debt, without disturbing the market, or raising sensibly the price of Consols. And even £5,000,000 might at first be, with similar facility, invested; but every year the difficulty would increase; the floating Stock would be absorbed; the free Stock of monied corporations would be attracted by a rise of price; but within no distant period the demand would be met only by tempting trustees of settled monies to change their Government Securities for others to such an extent as their trusts enabled them to make the exchange. I will not attempt to indicate at what stage of the redemption the continued purchase of Government Debt would become impracticable, except upon very disadvantageous terms; but that such a stage would be reached is certain, and the more rapidly inasmuch as the notoriety of a State scheme for the continuous redemption of the Debt would of itself enhance the value of the Stocks, and aggravate the difficulty of redeeming them. It must be remembered that whereas in the many Foreign Loans which provide a Sinking Fund, the material for redemption is secured by the operation of annual or biennial drawings, the obligations of our own Government are only to be redeemed by purchase in the market. I deprecate, then, the annual redemption of more than £5,000,000, as tending to a mischievous disturbance of the value of the Government Funds, and rendering the process of liquidation of Debt a very costly one. But I object, Sir, to the Bill of my right hon. Friend that in it he aims his shaft at a mark which it is beyond his strength to reach. "There shall be issued (so runs the Bill) during every subsequent financial year the sum of £28,000,000." Clearly these words, though positive, are powerless—powerless to bind any subsequent Finance Minister, or any subsequent House of Commons. They may be operative during the life of the present Administration, but no longer. Perhaps this is not wholly regretable—the continuity of a particular policy should depend not upon its being irreversible, but upon its acknowledged merits. So far, however, as a particular mode of action can lead to an equable and continuous process of redemption, it becomes entitled to consideration and adoption; and undoubtedly the conversion of Perpetual into Terminable Annuities has received a large measure of intelligent approval, and has the merit of being an operation fixed for a given period beyond the reach of capricious change. It appears to me, that with a view to the results desiderated by my right hon. Friend, the instrumentality of Terminable Annuities might be used with entire safety, convenience, and efficacy. In the discussion on the Budget the opinion of the House was expressed in a distinct desire for a sensible reduction of the Debt, but objections were raised against each of the means hitherto pursued for that object. The application of the ultimate surplus of the year in the purchase of Stock was uncertain both in the extent and continuity of its operation. The requirement, by statute, of the appropriation of a given sum to the reduction of Debt, had no binding efficacy; and to the system of Terminable Annuities my right hon. Friend objected that their action is spasmodic, and that they can be placed in the open market only upon terms so disadvantageous as practically to confine their adoption to the funds under the control of the Government in the Savings Banks. Those objections were all real, and if the Chancellor of the Exchequer desires again to see Terminable Annuities become negotiable, all that he has to do is to act upon this brief rule—"be honest;" do to the creditors of the State that which the State had required its debtors to do towards itself when it became the creditor. In 1846 the State lent £3,000,000 to landowners, repayable with 3 per cent interest in 22 years, and the landowners, following the example of the State, deducted from their annual repayments the tax upon the whole annuity. What did the State? In the Income Tax Act of 1853 the State provided that— Certain public monies had been lent repayable with interest by way of rent-charge and that it was just that provision be made for deducting the duty in proportion to such interest and no more. This provision was equitable in itself; but then how it exposes the iniquity of the system which admitted the adoption of one measure for the creditor and another for the debtor of the State. I may illustrate the advantage forfeited through this imposition upon capital by reverting to the Terminable Annuities created in the year 1834. In that year the State, having decided to pay off one-fourth of the Debt due to the Bank of England, converted that sum, amounting to £3,671,700, into a Terminable Annuity of £212,783 12s., expiring in 1860. Had the Bank received payment in Reduced Three per Cents at 92½, the price of the day, they would have obtained an investment yielding an annual interest of £3 4s. 10d. per cent. The interest they derived from the Annuity was £3 7s. 2d., so that the State, for the slight difference of 2s. 4d. per £100, secured the great convenience of the Terminable Annuity; and I venture to say that if Terminable Annuities were taxed on interest only, Banks and other monied corporations would readily accept them in exchange for perpetual Stocks upon terms not perhaps quite so favourable as those I have cited, but still quite satisfactory to the Chancellor of the Exchequer. But for the purpose of the reduction of Debt, the Chancellor of the Exchequer need not go beyond his City office in the Old Jewry; and I submit to his consideration a scheme which is free from all the objections which have been opposed to other means of acting upon the National Debt. It is independent of the casual surplus of the year—it is definite in the extent of its operation—its continuity could only be arrested by counter legislation, and it is free from the inconveniences of spasmodic action. The scheme which I submit consists in the combination of Terminable Annuities of 10 years duration, of which a portion annually expires, and is succeeded by a similar annuity of equal amount and of equal duration. To give effect to this scheme two clauses would suffice. Clause would enact— That in exchange for £40,000,000 worth of Terminable Annuities now held by the Commissioners for the Reduction of the National Debt, there should be created, to the value of £24,500,000, Terminable Annuities of £500,000, terminating respectively in 1, 2, 3, 4, 5, 6, 7, 8, 9, and 10 years. And for the remainder of the present Terminable Annuities held by the Commissioners, permanent Three per Cents should be substituted. The 2nd clause would enact— That every year the Bank of England should, upon the application of the Commissioners for the Reduction of the National Debt, issue an Annuity of £500,000 for 10 years in exchange for an equivalent amount in Perpetual Annuities. Every year £5,000,000 would be the entire charge for the Annuities, and deducting £735,000 interest saved on £24,500,000, the equivalent value of the Three per Cents cancelled, the residue, £4,265,000, would be applied to the reduction of Debt. This process would continue independently of any further Parliamentary sanction until, if ever, it were arrested by counter legislation. I do not propose to enforce this scheme by any Resolution, for it is not my office to do so; but I place it at the disposal of my right hon. Friend for his deliberate consideration hereafter. The Resolution which I am about to propose is, however, a protest against the intention of the Chancellor of the Exchequer to require, without limitation of time, the appropriation of £28,000,000 to the charge for the National Debt—a scheme which would act with needless stringency upon the taxpayer, and which has, moreover, this insurmountable defect—that it is impracticable. I beg, Sir, to move the Amendment of which I have given Notice.

Amendment proposed, To leave out from the word "That" to the end of the Question, in order to add the words "as reduction of debt implies taxation in excess of the requirements of the State for the services of the year, the pressure of the debt upon the taxpayer should be diminished to the extent of the interest saved upon the amount of debt previously redeemed,"—(Mr. Hubbard,)

—instead thereof.

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


said, that as far as he understood the arguments of his right hon. Friend he was forced to the conclusion that he had not understood the nature of the proposal contained in this Bill. There were one or two points which he would just advert to in the first instance. He admitted that his right hon. Friend had not thought it desirable to take the present opportunity for entering into a general discussion on the various points of the system of taxation that were open to and might call for amendment. It was not his intention when he made the observation which his right hon. Friend had quoted in his speech to say that the career of Financial Reform and Adjustment of Taxation had closed. "What he meant to say was that we had now arrived at a time when we should consider that supposing the present prosperity continued and the wealth of the country continued to advance for some time in the same ratio as it had recently done, and supposing we should have a progressive advance in the Revenue, greater than the increase in Expenditure, there would be the means of gradually and quietly dealing with all those problems which required consideration and which might be disposed of. And he thought we had arrived at a time when we might fairly say that having the means we ought to devote some of our attention and some of our wealth to a continuous effort to reduce the National Debt. It was well to bear in mind the history of the past, and many of the lessons which his right hon. Friend had impressed upon the House deserved full consideration. He would not enter into the question whether Sinking Fund was or was not a misnomer, The old Sinking Fund—by which he meant the system established in 1828—he thought, was exceedingly valuable. He understood his right hon. Friend to say that he admitted, to a considerable extent, the justice of some of the criticisms which he (the Chancellor of the Exchequer) had ventured to pass upon the present system of applying casual surpluses to the repayment of Debt, which was a very good system as far as it went, but which was open to difficulty—because it was very uncertain, and of late years there had been a tendency to cut down surpluses as much as possible. His right hon. Friend had made certain criticisms on his proposal, and then proceeded to explain the plan he himself was prepared to propose, and which he no doubt thought would be free from the objections he had urged against the scheme embodied in the present Bill. Yet his right hon. Friend's plan was open, except in the last point to which he had referred—namely, the gradual diminution of the burden on the taxpayer—to every one of the objections he urged against the Government plan, while all the advantages his right hon. Friend had found in his own scheme were capable of being attained under that now submitted to the House. His right hon. Friend's plan was the creation of Terminable Annuities, which were to go on in an endless series, year by year, for the purpose of redeeming a considerable amount of Debt. Did he understand his right hon. Friend to mean that these Terminable Annuities were to go on until we had redeemed as large an amount of Debt as was capable of being redeemed by that process? Were they to go on until they had redeemed £50,000,000 or £60,000,000 and then stop, or were they to go on in perpetuity? As he understood the matter they were to go on in perpetuity; and, if so, his right hon. Friend's scheme was open to the same objection which had been urged against his own. He presumed these Terminable Annuities were to be provided out of the surplus for the year, that was a permanent surplus; but unless his right hon. Friend possessed the gift of prophecy, which he denied to him, it was difficult to perceive how his right hon. Friend could look forward to a permanent surplus. If it was proposed to provide the annuities by borrowing, that would be exceedingly objectionable. His right hon. Friend had said his plan had the special merit of being irreversible, except by the direct action of Parliament. Besides, it was pretty evident from some of his remarks that his right hon. Friend would like to get rid of the injustice which the mode of collecting the income tax imposed on the system of Terminable Annuities, and that he would make Permanent Annuities purchase-able in the open market; but if that were done the matter would not be under our control, and we should have to find year by year the means of meeting the demands. But if they were not permitted to prophecy, where would they be when this continuous burden fell upon them year after year? They would have as much difficulty in dealing with it as they could possibly have in carrying out the proposal of the Bill, which after all was a measure calculated for the period in which he believed ourselves to be living. The Bill was intended to go on as long as the state of things remained favourable to its going on; but, of course, if a state of things arose in which it was inconvenient for Parliament to apply £28,000,000, or any other particular sum, to the abolition of the Debt, Parliament would, for good cause shown, make an alteration in the system. His right hon. Friend had referred to what was done in 1858 when an attempt was made to establish a Sinking Fund which would have operated on the Debt. What then occurred showed that the matter must be completely within the control of Parliament. This was, indeed, as clear as the sun at noonday, and he could not understand how his right hon. Friend could imagine that we should be putting ourselves under a burden too heavy to be borne. And here came the point on which he was satisfied his right hon. Friend did not understand the plan of the Government. His right hon. Friend thought we should find ourselves obliged at some future time to apply £14,000,000 in a year to the purchase of Stock. Well, he did not see the necessity of that. His right hon. Friend proposed a system of Terminable Annuities; but why should not such a plan be adopted together with that proposed in the Bill? In fact, he contemplated the adoption of a system of Terminable Annuities. Over and over again he had endeavoured to explain that the Government would name the sum of £28,000,000 and within that sum would make such arrangements as might be desirable with regard to Terminable Annuities. In his right hon. Friend's plan he saw nothing inconsistent with his own, and he regarded it as being in a measure a very good plan and one which he was prepared to adopt. But to adopt his right hon. Friend's plan at a first jump would carry the matter over the point to which the House was prepared to go, inasmuch as it would involve in the first year an expenditure of £28,500,000. He was much indebted to his right hon. Friend for the suggestion which had led to his having proposed this particular Bill to the House. In a former discussion his right hon. Friend threw out something like this plan of a perpetual series of Annuities. He was very much taken with the idea and considered it carefully in the autumn. The result Was that he proposed the plan now before the House with a view to enable himself, if necessary, to adopt a plan of that sort under cover of the total amount of £28,000,000 that would be applied to the discharge of the Debt. There was nothing in the Bill or in his intentions further from the truth than the idea that the Government were going to set aside the system of Terminable Annuities. When they were held up as being more important than anything else in the world, he might be led to speak slightingly of them; but he did not deny that they were a most admirable system in a proper measure, though he desired to cure their defects. The difficulty in regard to them arose when the Annuities ceased. A large sum was then thrown on our hands, and there was a natural temptation to apply it to some other purpese than the extinction of the Debt. He trusted Parliament would maintain the payment of the really moderate amount of £28,000,000 a-year for the discharge of Debt. His right hon. Friend said the time would come when it would be impossible to get the Stock, because there was only some £5,000,000 of floating stock in the hands of the jobbers, and some £50,000,000 in the hands of persons who would be willing to part with it if it rose somewhat in price. Did his right hon. Friend mean to assert that if we bought up that £50,000,000 of Stock, we should have got to the limit of our tether in regard to the reduction of the National Debt? If so, the objection told against his right hon. Friend's system of Terminable Annuities just as much as it did against his own. Whenever the time came that the Chancellor of the Exchequer of the day found he had paid off so much Debt that there really was no more Stock to be got, of course he would come to Parliament and say—"I have paid off as much Debt as in the interests of the country it is desirable should be paid off, and I think that now the Debt has been reduced to £650,000,000 it had better remain at that figure for ever and ever. In fact, it must remain, because I cannot find any more to pay off; and therefore we will now dispense with all those payments which heretofore we have been called upon to make." But did his right hon. Friend really think we should come to such a point as that? Supposing the effect of buying up any large proportion of this floating Stock was greatly to raise the price of Funds and to carry them up above par, there were other matters which might possibly suggest themselves. For instance, if we were to find that these funds of £600,000,000 or £700,000,000 had got up to 2 or 3 above par, a question would arise as to whether something could not be done in the way of reducing the rate of interest, and thereby relieving the taxpayer. All these things ought to be considered, and the House ought also to bear in mind the fact that while the Government were, on the one hand, doing what they could towards redeeming the National Debt and giving a certain impulse to the price of Funds, they were also endeavouring by other measures to open new channels of investment which would, to a certain extent, have the effect of giving a further opening to those persons who were now supposed to be so unwilling to part with their Consols. His right hon. Friend concluded with a proposition, of which he could not see the importance. If, argued the right hon. Gentleman, the Government were going to do this, they ought to do it in such a way as to afford some yearly relief to the taxpayer. In other words, they must contrive somehow or other to give back to him a little in respect of the Debt he was paying off. If that meant anything, we were in 1875 to arrive at a certain sum which we said we would pay in reduction of the National Debt, and in the next year, 1876, the taxpayer would have to pay a little less than he had done in 1875, because a certain portion of the Debt would by that time have been redeemed. "Why," it was said, "apply more than was necessary now in the reduction of Debt in order that somebody 10 years hence might have a sensible relief from taxation?" Well, in the present year we were reducing the Debt by some £3,700,000. Why? Not in order that the Chancellor of the Exchequer in 1885 might have a good surplus, but for the national benefit; because we thought it a good thing for the country that at a time of peace and prosperity it should make a steady effort to reduce Debt. His right hon. Friend either meant that when they paid a sovereign they were to take back ten shillings, or he meant that they were to pay less and less year by year. Assuming the annual reduction of Debt by the operation of £500,000 annual surplus revenue, and assuming also the usual amount cancelled for Life Annuities, the annual reduction of charge would be at the rate of £39,000 a-year up to 1885, when there would come a reduction of £2,395,000, and in another year of £2,000,000 more, and the charge of the the Debt would gradually fall from £27,000,000 to £21,600,000. That was a very pleasant prospect for those who came after us; but why should the present generation bear the burden unless for the benefit of the country? He confessed that he thought that even the plan, which had been called "spasmodic" had the advantage over that of his right hon. Friend. In I860, when the Long Annuities fell in, the right hon. Gentleman (Mr. Gladstone) took the surplus arising from the cessation of the charge, and by means of it accomplished great fiscal reforms. It was a great operation, and without discussing the question whether it was better than a reduction of Debt, it was clear that by reserving yourself for great operations you might do some good. His right hon. Friend the Member for London said they might reduce the burden by £50,000 a-year; but what could such driblets effect in reducing their liabilities? [Mr. J. G. HUBBARD: I proposed £5,000,000 a-year.] He was sorry he misunderstood his right hon. Friend. His right hon. Friend spoke of £150,000 a-year being gained; but if that was the limit of the sum to be gained in the year it would, in his opinion, be absorbed in the expenditure. [Mr. J. G. HUBBARD: Oh, no.] Allowance should be made for the pressure that was put on the Chancellor of the Exchequer who was supposed to have a surplus. He protested against what might prove a very great temptation to laxity of expenditure. If they acted on the principle of the right hon. Member for Greenwich that, when there was a large sum falling in there should be a large operation of taxation, they got the quid pro quo; but he was not sure that that would be secured under the alternative proposal. He earnestly pressed upon the House that, in the immediate prospects of the country, £28,000,000 a-year was not an excessive amount for the country to pay for the reduction of the National Debt. It was an amount far short of that which our forefathers bore under circumstances of much greater difficulty, and which they bore cheerfully and without a murmur. Why were we not to be as courageous as they were, and make this very moderate effort, which would still yield very considerable results? The House would have in its hands the opportunity of stopping the operation of the plan, if circumstances changed and the public interest demanded that it should be stopped. Nothing, therefore, would be gained by adopting the suggestion of his right hon. Friend, except that it would stop the Bill; and he thought it would be against the feeling of the House and the country to stop a plan which had reduction of Debt for its object, and which it would be creditable for the country to adopt.


said, the subject was reduced into the simple question of a reduction of the National Debt; but that was a matter which was considered before they had any surplus at all. But without entering into that, he would address a few words to the Resolution of his right hon. Friend the Member for London, and the Motion of the right hon. Gentleman the Chancellor of the Exchequer. Looking at their plans, he could not say that he approved of them, and they seemed to him to neutralize each other. Both, in his opinion, were inferior in wisdom to the great principle laid down in 1829, which, in connection with the plan of Terminable Annuities, had proved perfectly successful, but which would be distinctly made less efficacious by these changes. He hoped his right hon. Friend the Member for London would not feel offended with him when he said that in the first part of his speech he went through the whole system of the Sinking Fund, and that the second part of it was a criticism on the speech of the Chancellor of the Exchequer. But when he (Mr. Childers) came to the Motion itself, he confessed he did not see the force of it, nor how it applied.


wished to explain. His Motion was a commentary on the scheme of the Chancellor of the Exchequer—namely, that with a sum of £28,000,000, they would burden the taxpayer.


The scheme of the Chancellor of the Exchequer neutralized the plan of the right hon. Gentleman the Member for the City of London. The difficulty was one which appeared to him insurmountable, and he preferred that they should take the law as it was with reference to the Sinking Fund, and that they should also take the law as it was with reference to the Terminable Annuities. In his opinion, the simple plan upon which they had been acting for so many years past was the best to follow. The Chancellor of the Exchequer, in criticizing the plan of the right hon. Gentleman, showed that it was obnoxious to his own scheme; and the right hon. Gentleman, on the other hand, showed that the scheme of the Chancellor of the Exchequer was obnoxious to his plan. The Chancellor of the Exchequer assumed a given surplus, and then said— By a series of steps during the next three years—steps of £300,000 each—I will gradually reach a certain fixed amount, and apply the difference between that fixed sum and the interest on the National Debt to the redemption of the National Debt. He thought that the Chancellor of the Exchequer had taken up shifting ground, though he did not mean to use the words in any offensive sense. In his Budget speech the right hon. Gentlemen distinctly proposed a plan which would work in a certain advantageous way not only for 10 years, but for 30 years, mentioning a cetain number of millions which would be paid off in 10, and also in 30 years. That was an important speech, and it produced considerable excitement. The Funds rose 1 per cent next day, and his plan was described as one which would reduce the National Debt by more than £200,000,000, having a permanent character, and working for 30 years. But what did the Chancellor of the Exchequer say now?— Although this is a permanent plan, yet it can he repealed at any time. Any future Chancellor of the Exchequer may interfere with its operation. Remember what was done in 1855 and 1858. In 1855 you established a Sinking Fund of only £1,000, 000, and in 1858 you repealed that Act. My plan may he dealt with in the same way. Any future Chancellor of the Exchequer may follow the example of the present Prime Minister in 1858, and put an end to my plan. But the right hon. Gentleman could not blow hot and cold in the same breath; he could not claim for his plan that it was a permanent one, and also justify it on the ground that it might be rescinded at any time. The whole proposal was vitiated if he attached to it the qualification that, after all, he did not mean it was to last 30 years. Another objection to the proposal was that the Chancellor of the Exchequer was dealing prospectively with an assumed surplus of which there was no proof whatever. He was taking for granted that three years hence there would be a surplus of Revenue equal to nearly £1,000,000 beyond the ordinary surplus of £500,000 under the Act of 1829. In that respect the plan was open to every objection which the Chancellor of the Exchequer had taken to the plan of the right hon. Gentleman (Mr. Hubbard), and was utterly opposed to all the financial principles by which the House of Commons had hitherto been guided. It ran the risk of breaking down, and of thus seriously interfering with our chances of reducing the Debt. The plan also required that when in 1885–6 the Terminable Annuities fell in, the then Chancellor of the Exchequer should not apply any part of it to the relief of taxation under this permanent Act; he must apply the whole to the reduction of the Debt, and would be debarred from doing what his right hon. Friend (Mr. Gladstone) did in 1860—use the £2,000,000 of Terminable Annuities which then fell in in effecting great financial reforms. Surely it was better to deal with their surplus from year to year as it arose, and to leave the year 1885 to be dealt with as 1860 and 1861 had been by the right hon. Member for Greenwich. With regard to the specific proposition of the Chancellor of the Exchequer, they had not that day had from the right hon. Gentleman the same disparaging tone in respect to Terminable Annuities as he had held a few nights ago.


explained that on a former night he had stated that within the limit of their £28,000,000 a-year they would be able to create as many Terminable Annuities as they pleased, and that, on the whole, there would be no objection to their undertaking those good and beneficial operations.


said, that, although the right hon. Gentleman had qualified his remarks by some general expressions, they certainly left on the country the impression that he was not particularly enamoured with Terminable Annuities. That day the right hon. Gentleman had, however, adopted a somewhat different tone, consequent, perhaps, on what had occurred in last night's debate. Now, the Chancellor of the Exchequer would put Terminable Annuities upon a somewhat better footing, and he (Mr. Childers) would certainly not in the smallest degree blame him for that change. What was the main difference between the plan of the Chancellor of the Exchequer and the state of things which would exist under the present law, if they did not build up that new Sinking Fund? By the present law we should apply whatever difference there might be between the receipts and expenditure in reduction of the Debt by the simple operation of reducing Stock. In addition, this would be followed up by dealing with the Post Office Savings Bank Fund. If, however, a given sum were to be in the hands of the Chancellor of the Exchequer in any one year he might be induced to apply part of that sum in the reduction of taxation, and part in reduction of the Debt, by the creation of Terminable Annuities, instead of having Perpetual Annuities. It was proposed by the Chancellor of the Exchequer to apply in future years money which he had not yet got in the reduction of the Debt, and which money—if it should ever be in hand—would be applied in a somewhat similar way under the Act of 1829. An argument which had great weight with Members of the House was, that the proposed Terminable Annuities would, by a sort of hocus-pocus, delude the public, and that the best way would be to apply any money which might come in directly to the reduction of the Debt by the purchase of Stock. It was thought that if—by a method of Terminable Annuities, or by having a fixed charge—we attempted to deal with the Debt, both these systems would fail when our finances should happen not to be in a good position. That was the position on which the Chancellor of the Exchequer's proposal was based; but he maintained that it was a position utterly opposed to their past experience. In 1855 they established a Sinking Fund almost identical with that of the right hon. Gentleman. Its amount was £1,000,000, and the present one was also very nearly £1,000,000. In 1858, the then Chancellor of the Exchequer came down to the House and said that that Sinking Fund was artificial; that the only sound principle for a Sinking Fund was the Act of 1829; he proposed to Parliament that they should maintain the Act of 1829; and in accordance with his recommendations the Sinking Fund established only three years before was absolutely repealed in a full House without a Division, and that £1,000,000 went into the Exchequer. The Preamble to the Act by which that was done ran thus— And whereas the issue, for the reduction of the Funded Debt, of fixed sums without reference to the relative amounts of the income and expenditure of the United Kingdom is inconsistent with the principle established by the said (10th George IV., c. 27) Act. He would ask the Chancellor of the Exchequer whether he proposed to put into this Bill words repealing that Preamble of the Act of 1858? They had had very important debates on the plans established since then in reference to Terminable Annuities. In 1867 there was more than one very interesting debate on the question of a Sinking Fund. In his Budget speech, in 1867, the Chancellor of the Exchequer (Mr. Disraeli) said— Now, if we admit that the only way of dealing effectively with the Public Debt is to deal with it by some specific amount which shall be charged upon the Consolidated Fund, there are only two modes by which we can operate. The first is by a charge of that character, voted annually, when the Financial Statement is made, the amount of which shall be employed in the purchase and cancelling of Stock and other public securities—in short, what is called a Sinking Fund. Now, I have myself always looked with great disfavour upon that mode of operating on the Debt……There is another method by which the reduction of the Debt can be effected.…. you may convert Stock into Terminable Annuities."—[3 Hansard, clxxxvi. 1116.] In a subsequent debate in the same year the right hon. Gentleman also said— I will not attempt to show the House the difference between a Sinking Fund—which I disapprove—and the plan of Terminable Annuities."—[Ibid. clxxxvii. 670.] And further on he added that— The only way to regulate your Debt is by favouring, as much as possible, its conversion into Terminable Annuities."—[Ibid. 671.] The old Sinking Fund went down when time of pressure came; but what was the fate of the Terminable Annuities? A deficit arose, and it was proposed to interfere with the Terminable Annuities; but right hon. Gentlemen on both front benches disapproved of the plan, and the Terminable Annuities stood their ground, even although an extra penny of income tax had to be imposed. If there had on that occasion been a certain specified amount to be spent in the redemption of Stock in that year, that system would, like the Sinking Fund, have gone down. In 1871, also, there was supposed to be a deficit of some £2,000,000 or £3,000,000, and the proposition as to how to meet it raised a good deal of debate. Throe separate attacks were made upon the Budget; but there was only one attempt to interfere with the Terminable Annuities. This last proposal, however, received no support from those hon. Members who usually took part in financial discussions. The present Secretary to the Treasury made a Motion against the increase of the income tax; but the Terminable Annuities stood their ground, in spite of an attack made upon them. The hon. Member for Finsbury (Mr. Torrens) proposed to take off a penny of the income tax; but the right hon. Member for Buckinghamshire came to the rescue with the Home Secretary, and protested against any interference with the Terminable Annuities, which, in fact, again stood their ground. He had given these illustrations to show that where a common Sinking Fund failed the Terminable Annuities had not failed; and he hoped that the House, instead of embarking in the scheme of starting a second Sinking Fund, would adopt neither the proposal of the Government nor that of the right hon. Member (Mr. Hubbard); but would stand by the financial proposals by which we had been governed for the last 30 years and more. He trusted that they would maintain intact the Act of 1869 and the policy of 1867; for in this way they would be able to make perceptible attacks upon the Debt when it was for the interest of the public that they should make them, and that without, hampering the Chancellor of the Exchequer in making, in the best possible manner, his financial arrangements.


felt that that there was great difficulty in dealing with a plan of this nature when practically there was no surplus in hand; and he thought, therefore, that this discussion might well be postponed for another 12 months. Under the proposal of the Chancellor of the Exchequer they would have to levy taxation on the one hand to pay the Debt upon the other. No doubt there should be some scheme for reducing the Debt when we could afford it; but he could not understand why, when they redeemed an amount of Debt, the public did not at once benefit from the reduced amount of interest. Under this scheme, as time went on, we should annually have a larger amount with which to buy Stock, whilst each year there would be less Stock in the market. In this way the price of the Stock would go up constantly and the fund for investment increased, the tendency being always to raise the price of that which we had to buy. The Chancellor of the Exchequer had said that if stock went above par he could reduce the interest; when there had been such general objection to reducing the interest allowed by the Government upon Savings Banks deposits, what would be the feeling of reducing by Act of Parliament the interest on the National Debt? It was simply confiscation, and he hoped it was the last time a Chancellor of the Exchequer would broach such an idea. The real question before the Committee was whether it was right to establish such a Sinking Fund as that now proposed by the Chancellor of the Exchequer; and for his own part, he considered that the plan was a most dangerous one.


remarked that some Members who did not very cordially approve of a Sinking Fund, might never- theless, give the Government their support on the ground that the scheme was, after all, only an experiment, and that, if it did not do much good, it would not do much harm. That was a very natural view to take of the matter, but it was not a correct one. In managing the affairs of the country they ought never to lose sight of economy. The constituencies did not seem to put much pressure on their Representatives in this respect; in fact, it was much easier to get pressure in favour of increasing expenditure than in favour of reducing it. Nor could Ministers always be trusted to keep down expenditure, for a Minister's first object was generally to make his Department efficient. There was one person, however, to whom they might look as having an interest in being economical—namely the Chancellor of the Exchequer. It was so for the simple reason that if economy was not practised, it was he who had to bear the abuse and the difficulty. That Minister had constantly before him that, if he gave way to what often seemed fair and reasonable requests, he might have to impose fresh taxes—a thing which every Finance Minister regarded with the utmost aversion. The proposal now was that, although the account might not balance, there should be an alternative offered between a deficit and the laying on of fresh taxes—namely, the provision of a sum of money to be applied to the reduction of taxation, which sum might, by a single stroke of the pen, be turned into the Ways and Means for the year. As far as that consideration had any weight, it was a direct encouragement to extravagance in the management of the public funds; and therefore this measure was not the innocent thing that might do some good and could not do much harm. It had a tendency to increase the public expenditure by removing the motive for its being kept in order. With regard to the past history of Sinking Funds, it was not confined to the foolish delusions of Dr. Price and those who immediately followed him. Take the case of Sir Robert Walpole's Sinking Fund, which was of a reasonable character, involving a legitimate operation. The Act under which that Fund came into existence was so framed as to make it appear impossible to apply the money in any other way than that prescribed without a direct breach of the law; but in the result the Fund was appropriated for the purpose of keeping down taxes and meeting ordinary expenditure. In their nature there was no distinction between the present proposal and that of Sir Robert Walpole, and surely it would be most unwise and undignified to enter upon a course which all experience had demonstrated could end only in one way—namely, in laying hands upon the Fund and appropriating it as Ways and Means. As to the question with regard to Terminable Annuities, he was happy to think that the right hon. Gentleman had modified his views upon it. In making these Annuities the Chancellor of the Exchequer occupied both sides of the contract, but it was in different capacities, in which he was bound to act fairly for both parties. When once he had made them he had no power to recall the Act. It was said Parliament had the power, and so, no doubt, it had; but it could only exercise the power by overruling the solemn act of a public functionary—by an act of force—rather than by an act of right. The right hon. Member for the City of London (Mr. Hubbard) had made a Motion and submitted a scheme, and although one or the other taken by itself might be very good, yet together they could not stand. The right hon. Gentleman maintained in his Motion that whatever Debt was paid off the public ought to be benefited by the remission of taxation to the amount of the interest on the Debt paid off. He (Mr. Lowe) did not know what connection there was between the two; but the right hon. Gentleman having established it in his own mind he then proposed a scheme of Terminable Annuities—that was, an uniform payment for a series of years, the elements of which it was made up varying from year to year. The House was being asked to adopt a singular course of procedure in this matter. In 1875 the Government of the day was asking this Parliament to dictate to the Parliament of 1885 the mode in which they were to deal with the National Debt. That was a very serious course to take. What would the Parliament of 1885 be likely to say of the action of that of 1875? Would they not lay claim to more knowledge on the subject than the present Parliament could have, and say it was they, and not we, who were responsible? Then, too, would they not very reasonably inquire what title the present Parliament had to take upon itself to lecture and dictate to the Parliament of 10 years hence and say that they must pay £5,000,000 of the National Debt? We should not occupy a dignified position in the debates of 1885. They would ask what sacrifice we made, and would find we had sub-scribed £185,000 that we had not got. The present Parliament was in the position of the clergyman who having preached an eloquent charity sermon, borrowed a shilling from the churchwarden's plate to make a contribution to the collection. The Chancellor of the Exchequer reminded him of Timon of Athens— His promises fly so far beyond his state, That what he speaks is all in debt; he owes For every word. All his propositions were based on the future. We might have applied £5,000,000 to the Debt last year, and that would have been some warrant for dictating to the Parliament of 1885; but the Chancellor of the Exchequer then preferred to take off taxes. It was strange that the right hon. Gentleman should say—"We will spend every far-thing we have: now let us pay off the National Debt." His (Mr. Lowe's) humble advice to the Chancellor of the Exchequer was that he should take the opinion of the First Lord of the Treasury, who had laid down most excellent doctrine on this subject whenever he had the opportunity of doing so. Let him, before he thought about paying off the National Debt, create for himself a surplus; when he had got one let him pause and see if he could get another surplus. It would then be time for him to think of paying off the National Debt, because there would then be something towards paying it off; and when he had something for that purpose and had done more in the cause of economy than merely utter words in praise of it, then, and not before, it would be time for him to insist on his orders being executed by Parliament at the end of a period of 10 years from the present time.


Mr. Speaker, it appears an extraordinary thing to me that Gentlemen on the Treasury Bench who are entitled to make a speech, and who, it appears to me, are bound to make a speech—as far as binding obligation can be said to arise out of arguments of great importance in opposition to measures proposed by them, which have been made on this occasion—are treating these arguments as if they thought them quite unworthy of answer. Without going over the ground again which my right hon. Friends in particular and other Gentlemen have covered in this debate, I may say they have traced the history of Sinking Funds based upon fixed appropriation beforehand in this country during a century and a-half; and they have shown that the history of those Sinking Funds has been uniform failure. They have shown that the authority of all recent Parliaments has been adverse to those Sinking Funds; and they have shown that among the financial authorities which have condemned those Sinking Funds is the authority of the right hon. Gentleman the present First Lord of the Treasury, and the head of the Government that is now proposing to revive them. The Chancellor of the Exchequer has stated that he himself undoubtedly voted against the principle of Sinking Funds of this kind in 1855. He likewise, in 1858, was Secretary to the Treasury.


No; I said I was not in Parliament at the time.


I beg your pardon; I was mistaken. The right hon. Gentleman has given us to understand that he expresses the conversion through which he had passed in his work on Financial Reform. I do not find there the evidence of that conversion. If the evidence were found there, where is the conversion of the First Lord of the Treasury? The right hon. Gentleman the First Lord of the Treasury has distinctly on principle condemned a Sinking Fund of this kind, and we have never been given to understand that his mind has undergone any change, and still less that he has been able to find answers to the excellent arguments he made in former times when he proved the inutility and inexpediency of Sinking Funds of this kind. That has been set forth with great fulness and quotation of authorities in the course of the present debate, and surely cannot be deemed to be entirely independent of the issue before us. We are now discussing a Bill for the establishment of a Sinking Fund, the importance of which cannot be denied any more than the relevancy of the arguments we have heard; and it appears to me that respect to this House requires that the argument on the side of the Government, if there be an argument, should be stated and defended; for the silence we have observed leaves room for no conclusion whatever, except that there is no argument at all, that the authorities cannot be denied, that the facts are not to be impeached, and that that docile majority which has done so much for the Government on various occasions has still a fund of patience unexhausted, and is available to march into the Lobby with the majorities which, even when reduced to their lowest point, come within one of the Thirty-nine Articles. I will not add a word to the argument of my right hon. Friend except this—that English experience and authorities have been quoted, and I do not think I abuse the patience or time of the House when I mention the authority of a distinguished French economist, whose attention was drawn—not from this side of the water—to the recent discussions on this subject. I mean M. Michel Chevalier, the well-known firm and conscientious adherent of the Empire which fell in 1870, and therefore one who had every disposition to maintain and support the system of finance which was established during the period of the Empire. He has written to me to say he had read these debates, and he traces the manner in which the system of Sinking Funds based on the principles now proposed for your adoption had been embodied in the law of France, and had signally failed— Throughout the whole reign of the Emperor the National Debt was in a constant state of growth; and throughout the whole reign of the Emperor, side by side with the growth of the National Debt, there was the existence of the Sinking Funds. The praise of good intentions is always to be carried to the proposals of these Sinking Funds; but the misfortune of having these good intentions, and of giving them form, is this—that they induce people to believe that they have done something for the public service and the reduction of the Debt, when they really have done nothing whatever—to suppose themselves to have done something real when they have made an imaginary sacrifice to economy and public interest, for which, unfortunately, they are much more disposed to compensate themselves by substantial additions to the public expense. The point, however, on which I wish to say a few words is one which has been little touched on in this debate. I myself have said, and say again, as far as regards prospective Sinking Funds, much as I mistrust them, if the House chooses to adopt them, I earnestly hope my right hon. Friend will succeed, which I am afraid he will not. But I shall be glad if he does succeed in getting public money applied in that way to the payment of Debt. The payment of Debt is an object so good, to get the money quocunque modo—any way—is better than no way; but the difficulty is that you do not get the money at all. But there is another branch of this question entirely distinct from the main object of the Bill and the prospective Sinking Fund, to which I would for a moment call the attention of the Government and the House. I adhere entirely to the arguments made from this side of the House on the general and prospective operations of the Bill, which have placed the subject fully before the House. Now, I want to speak on that portion of the operation of the Bill which has reference to the present year. And here, Sir, a perfectly different principle is involved. The objection to the prospective operation of the Bill is that in that prospective operation of the Bill we are unwisely, illegitimately, ineffectually attempting to bind the discretion of those who are to come after us. The objection to the operation of the Bill which affects the present year is totally distinct. That undoubtedly is not binding the discretion of those to come after us by exercising a power which we are incompetent to exercise. It is a matter thoroughly within our competency. But what I wish to know is whether any power which we legitimately possess we are about to use in a legitimate manner. I object to all appropriations of money for the reduction of Debt which are totally visionary and unreal, and in respect to which the money has not been shown to exist for the purpose. I have endeavoured to show that there is no possible reason from this point of view, or from any point of view, for maintaining in the Bill the words which are in the eighth line of the first page, and which provide, "during the financial year ending March 31, 1876, that a sum of £27,400,000 shall be appropriated for the payment of Debt," or, in other words, that £185,000 shall be voted out of the service of the present year for the reduction of Debt. My contention is this—and it is invincible upon the grounds of Parliamentary practice and general policy—that you have no right to vote that money until you have shown you possess it. The Chancellor of the Exchequer has not shown that he does possess it. He has shown us a surplus of £416,000, against which there are three charges—£60,000 for the Brewers' Licences, £70,000 balance on the interest of loans, and £118,000 for Irish education—making a total of £248,000, and leaving a balance of £168,000 to pay £185,000. He is, therefore, positively calling upon the House to vote away money which he has shown he does not possess, and that is a violation of one of the cardinal principles necessary to maintaining, not only the responsibility of the government of this House, but the character of this House in the face of the people. But this is not, by any means, the whole case. While I admit there is a primâ facie surplus of £168,000 to his credit, he has got other charges, besides the £185,000, which he will have to meet, though the amount of these charges has never been told us. Why have we not heard what is to be the excess of the Vote on Irish education this year, in addition to the £118,000? Then there will be other supplementary Estimates, so that this £168,000 is more than pledged for them alone. It has been said, however, by the Chancellor of the Exchequer—and this is very far from mending the matter—"Oh, but I have submitted very moderate Estimates. My Estimates of the produce of the Revenue are moderate, and I shall have money enough to meet these charges." I am sorry to say that, in my opinion, that is the commission of a fresh offence—I do not use the word offensively—on the part of the Minister of Finance. He produces to us certain figures of Revenue and charges, and what is the use of these figures if they cannot be taken as the basis of our proceedings? When it is shown, however, that these figures will not justify the charges which the right hon. Gentleman is about to impose on the public and the sum he calls upon the House to vote, he says,—"Oh, I have another set of figures in petto different from those I have presented to you. That which I presented to you was not the real Budget. I shall have more Revenue than I have told you. I shall have a larger surplus, and I shall spend less than I have told you," and it is upon this presumed larger surplus that the Government rely when they call upon us to make this appropriation. Now, it is impossible to conceive a more complete and radical destruction of all the principles upon which all finance has been conducted by all Governments in respect to their relations with this House than is involved in this proceeding. It is a totally different thing when in the course of a financial year unexpected charges arise. My right hon. Friend has referred to the year 1860, when there was a deficiency of £1,300,000. That is perfectly true; but the Budget of that year was introduced in February, and it presented a surplus; but in July we had to provide £5,000,000 for the China War. Of course, it was quite impossible that any Chancellor of the Exchequer could in his Budget cover all the contingencies of the year; but it is right he should cover all the circumstances of which he is aware, and also the contingencies which he knew to be so probable that he was virtually aware of them. It is in reference to that one great cardinal annual arrangement that I say. this House of Commons may as well abandon financial control altogether, and exclude from the circle of its duties the business of balancing public receipts and expenditure, as accede to a system of action under which the Chancellor of the Exchequer is to present to us certain figures as his Estimates of Revenue and charges, and at the same time say,—"I will not be governed as to the sums I shall call upon you to pay by these estimates which I have presented to you, for I have other knowledge in my breast, upon which knowledge I shall request you to frame a scheme of appropriation." But let us suppose there is no value in any of these arguments, because general rules and principles may be beneath the notice of this philosophical age, which has made such rapid progress in wisdom. Let me ask, apart from what I have said, what in the world is the use of this provision in the Bill for the present year? It is of no use whatever under any possible circumstances. If my right hon. Friend has not got the money —and that he cannot know absolutely until the close of the year—then clearly the provision is very inconvenient, because it will compel him to make a purchase of stock with a view to redemption; while, on the other hand, he will be compelled to create stock in order to meet his deficiency. But, supposing my right hon. Friend has the money, the provision will be absolutely useless, inasmuch as the money is already appropriated, and, as surplus Revenue, it will go by the law already existing, to the payment of Debt. I think, whatever may happen, even if the House approves of the principles of this Bill, that the Government will see no advantage in persevering with a provision of this kind; but, at any rate, so far as I am concerned, I assure the House, if they are determined to go on in the course of these opinions, it is by no means from any disposition to create inconvenience to those who are charged with the conduct of Public Business, but because it is the business of those who see valuable principles neglected and valuable rules contravened, to place upon record their deliberate protest against such methods of proceeding; and these methods, even if faulty and unfruitful at the moment, yet become the record in after times when a better, or at least, a different spirit may have arisen, and when there is a disposition to renew the exercise of the old rules and principles upon which the satisfactory discharge of the duties of this House towards the constituencies of the country is necessarily maintained.


I regret very much I was not present at the commencement of this debate. That, however, arose from no negligence on my part, but from circumstances over which I had no control. There was also another reason why I thought I might stay away with impunity, because the Motion before the House was to go into Committee, and I did not anticipate we should have a discussion upon the principles of the measure, which it appeared to me had been amply debated on the second reading. [Mr. CHILDERS: There was no debate on the second reading.] Oh! I presume, because right hon. Gentlemen opposite could find no objection to the principles of the Bill. The right hon. Gentleman the Member for Greenwich (Mr. Gladstone) accuses me and others on this Bench of silence. Now, I trust that we shall soon go into Committee, when there will be ample opportunity to enter into a discussion of those details which the right hon. Gentleman referred to in the close of his speech, and which I think are eminently adapted to discussion in Committee. As my conduct has been adverted to with reference to the subject, and with respect to certain things which are involved in the question before us, I must ask the permission of the House to make one or two remarks. It is perfectly true that I have, on principle, opposed what are called. Sinking Funds. My general opinion is much the same as it always has been, founded rather on historical experience than on experience in our own times; but I have seen Sinking Funds established and properly and efficiently worked in very modern times, for I cannot make any distinction between a Sinking Fund and the establishment of Terminable Annuities. I know there is one right hon. Gentleman on the Bench opposite who will maintain there is a distinction; but I confess I always viewed both forms in which the payment of Debt is effected as being founded on the same principles. It is impossible to deny that in recent times we have seen an application of the principle of Terminable Annuities for the reduction of the Debt which has been successful. It was certainly as-sailed; but I was one of those who upheld the arrangement, although it was made by those opposed to me in politics. I thought the experiment was safe so far as we had experience of it, and I thought it ought to be upheld. I afterwards pursued a similar policy and, effected on a considerable scale a reduction of Debt by establishing Terminable Annuities. Therefore, I might certainly plead those instances as a proof that, whatever my general opinion may be on the main question, I am not so prejudiced as to shut my eyes to the merits of any scheme which gives us a possible chance of the reduction of Debt. In regard to the case so often brought forward by the right hon. Member for the University of London (Mr. Lowe) as to my abolition of a Sinking Fund, I would recall the attention of the House to the fact that at the time when I was Chancellor of the Exchequer there was a great deficiency—I will not charge my memory with the amount, but it was a deficiency of millions, partly occasioned by the demands of the Sinking Fund for that year, which could not have been less than £1,500,000. I was called on not merely to maintain the Sinking Fund which had been established during the war by Sir George Cornewall Lewis, but I was called on to impose new taxes to maintain that Sinking Fund, and I declined, and I should decline under similar circumstances to-morrow. I do not think it would be wise to impose new taxes for such a purpose under any circumstances. If the right hon. Gentleman opposite (Mr. Gladstone) were in my place and had to maintain any system he had established for reducing the Debt by means of Terminable Annuities, he would, if he possibly could, maintain the system so established; but he must acknowledge there is a great difference between maintaining a system for the reduction of Debt by Terminable Annuities, so far as the facility of appealing to Parliament is concerned, and being called on to impose a large amount of taxes to support a Sinking Fund recently established. At that time our expenditure on the Debt was £28,000,000 and upwards, and I was asked to increase it to nearly £30,000,000. It is all very well to argue on general principles, which the right hon. Gentleman has very properly vindicated; but there are such things as common sense and common necessities. I deny the propriety of taking an extreme case like that to which I have referred, and saying that it is to be the foundation of our general conduct in the management of our finances. Then the right hon. Gentleman says there is a second branch of this question of much importance—one partaking of the nature of those general principles which certainly are not to be conveniently discussed in Committee, and that is that he opposes the appropriation of a fixed sum, £185,000, by the Chancellor of the Exchequer to the reduction of the Debt, or the establishment of a Sinking Fund, whichever you may please to call it, when he has not got a sufficient surplus to justify that proposition. Well, the surplus of the Chancellor of the Exchequer was not a very large one, and I san easily understand that the right hon. Gentleman opposite, who has been so fortunate in his financial arrangements, may look with great contempt upon our estimated surplus for this year. Upon that surplus, as he remarked, there are certain demands, and although on the Budget night circumstances made it impossible to place those demands precisely before the House, and although it is possible there may not have been a remainder from that small surplus of £400,000 or £500,000 to absolutely furnish the £185,000 which the Chancellor of the Exchequer proposed to appropriate to the reduction of the National Debt, still the Chancellor of the Exchequer said he was ready to take the responsibility. He had not allowed for any natural increase in the revenue in his Financial Statement this year, and therefore he was prepared to recommend the House to sanction that appropriation. The right hon. Gentleman upon that takes the opportunity to denounce, in very strong language, the conduct of the Chancellor of the Exchequer. He says that he had placed figures before the House which—after that subsequent declaration on his part that he had not a surplus sufficient to justify the appropriation—were no longer any basis for the House to form an estimate upon if he looked at the natural increase of the revenue; but it must be remembered that the right hon. Gentleman himself always took into consideration the natural increase of the revenue, and admitted it into the figures which he placed before the House; and, although I acknowledge there is a certain distinction, it is a distinction only between the two processes—that pursued by the right hon. Member for Greenwich, and that pursued by the Chancellor of the Exchequer. The right hon. Gentleman always took into the figures which he placed before the House the natural increase of the revenue. The Chancellor of the Exchequer thought fit—and he had good reasons for it, from observations made in this House and from other causes—not to take that increase into his account, and he frankly announced to the House that he had not done so. Therefore, to pretend that for that reason the figures he placed before the House were utterly deceptive, misleading to the House, and striking at the root of all sound finance, is, I will not say a monstrous exaggeration—which was the epithet of yesterday—but one of those exaggerations which such a great orator as the right hon. Gentleman need not condescend to adopt, although sometimes even he consents to avail himself of those illegitimate weapons. The House, I trust, will now go into Committee, and consider the minutest criticisms of the right hon. Gentleman and his late Colleagues. What I hope is that there is an earnest desire on both sides of the House to use their utmost efforts to reduce the public Debt of this country; and I feel convinced that, if we reject this Bill by adopting the Amendment of the right hon. Member for the City of London, who sits on this side of the House, we shall be striking a great blow at that policy which I believe the country and the public opinion of the country favour.

Amendment, by leave, withdrawn.

Main Question, "That Mr. Speaker do now leave the Chair," put, and agreed to.

Bill considered in Committee.

(In the Committee.)

New Sinking Fund.

Clause 1 (Amount of permanent annual charge for National Debt).


moved the omission of words the effect of which would be to prevent the appropriation of £185,000 towards the reduction of Debt from the revenue of the current financial year. If the Chancellor of the Exchequer had really framed his Estimates deliberately rejecting the natural increment of revenue he had done what had never been done before, and what should have been stated to the House in the fullest detail. But no such thing was done. It was not open to Chancellors of the Exchequer to present Estimates on their own arbitrary will; they must, in the main, take their Estimates from the Heads of Departments. If the Chancellor of the Exchequer had altered his Estimates he ought to have said so in the clearest manner. The Prime Minister had now expressly admitted that probably the charge of £185,000 would not be covered by the Estimates.

Amendment proposed, in page 1, line 8, to leave out from the word "During," to the word "and," in line 11, both inclusive.—(Mr. Gladstone.)


said, the right hon. Gentleman enjoyed a great advantage from the high position he occupied in the House and the country which enabled him to lay down ex cathedrâ general rules suited to every occasion, to be accepted as canons from which it was impossible to depart without going extremely wrong. Unfortunately, however, he (the Chancellor of the Exchequer) could not always accept the rules laid down by the right hon. Gentleman, because it frequently happened they were not quite consistent with each other. At one time it was the habit of the right hon. Gen-man to estimate the revenue without reference to the increase of population and prosperity. When in Opposition it had been his (Sir Stafford Northcote's) business to pick holes in the Budget and prove that the Chancellor of the Exchequer had no surplus; and he knew, therefore, how far it was usual to go in this way. Last year, however, he found himself in office, the map of the country having been laid out by his right hon. Friend and traced with lines of great breadth and boldness, and making a larger estimate for the natural increase of revenue than was usual. His own Budget was framed upon these lines. He was then charged with doing an imprudent thing, and when, in defending himself, he referred to the Estimates of Heads of Departments he was told—"Never quote Heads of Departments. You must not shelter yourself behind them. The Chancellor of Exchequer is responsible. By any other theory you would be violating the principles of our Constitution." Upon the whole, the Estimates of last year were realized. Nevertheless, he was severely taken to task for not adopting less sanguine and more prudent Estimates. In framing the Budget of the present year he told the Heads of Departments—"We do not want excessive Estimates; we must take care to be within the mark: "and the Estimates accordingly were not as sanguine as those of last year were. In his Budget statement he told the House there would be some Supplementary Estimates, but not more than would be covered by the anticipated excess of revenue; and when any Supplementary Estimates were presented he meant to justify his statement. The right hon. Gentleman said:—"If you have a surplus you do not want this appropriation." By that Bill they were proposing to establish a new system of applying surpluses; and there was a dis- tinction between the mode of applying the £185,000 under the old Sinking Fund and the new. Under the former the surplus of the year was applicable to the redemption of deficiency bills, while under the latter it would be otherwise. With regard to binding Parliament in future years, the doctrines put forward were in themselves most extravagant, and, taken in connection with the action of those who put them forward, they were most unreasonable. If they created £20,000,000 or £25,000,000 of Terminable Annuities, would they not be equally binding Parliament in future years to find that sum? When it was said that if they brought up the charge for the Debt to the moderate amount of £28,000,000 a-year they were not sure that there would be revenue to cover that expenditure, he answered that it would be the duty of the Chancellor of the Exchequer to see that there was such a revenue. He need not pursue the matter further, as it had been thoroughly threshed out, and the very point raised by the right hon. Gentleman had been debated two or three times.


said, he did not re-collect the occasions on which this matter had been discussed, as the second reading of the Bill was passed without debate, and they had only had half a debate on it upon the Budget night. A measure of that importance, dealing with such enormous figures as £28,000,000, was one well worthy the serious attention of the House and the country. If he understood the Chancellor of the Exchequer correctly, the right hon. Gentleman thought he was able to dispense with a surplus, and even to face a deficit if it were incurred by that year's payment for the Debt, because he relied on the normal growth of the Revenue. If that doctrine was to be maintained it amounted to this—that future Chancellors of the Exchequer would be relieved from the necessity of providing a surplus, and of course the process of paying off Debt by means of their surplus revenue would cease from the moment that principle was adopted. Would the right hon. Gentleman inform them what was the growth of the Estimates which he now anticipated? The right hon. Gentleman had told them he could not say whether there would be an increase in the Excise or in the Stamps, but that he expected a normal increase. A more vague declaration in order to induce them to vote money had seldom been made to the Committee. They ought not to vote money for the repayment of Debt before they had seen whether that money was available. What the Chancellor of the Exchequer proposed was that this year we should pay a certain sum, next year so much more, and a vastly larger sum in six or seven years time.


denied the statement of the right hon. Gentleman opposite that they were paying off no Debt this year. They were paying off upwards of £3,000,000 of Debt. [Mr. GOSCHEN: Not by this Bill] They were not imposing burdens on their successors which they were not prepared to place upon themselves. They simply proposed that £28,000,000 a-year should be devoted to the National Debt; and if more of that sum was applied to paying off Debt in future years it would be because the Debt was going on decreasing. The right hon. Gentleman asked whether he was prepared to say what his estimates of Revenue were. He was prepared to give them, but that was not the moment for doing so. He had given the Estimates as they stood upon the Paper, and asked that they should be taken into consideration. They showed a surplus of £200,000, and when Supplementary Estimates were proposed he would show how they were to be met. Hon. Gentlemen had no right to anticipate' those Supplementary Estimates until the Government told them what they were—[Mr. GLADSTONE: Hear, hear!] and what means they would have of meeting them. This rule, upon which right hon. Gentlemen were insisting, was of an intermittent character. On the 25th of March, 1872, when the Financial Statement was made, his right hon. Friend the President of the Local Government Board (Mr. Sclater-Booth) said that— Although the right hon. Gentleman estimated his surplus at little over £300,000, he gave the Committee to understand, with some complacency, that it would probably he his duty to propose later on in the year a Supplementary Estimate of £400,000"—[3 Hansard, ccx. 635]— to which the Chancellor of the Exchequer replied— That is quite true. But, on the other hand, I have taken no credit for the corresponding increase on the other side, which will make up the deficiency, and more than make it up."—[Ibid. 638.]


asked whether the Chancellor of the Exchequer intended this year to follow the custom for many years past of submitting a statement of receipt and expenditure, of which the first column gave the items of the Budget Estimate of the receipts?


said, it was his intention to do so. But the Estimate for the Budget had for some reason or other not been put in. In other respects the Return was the same.


wished to ask this further question—whether the right hon. Gentleman intended to put into the first column of that Return the Budget Estimate of receipt, and in the corresponding column of expenditure the actual expenditure?


said, perhaps the right hon. Gentleman would wait until he should lay the account on the Table.


said, that this was a matter that ought not to be left in obscurity; but everything he had heard from the Chancellor of the Exchequer on this subject was of a nature to induce him to enter a protest upon the course he was adopting. He felt quite sure that unless something more were stated by the right hon. Gentleman great confusion would arise in future years with respect to what was called the normal increase of revenue. The question was, how far was the right hon. Gentleman justified in anticipating it? He could only say he had never taken it into view, except in so far as it was included in the figures submitted to the House, and it was absolutely necessary to solid and creditable finance that the normal increase of the Revenue, so far as it could be ascertained, should be anticipated the figures submitted to the House be the Chancellor of the Exchequer. He had no right to submit a set of figures to the House and say—"Besides these figures, I anticipate, but will not state to you, a normal increase." The fact is he (Mr. Gladstone) did not know what was meant by a" normal increase "of the Revenue. He had spoken himself of the average increase of the Revenue; but if by a "normal increase" was meant an annual increase of the Revenue he was aware of no such increase. The circumstances of the time, years of difficulty or calamity, might prevent any increase at all. What he wished to insist on was the necessity of holding the Chancellor of the Exchequer to the figures of his Budget. The right hon. Gentleman laid down a totally different principle—namely, that when he made his annual Statement it was the duty of the Chancellor of the Exchequer to make provision for no Estimates except what were actually on the Table, although he might know, not only that considerable charges might, but in all reasonable probability would, arise. [The CHANCELLOR of the EXCHEQUER: As in 1872.] He (Mr. Gladstone) would like to know the particulars of the case; but he did not care whether it was done in 1872 or any time else. The case of 1872 was not the case of this year. In 1872 the Chancellor of the Exchequer laid £3,000,000 of new taxes on the country, and made a great and successful effort to provide for the whole of the charges of the year. But what he contended for was—and his own practice, as far as his knowledge went, supported it—that it was the duty of the Chancellor of the Exchequer to concentrate the financial operations of the year, and he had no right to say in March or April—"I submit to you a Budget, but I shall have more charges coming on, and then I will tell you how I mean to meet them." He protested against such a system; it was contrary to principle and contrary to practice, and would be fatal to all Parliamentary control. If the House assented to what the Chancellor of the Exchequer believed would be his expenditure, and held that he should not be bound at the time of the Budget to submit a complete statement of Revenue to meet the charge, Parliamentary control over the management of our expenditure became an idle name. He hoped the House would always hold to the principle of binding the Chancellor of the Exchequer to a complete annual Statement

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

The Committee divided:—

The Tellers being come to the Table, Lord Frederick Cavendish, one of the Tellers for the Noes, stated that Mr. M'Combie, Member for Aberdeenshire, had not voted, though he had been in the House when the Question was put:—Whereupon the Chairman directed the honourable Member to come to the Table, and asked him if he had heard the Question put, and the honourable Member having stated that he had heard the Question put, but did not pass out of the Left Lobby till after the Tellers had left the Door, and having declared himself with the Noes, the Chairman directed his name to be added to the Noes:—

The Tellers accordingly declared the numbers Ayes 189; Noes 122: Majority 67.

Clause agreed to.

Clause 2 (Annual charges payable out of permanent charge) agreed to.

Clause 3 (Application of surplus as new sinking fund to reduce debt).


, after stating that he understood that it was the intention of the Chancellor of the Exchequer to pay off a certain amount of Debt every year, suggested that the best way would be to purchase so much stock and cancel it, as that would give more to appropriate for the same purpose the next year.


intimated that the National Debt Commissioners would have power to adopt that course.

Clause agreed to.

Remaining clauses agreed to.

Bill reported, without Amendment; to be read the third time upon Monday next.