SECOND READING. (Hansard, 8 March 1877)

§ THE CHANCELLOR OF THE EXCHEQUER
I rise to move that this Bill be read a second time. I have already briefly explained, when I introduced the Bill, what its purport was, but I desire on the present occasion to say a few more words in explanation of it. In the first place, in order to remove any misapprehension I should state what the Bill does not propose to effect. The Bill is not intended to give any new or additional powers to the Chancellor of the Exchequer for increasing the public Debt of the country. Its object is simply to enable the Chancellor of the Exchequer in those cases where he now has, or in the future may have, power by law to issue Exchequer Bills or to raise money by way of Exchequer Bonds, to adopt, if he deems it expedient, another form of Exchequer Bill, called here a Treasury Bill. Right hon. Gentlemen on the opposite bench know very well what the arrangements are with regard to our 1584 floating Debt, and will quite understand what the object is that we have in view. When it is the duty of the Chancellor of the Exchequer to raise money for temporary purposes he has to choose commonly between issuing Exchequer Bonds and issuing Exchequer Bills. If he issues Exchequer Bonds, he has usually to borrow the money at rather a high rate of interest, never, I think, under 3 per cent, and more commonly at 3¼ or 3½ per cent. Therefore, that is rather an extravagant arrangement at times when money is cheap. The Chancellor of the Exchequer may also raise money by the issue of Exchequer Bills, and when he does that, he can obtain a rate of interest more in conformity with the market rate of the day; but still, as these Bills have a year to run, it is rather difficult for him, looking forward for so long a period, to put them out at the same rate of interest which may be the rate of the market at the time. It has constantly happened that when ordinary borrowers have bills at 1 or 2 per cent the Chancellor of the Exchequer, though he has the best possible security, is obliged to pay between 2 and 3 per cent. Besides that inconvenience attaching to the present form of Exchequer Bills, there is another which renders them rather unpopular as an investment. Exchequer Bills have now become so few, and so many of them are in the hands of public Departments, that they are almost lost sight of by the market, and there is comparatively little demand for them. Exchequer Bills are issued twice in the year, and may be presented for payment any time within six months of the end of the year. When they are sent in, they may be renewed or exchanged for other bills, but frequently they are paid. At the present time we find that the unfunded Debt of the country, which some years ago had fallen to a very low amount, is beginning to run up again, and on this account. It has of late years become the policy of Parliament to advance considerable sums on security to local bodies and others for local purposes. The money so provided is now greatly in excess of the repayments. Therefore, it is necessary to provide the money which is to be lent out from year to year to the different public bodies who under various Acts of Parliament are entitled to borrow from the Exchequer. Consequently, our unfunded 1585 debt, which was at one time as low as £4,000,000 or £5,000,000, is now about £9,000,000 in Exchequer Bonds, and about £4,000,000 or £4,500,000 in Exchequer Bills. Of course, a considerable portion of that sum mentioned as being in Exchequer Bonds is accounted for by the purchase of the Suez Canal shares, amounting to about £4,000,000. Besides that, however, there are large sums which have been lent for sanitary and educational purposes or under the Artizans Dwellings Act, and many other statutes which have been passed; and the demands for these loans are increasing, and likely to increase. Of course, then, it becomes an object for us to borrow the money at as low a rate as possible, and it has been thought by those who are conversant with the market and with these questions that it might be well worth our while to try the experiment of a new form of Exchequer Bill, which we here call a Treasury Bill. These bills will be issued periodically. We do not mean to set aside Exchequer Bills altogether in favour of these Treasury Bills; but it will be a matter for the Chancellor of the Exchequer of the day to decide in particular circumstances whether, when he has to borrow money under the authority which is given to him, he will borrow it in the one form or in the other. If he borrows in the form of Treasury Bills, they will be in the nature of bills issued for three months. They may be so arranged that the money shall be called for and the bills fall due at convenient times, month by month, or quarter by quarter, so as to spread the charge more equally over the year; and it may be convenient in some cases to issue the bills, paying the interest in advance at the time the bills are issued. That is the general idea worked out in the Bill; and I think the House will be doing what is good for the public service by allowing us to make this experiment, which is particularly desirable at the present time, when the price of money is very low. Our object is to pass the Bill quickly. There will be £1,500,000 or £2,000,000 which must be borrowed in the course of the present financial year, and we should like to have the power of borrowing it in the form I have suggested, rather than in the more expensive form of bends or in the less convenient form of Exchequer Bills.

§ MR. DODSON
gathered that the object of the Bill was to enable the Chancellor of the Exchequer to offer to the public a more handy security—one which would be more negotiable, and therefore more acceptable to the mercantile world generally. It was, he believed, an adaptation of—at all events it resembled —the practice which prevailed in France of issuing Bons du Trésor. He had no wish to object to the proposals now made. The only criticism which occurred to his mind was that it offered to the Chancellor of the Exchequer increased facilities, or temptations, for dealing with a kind of debt over which there was comparatively little control. Perhaps the right hon. Gentleman would state whether he would give the Chancellor of the Exchequer power to issue these bills at any rate of interest; whether he would be able to issue them at a discount; whether the limit on the amount issued would be the same as upon Exchequer Bills; and whether there would be the same power of funding.

§ THE CHANCELLOR OF THE EXCHEQUER
said, it was not now the practice to fund Exchequer Bills, and these would be in the same position. Practically there would be a discount, as a bill might be issued for £100 and the interest paid at once, the money given for the bill being in accordance with it. The limit of issue depended upon statute; there was no limit upon interest.

§ MR. HERMON
understood that these Treasury Bills would be short bills for temporary purposes, and congratulated the Chancellor of the Exchequer upon having devised a plan by which he would get money at a cheap rate for the public, and, at the same time, offer facilities for those who had money which they wanted to invest for a short time upon the best security.
In reply to General Sir GEORGE BALFOUR,

§ MR. W. H. SMITH
said, the Bill would give full power to the Treasury to frame regulations under which the payment of interest would be made; but the present intention was to constitute what was known as a clean bill, without coupons, giving to the holder for the time being the amount specified in the bill. 1587 With regard to funding, any powers which attached to Exchequer Bills would be made to attach to Treasury Bills. There was no limit to the rate of interest; but the practical limit would be the difference between the interest paid on Exchequer Bonds, which was 3½ per cent, and the lower rate of interest paid on this new security.