HC Deb 06 July 1877 vol 235 cc841-54

Order for Second Reading read.

MR. FAWCETT

said, the Bill contemplated two entirely distinct objects. First, it empowered the Government of India to raise £2,500,000 by the issue of bills for a limited period, to serve as a fund which would make it unnecessary for the Government at unfavourable times to go into the Money Market. The second object was that £2,500,000 should be raised in this country to meet a deficit in the present year's revenue, and that that sum should be added to the permanent debt of India. Confining his attention for the moment to the power given by the Bill to raise £2,500,000 simply for the purpose of giving the Government the command of a balance which would enable them at particular periods to go into the market or not as they thought fit, he wished to observe that that was a proposal which had been recommended to the House on the plea that it had had the support of Mr. Bagehot. Now, he had read, every word, he believed, which had been written by Mr. Bagehot, and, having had the privilege of enjoying his most intimate friendship, had discussed over and over again with him the subject of Indian finance; and he ventured to say that if his works were searched from beginning to end, not a single argument would be found in them to support the proposal now before the House. For years Mr. Bagehot had been the distinguished editor and chief contributor to one of the leading financial journals, not only in this country, but in Europe; and immediately after the Under Secretary of State for India had stated that he based his proposal on his authority, The Economist said that there was a most material difference between that proposal and what Mr. Bagehot had always recommended. Mr. Bagehot's advice was that if it was necessary for the Indian Government again to come to England to borrow, they should not add to the permanent debt of India, but should obtain the money they required by the issue of a certain amount of bills or temporary securities, and then if they found that the price of silver was likely to settle down, these temporary securities could, in a year or two's time, be withdrawn. That recommendation, whether deserving support or not, was obviously distinct from the proposals of the Bill before the House. Considering the great practical importance of the subject, he hoped that between the second reading and the time for Committee there would be a sufficient inter- val to admit of the question being fully considered by the mercantile community, who had direct dealings with India. The Government wanted to raise, in order to meet a deficit, £2,500,000 in this country, and, flying straight in the face of Mr. Bagehot's advice, they were about to add that amount to the permanent debt of India. They then hit on the novel expedient of issuing a certain amount of bills whereby they could enter the Money Market as speculators in silver; but he had been assured only the day before by a mercantile man of experience and eminence that that was a course of proceeding which involved very serious considerations, and to the full importance of which those engaged in business in connection with the East were not fully alive. It was said, however, that it was necessary the Government should have the power of which he was speaking to protect themselves against combinations of those who intended to purchase their council bonds, and who by forming a ring might compel them to sell at less than the market value. That fear of combinations, however, was, he was assured by some leading bankers and merchants, an entire delusion; but, of course, if it could be shown that the Government would have to contend against a ring of that kind, it might be necessary to arm them with power to resist it. With respect to the second part of the Bill, it was proposed, in the first place, to borrow in this country £2,500,000 to enable the Government to enter into those speculations to which he had alluded, and to increase the permanent debt by £2,500,000 more by loan from the same source. At present the revenue of India was only about £40,000,000, which was inadequate for the ordinary expenditure; but notwithstanding that fact, and notwithstanding that the present was a time of profound, peace, they proposed to borrow on the whole £8,500,000, being 20 per cent of the whole revenue. It might be said that the borrowing of this large sum was necessitated by the famine. The famine charge was put down at £2,000,000, and leaving this out of consideration for the moment, he would say the Government were going this year to take authority to raise £6,500,000. If the £2,500,000 of which he had spoken was placed in the hands of the Government, what security had we that it would not be devoted to purposes of ordinary income? He had the more reason to think this would be done, because the Under Secretary did not say a word the other day about the extraordinarily low figure to which the cash balances had been reduced. Some years ago they amounted to £24,000,000; they had now been reduced to £12,000,000, so that no less than £12,000,000 had been spent. Lord Northbrook thought that the cash balances ought at least to be £1,000,000 more than they were at present, and they ought therefore to be replenished. Three years ago, when the noble Lord came into office as the Under Secretary of State for India, he gave three distinct promises with regard to the future finance of India. At the time those promises appeared to him (Mr. Fawcett) to be distinct and satisfactory. In 1874 the noble Lord (Lord George Hamilton) said that Lord Salisbury had determined that no work should be undertaken which did not produce a fair return; that no work should be undertaken even of a reproductive character which involved the raising of capital in this country; and that every effort should be made to keep the ordinary expenditure within the ordinary revenue. He regretted that those promises had not been fulfilled. The second part of the Bill added £2,500,000 to the permanent debt. This was a policy fraught with the utmost peril. At the present moment the home charges were no less than £16,000,000, while, a few years ago, they were only between £9,000,000 and £10,000,000. He had given Notice of an Amendment—namely, That, in the opinion of this House, it is inexpedient to raise by loan in this Country, on the security of the revenues of India, so large a sum as is provided for by this Bill. If he moved this Amendment and divided upon it he should be hopelessly beaten, and the division would be misunderstood. He bad therefore come to the conclusion that it would be better not to move it at the present stage of the Bill. He reserved to himself the right of proposing in Committee the reduction of the amount to be borrowed.

MR. ONSLOW

said, that looking at the calamities which had recently visited India, it could not be pretended that it was in a satisfactory position. More money was required for India, and the Government had to consider the best way of obtaining the necessary means of carrying on the government of that country. He could not see that there would be any greater speculation in silver as the result of the loan than existed at the present time. He thought there was a good deal of force in what had been said by the hon. Member for Hackney (Mr. Fawcett), with reference to the desirability of having a reserve fund to meet such exigencies as those of the recent famine in India; but such a fund, in the event of there not being any famines for many years to come, would amount to a very large sum, and what was to become of these reserves? We should have large sums of money lying idle. He held that the Bill would only empower the Secretary of State to do what he now had the power of doing. As for the cash balances in India and England, it seemed to him that if they only amounted to £12,000,000 at the present time, they were far too low. That a large sum of Indian money should be spent in this country was inevitable so long as our present relations with India existed; and it was therefore important that the Government of India should not be obliged to sell its drafts when the market was against it. The great danger to Indian finance was the construction of unproductive works, which, if unchecked, would probably bring about some great financial catastrophe. Unless great caution was exercised, he was afraid engineer officers with flashy schemes would continue, as heretofore, to cajole the Indian Finance Minister and the Viceroy into unremunerative undertakings. He hoped this subject would receive very careful attention, and he would even go the length of saying that the Viceroy ought not to undertake any new work which was not sanctioned by the Secretary of State in Council. If these views were carried into effect, he believed the finances of India would soon pass into a sound and prosperous state, subject only to such perturbations as famines might produce.

MR. WHALLEY

said, he hoped the Government would give an assurance to the House that no part of the money proposed to be raised under the Bill would be diverted to other purposes than those for which the House was asked to sanction the advance. England was without a single Ally in Europe at the present time—excepting the Papacy—either in council or in action, with reference to that policy which related to "British interests" in the East—those interests, so far as we knew, being confined entirely to India. Action might be taken, and the money now asked for might be used during the ensuing Recess for some purpose we could not very well anticipate. The noble Lord at the head of the Government had played with the public interest with reference to India, making the Queen an Empress to check aggression on the part of Russia, and exciting alarm on the fictitious pretence that British interests were threatened; and he hoped that the Government would not pursue that policy by playing with the millions of money which were to be taken under this Bill. He trusted the noble Lord the Under Secretary of State for India would give an assurance that no portion of that money would be applied to carrying out the foreign policy of the Government on the Eastern Question.

MR. C. B. DENISON

observed that the hon. Member who had just spoken appeared to be labouring under a nightmare. He did not suppose it could have entered into the mind of any other person to suppose that a Money Bill whose Preamble said—"Whereas the exigencies of the public interest in India require" such and such things to be done, was going to be diverted into secretly carrying out a policy of warfare which was not avowed and openly discussed in Parliament. He (Mr. Denison) trusted the noble Lord the Under Secretary of State would not think it within his province to answer even in the negative a question which was almost an insult to the Government and the common sense of the House. This Money Bill was, no doubt, one of very great importance, and the exigencies of the service in India required that it should pass without any undue delay. He regretted the necessity which rendered it imperative on the Secretary of State for India to ask for the power which was granted under the Bill. The case was not based entirely on the necessities arising out of the famine in India. It was in vain to deny that the cash balances of India had been unduly decreased, and they must be replenished by loans. But the whole of this ques- tion turned on the public works in India. The noble Lord had explained how it was proposed to keep the accounts so as to show what works were remunerative and what were not; but, for his own part, he had grave doubts whether in practice the plan would be at all feasible in India, where the superintending of these public works—railways and canals excepted—was all one and the same thing. Nor was he able entirely to concur with his noble Friend in what he said the other evening as to the elasticity of the revenues of India. The hon. Member for Hackney (Mr. Fawcett) had pretty nearly hit the mark when he said that the revenues of India did not exceed £40,000,000, while his noble Friend had spoken of £51,000,000. If we wanted to estimate the revenues of India, we must have regard to those sources of income which were raised from taxation, and not from the opium revenue, although that was a pretty constant quantity. With regard to the Bill before the House, he had no particular objection to offer to the mode in which the money was proposed to be raised. He failed to appreciate the objections which the hon. Member for Hackney had raised to that portion of the Bill by which it was proposed to empower the Secretary of State to raise £2,500,000 by bills of exchange. He did not think there was any danger of that power being abused. There was one omission in the Bill as compared with the Bill of 1874 which he wished to point out. The present Bill left out a very important clause, which made it imperative on the Secretary of State for India to lay before Parliament a statement of the manner in which he had exercised the powers given by this Bill. There was no doubt that it was a continuing clause, and would be equally operative whether it was repeated in the present Bill or not; but there was a distinction between the two Bills, because in the former there was no power to borrow money on bills of exchange, and the old clause would only be operative as regarded the permanent debt of India. Perhaps his noble Friend would explain whether it was intended to leave out of the purview of Parliament the money he received under the discretionary clauses of the Bill.

GENERAL SIR GEORGE BALFOUR

said, he was under great apprehension with respect to the whole question of Indian finance. It was impossible for any State in the world to go on spending more money than it received without getting into a position of grave embarrassment. Strange as it might seem to the House, it was a fact that there was no exact statement of the indebtedness of India. They had no connected account of the deficits of India. Another mistake was that the settlement of India Proprietary Stock, which was paid off in 1874, had never been clearly stated. The Government of India ought to give a clear account of their indebtedness, not only as regarded the regular registered debt, but also of all liabilities, such as the capital of the various funds, and of the temporary loans, which might be considered in the same light as the floating debt of England. So far as he could make out, the debt of India was about £144,000,000, including the present loans in England and India. From the time when Lord Dalhousie ceased to govern India more than £80,000,000 of debt had been incurred, and since 1866 the debt had gone on increasing, and they went on borrowing money, not only without any prospect of repaying it, but without the expectation of being able to cease. The expenditure on the public works in India amounted in that year to £30,000,000, and it had since increased to £50,000,000, so that the increase of debt was not solely due to investments in works, but to other causes which ought to be kept under strict control. The Indian Government had the power of controlling the public works, although they had not exercised the power to control the other kinds of expenditure, yet the Government continued to borrow money, by which means they were able to spend more than their income. There was an arrangement in this Bill providing for the raising of funds in the London market by means of temporary loans. It was a power which required great care in the application, otherwise they would come into conflict with the bankers of London, if they abused the powers asked for. He had various Amendments to move in Committee on this Bill, and he would put them on the Paper, that the noble Lord the Under Secretary of State for India and the House might be able to see them. The time had come when the India Office should deal frankly with the House, and give every information to enable them to understand the Indian accounts.

MR. O'DONNELL

(who had a Notice on the Paper to move that the Bill be read a second time that day three months) said, that he should not be justified, in a House of such slender proportions, in pressing his Motion to a division. He had desired technically to separate his Motion from that of the hon. Member for Hackney (Mr. Fawcett), who had confined himself to the purely financial consideration. Now, he did not think they would ever get at the root of the difficulties of India if they confined themselves to the multiplication table. A financial catastrophe was looming in no great distance. He protested against the wasteful expenditure of the finances of India. There was reckless and censurable waste in the expenditure on unproductive works in India; and he was apprehensive that wasteful expenditure would go on there until India was represented in this House. He apprehended, then, that such matters would go on as long as Her Majesty's Government had the administration of the affairs of that part of the Empire. A distinguished officer had been removed from a high position in India because he had expressed opinions on our financial administration that were disapproved by the Government. A couple of years ago the hon. Member for Aberdeen (Mr. Leith), who was a high authority on Indian affairs, presented a Petition signed by 16,000 of the most respectable members of the Native community, praying for representation in the Imperial Parliament. There was a large, influential, and cultivated class in India eminently fitted for Representatives, and whose presence in that House would greatly contribute to its efficiency. He believed that by giving those people Representatives in the House of Commons, and opening up honourable and great careers to the leading minds of India, they would do more to secure the confidence of the people of that country than could be effected by a hundred Regal processions. The hon. Member referred to the Indian famine, and, with regard to the wasteful expenditure of the funds to mitigate the severity of that calamity, said a Commission to inquire into the matter was asked for, and was refused by Her Majesty's Government. Millions and mil- lions of the public money had been wasted in India, and, notwithstanding that, Her Majesty's Government now came to this House and asked Parliament for another loan, so that it was nothing but loans, loans, loans! It was stated by Sir Richard Temple that £500,000 had been unaccounted for. The question of borrowing £5,000,000 for India had not up to that moment occupied more than two hours; and looking at the seriousness of the matter, he, as one of a small minority, entered his protest against it.

MR. MELLOR

remarked that the only Indian question which was annually brought before the House was the question of furnishing the means for the government of India; and he felt sorry to find that those hon. Members who were so desirous to bring about the repeal of the duty on imported cotton goods into India were not in their places. He considered the expenditure in India to be most excessive, and urged the necessity of economy in the various departments. It was most difficult to make anything out of the accounts; but, as far as he could understand them, he believed that a sum of money of not less than £5,000,000 was annually expended upon ineffective and unremunerative services, and with respect to effective service he found that everyone employed in India was much better paid than he would be in this country; and he especially referred to the cost of the Telegraph Service, which was very high and showed a large annual deficit. The Director General was paid a salary of £2,400 a-year, and the electricians £1,200, while in this country they only received £400 a-year. Now, why electricians in India should be paid £ 1,200 a-year, while the same class in this country only got £400, he could not understand. He believed that if proper care were taken of Indian finances the cotton duty could be swept away, and an innumerable number of Custom House officials dispensed with, and by freeing the sea board from fiscal import, we should then impart a stimulus to trade, which would greatly promote the prosperity of India.

LORD GEORGE HAMILTON

said, that the hon. Member for Hackney (Mr. Fawcett) had addressed to the House some very cogent arguments against the borrowing of money in this country for the purposes of the Indian Govern- ment, and he would have completely agreed with those objections if only the hon. Member had been speaking in the abstract. But we were passing through a somewhat exceptional crisis in India, and he should state briefly what the circumstances were which justified the Government in proposing to raise a loan of £5,000,000. Lord Salisbury on coming into office had laid down certain principles which the hon. Member for Hackney said had been thrown to the four winds, but which he (Lord George Hamilton), on the contrary, maintained had been strictly adhered to. The first of these principles was that there must be a clear margin between the ordinary revenue and the ordinary expenditure in India. That clear margin had been obtained during the three years they had been in office, the excess of revenue over expenditure in the first year being £2,000,000, in the second year £1,300,000, and this year it was estimated at £1,200,000. The second principle was that no public works should be constructed in future which would not be of a remunerative character. That also was a very good principle. Lord Salisbury, however, came into office shortly after the Duke of Argyll had sanctioned the construction of a large number of railways and canals which had been projected by the Indian Government. The contracts for these works had been entered into, and in some instances their construction had been commenced, and nothing could be more unwise than to stop them. The question then arose, how was it that the Government had now to ask the House to give them certain borrowing power? They were obliged to do so simply because they had had to expend in five years a sum of £11,300,000 in meeting two famines. He admitted that if these circumstances were not exceptional, and if we were obliged to spend £12,000,000 every five years for such a purpose, no language could be too strong to represent the desperate state of the finances of India. One of two things must happen. Either the people must be allowed to die of starvation or assistance must be obtained from England. But, looking at the matter from a common-sense point of view, it was not likely that famines of the magnitude of that of Bengal in 1874 or of that now raging in Madras would occur again. It had been stated that excessive preparations had been made to meet that famine. That was very possibly the case, and the Government had never denied that, acting under Parliamentary pressure, they had made preparations in excess of the requirements of the case. The truth was that they had under-estimated the capacity of the grain trade and the resources of the people. In particular the expansion of the grain trade had agreeably falsified their calculations. Undoubtedly the sound way to meet an emergency was by having a balance between the ordinary income and the expenditure, so that a sum might always be available for beneficial purposes. He believed that in future the extension of railways and canals in India would have a tendency to check famines, and he pointed out that while year by year the number of miles of railroad was increasing the net loss was diminishing. But the policy of carrying on great public works was only an experiment, and he hoped that the question might next year be set at rest by a Select Committee. The Bill before the House asked for two powers—one of increasing the Funded Debt by £2,500,000, and the other of raising a similar sum by bills or bonds. Certainly there was a difference between these two powers, and arguments had been arged against them both. It was, however, to be remembered that the Indian Government was not in the position of our own Government—that it had two spending treasuries and only one of supply, and that bills were sold to get the money from India. Those bills competed with the London silver market, and the demand for silver depended on the Eastern trade; and while the cash balance of India might be overflowing, we might be unable to sell our bills here. Last year, owing to the extraordinary fluctuations of the silver market, they could not sell their bills, and a great pressure was put upon them to suspend their drawings and raise a loan here, and they were reluctantly forced to do so; and yet at that very time the Indian cash balances were so high that the Indian Government took up £1,250,000 in debentures that were not then redeemable. It had been stated in The Economist that he had not correctly represented Mr. Bagehot's view on that matter, though he believed he had done so. What Mr. Bagehot had maintained as to their bills was that, in order to avoid those extreme fluctuations in the silver market, when there was no demand for silver they should either reduce or suspend their drawings on India, issue temporary bills, and, if the demand for silver increased, draw largely on India, increase their balances here, and then take up those bills when they were redeemable, the object being to keep the price of silver as steady as possible. Under the present Bill they took power to raise the whole of that £5,000,000 by temporary bills; but, in order to show that they believed it would be necessary for the service of the year to raise £2,500,000 this year, they took power only to raise one-half of the £5,000,000 by increasing the Registered or Funded Debt. Last year they were extricated from their difficulty by the total failure of the European silk crop, when there was a rush for silver for China, and they were enabled to sell their bills largely; but if the Asiatic silk crop happened to fail next year they would find themselves in great difficulty again. It was, therefore, proposed to take that power of raising £2,500,000 as the only means by which they could temporarily get over the great difficulties which the extraordinary fluctuations in silver caused last year. The highest price at which they sold their bills last year was 1s. 10d. and 9–16ths per rupee, and the lowest price was 1s. 6½d. per rupee, making a difference of over 4d. the rupee. The Government only asked that temporary power for raising £2,500,000. He believed it to be absolutely necessary. They would not use that power unless they were obliged to do so, and they would endeavour so to increase their cash balances that they would be able to take up those bills when they became redeemable. He had had some Returns prepared which would give the annual indebtedness for the last 20 years, and the purposes for which the debt had been incurred, and as soon as the best method of showing their liabilities was arrived at that Return would be laid before Parliament. He had now answered most of the objections raised to the Bill. He did not go into the question of the cash balances in his Indian Budget Statement, because it was a very complicated subject. Their cash balances did not altogether belong to them, because they did a large bank- ing business. They had taken over the cash balances from the East India Company and had inherited their liabilities, among which was their connection with the Service Funds. But, no doubt, the cash balances of India had largely decreased. It would be most unwise to keep high cash balances in India. When once they were high every conceivable demand would be made on the Government which it would be difficult to resist. No doubt they were very low, because the Government were anxious to avoid borrowing in the last financial year, and they had met a heavy famine expenditure last year out of those balances. He agreed with the hon. Member for Hackney as to the absolute necessity of keeping down their expenditure in this country as much as possible. This expenditure was the great future danger of Indian finance; but as long as they had to deal with famines of such magnitude as those of the last four years, the Indian Money Market was not able to meet the increased expenditure thrown on the country. He sincerely trusted that would be the last time that he or any other Under Secretary for India for many years to come might have to ask Parliament for power to raise a loan in this country. Lord Salisbury had resisted as long as possible all the pressure put upon him to apply to Parliament for fresh powers, and he had only asked for the sum which was absolutely necessary and which was far less than the amount that the Indian Government had wished them to borrow. Under those circumstances, he hoped that the House would allow that Bill to be read the second time to-night, and he would be most anxious in Committee to listen to any reasonable Amendments which might be suggested.

Bill read a second time, and committed for Monday next.