HC Deb 27 February 1879 vol 243 cc1854-61
THE CHANCELLOR OF THE EXCHEQUER

I think, Sir, it would be for the convenience of the House that before you leave the Chair I should say a few words upon the two Votes which will be submitted in Committee. There is the Vote to renew the £2,750,000 of Exchequer Bonds, which fall in in the last weeks of March, and there is the Vote of Credit for the South African Services. With regard to the Bonds I need say but little. They belong to the finance of the year 1877–8. They were issued in that year to meet certain expenditure which had been voted, and it was hoped at one time that, in part at least, they would be discharged in the course of the present year. Circumstances, however, have been against us, and we have not been able to pay them off this year; and, therefore, it is necessary that we should take power to re-issue, or rather to issue, new Bonds in order to enable us to pay off these as they become due. With respect to the Vote of Credit, it is, of course, a new feature. As I explained just now, in answer to a Question of the hon. Member for Kendal (Mr. Whitwell), I last year warned the House that there might be a sum of, perhaps, £400,000 required for hostilities in South Africa. That did not refer at all to the Zulu War. It is well the House should bear in mind that the hostilities in South Africa are distinctly divisible into two periods—the period of what we may call the Transkei War, and the period of this unhappy conflict. The Transkei War was begun in August, 1877, and ended about July, 1878, and it was with reference to that that our Votes and my observations were made. No accounts were made up in time for the last Budget as to the expenditure up to March 31, 1878, as regards the Transkei War. We knew, by the drafts on the Treasury Chest, that there had been great expenditure; and I therefore warned the House that it was probable, before the expiration of this financial year, I should be obliged to present an excess Estimate. But that has not been found necessary, because the Army Votes were sufficient for the Services for which they were intended, and there were enough savings upon them to cover the amount. Well, then, there were further Supplementary Estimates taken of £300,000 for the Army, and about £40,000 for the Navy in August last. That was for the same war; and, as far as we at present know, that sum will be sufficient for the expenses incurred. With regard to the Zulu War, the expenditure properly chargeable to that contest may be said to have commenced in October last, when the first preparations appear to have been made. It is rather difficult to give full information as to what has been the actual expenditure occasioned by that war; but my right hon. Friends the Secretary of State for War and the First Lord of the Admiralty will be able to tell the House when it gets into Committee on what grounds the Estimates have been framed, so far as they have been able to frame them. I may only add that, being myself aware that the Treasury chest has been heavily drawn upon, I have thought it right to put into the Vote a sum of £300,000 for contingencies over and above the more detailed Estimates to be presented by my right hon. Friends. The House will bear in mind that that expenditure in respect to a distant war is carried on through the Treasury chest, and that the way in which that is done is this—the Treasury chest has a fixed Fund of, I think, about £1,000,000, which ought always to be maintained, and out of that Fund either payments are directly made, or bills are drawn, and the fund is used to meet these drafts, and from time to time it is replenished out of the Votes for the Army Fund. The Military chest has been heavily drawn upon for South Africa, and we therefore are now obliged to replace that Fund again. With regard to the Vote of Credit, the amount we propose to take is £1,500,000, and the details relating to it will be found in the Papers submitted to the House. I shall be asked—and I may as well enter on the question briefly now—in what way I propose we should raise this £1,500,000? I desire to point out to the House that we are now at a period so nearly approaching the close of the financial year and the next Budget, that it is hardly convenient for us to enter upon new financial operations at this moment; and, therefore, I shall propose a temporary arrangement to carry us over the end of this year and the beginning of next. I hope it will be in my power to bring in the Budget very early in April, before Easter; and, in the meantime, I propose that this money, if voted, shall be raised by the issue of Exchequer Bonds. In mentioning Exchequer Bonds, I wish to say two or three words in regard to what appears to me to be rather a mistaken idea in many quarters as to the nature and amount of our floating Debt. I observe that in many influential organs of public opinion there is an impression that the floating Debt has of late years been increased to a very large and even dangerous extent. I think that in some respects the idea arises from a confusion between the terms floating Debt and unfunded Debt, and that there is evidently a disposition to think that all unfunded Debt is floating Debt, which is not the case. The objections to a large floating Debt are, of course, these—that the securities which properly constitute a floating Debt may be presented for redemption suddenly or at inconvenient times, and in such a manner as to somewhat embarrass the Exchequer, or that, in renewing them, it might be necessary to give a high rate of interest. Now, that is the case undoubtedly with what is properly called a floating Debt—that is to say, Exchequer Bills and Treasury Bills. There can be no doubt that those bills are liable to be so presented, and that if they were in excess they might occasion some embarrassment. On the other hand, it is not quite to the same extent the case with Exchequer Bonds, which run for certain periods — two, three, or four years— even if these bonds are in the hands of the public; but still less is it the case with regard to a great deal of the unfunded Debt which now exists, because that is not in the hands of the public at all. It is money advanced by the National Debt Commissioners, and which, in fact, is only advanced from one hand of the State to the other, and is not, and cannot be, liable to the objection to which Exchequer and Treasury Bills are supposed to be liable. Let us see how we stand. The present amount of unfunded Debt is about £24,661,000; that consists of £14,458,000 of Exchequer Bonds, £4,497,000 of Exchequer Bills, and £5,706,000 of Treasury Bills. But of the £14,458,000 of Bonds now in existence no less than £11,708,000 are in the hands of the hands of the National Debt Commissioners, so that even if we reckoned as part of the floating Debt the Exchequer Bonds in the hands of the Bank of England the unfunded Debt is really no more than £12,953,000. That is a sum which, though I do not say it is altogether insignificant, is by no means open to the charge of being extravagantly large. I have seen it stated that we ought to take steps, by funding or otherwise, to bring the floating Debt clown to within £15,000,000. There can be no doubt that a certain amount of floating Debt is a convenience to the public, and also an advantage to the Exchequer; because the public, as hon. Gentlemen connected with business are aware, are glad to get a certain amount of Treasury and Exchequer Bills, and they take them at a lower rate of interest than they would have to pay if the same money was raised by the issue of Consols. I therefore think that the alarm which has been expressed with regard to the supposed magnitude of the floating Debt of the country is somewhat exaggerated. Having said these few words respecting it, there is one other question that may probably be asked of me. I may be asked what effect these Votes will have upon our financial position? I have said that at this time of the year, and with the Budget so near at hand, I must speak with reserve, and I hope I shall not be called upon to go into minute and conjectural details. There are always difficulties in estimating the Revenue towards the close of the year, and these difficulties are likely to be as great this year as upon any other occasion. But, speaking generally, I think I may say that the Revenue may probably fall short of the estimated Expenditure by something under £1,000,000; and I am sorry to say that the Expenditure, including the Vote of Credit and the Supplementary Estimates, and without reference to the £2,700,000 of Bonds, will exceed what we may now expect to be the Revenue by something like £3,000,000. At the same time, it must be borne in mind that £2,000,000 of that amount has been already provided for. In August we obtained permission to issue £2,000,000 of Exchequer Bonds, and these will absorb £2,000,000 out of the £3,000,000. I cannot say the outturn will be as I have described. I have put the figures in what I think to be the most unfavourable light, and I think I am making a safe statement when I put the probable excess of Expenditure over Revenue at £1,000,000. Under these circumstances, it might be sufficient for mo to ask for £1,000,000 of Exchequer Bonds; but I desire to be on the safe side, and to guard against any contingencies that may arise from disappointment in the Revenue. It will, therefore, be my duty at a later time—in Committee of Ways and Means—to propose an issue of £1,500,000 of Exchequer Bonds to carry us through to the end of this year. Of course, if my anticipations are fulfilled, and we do not want this money, the power will not be exercised to the extent I have indicated. I may mention, with regard to the Vote of Credit, that it is proposed to take it for the remainder of the present financial year. The power will lapse on the 1st of April, and anything further which may be necessary will be found the subject of a Supplemental Estimate. With these remarks, I beg to move that you, Sir, do now leave the Chair.

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

MR. CHILDERS

I do not remember any instance of a Financial Statement of the importance of that which we have just listened to being made before the Whole House, such Statements having always heretofore being made in Committee of Ways and Means. But, Sir, I shall not press that objection; but there is one remark which I feel it absolutely right I should make to the House upon the Statement of the right hon. Gentleman the Chancellor of the Exchequer. He has told us that he is taking the present course because we are approaching the end of the year, and he followed that with the remark that after the end of the financial year it would be his duty to place the Budget before the House. I wish to say to the House—and I hope the Chancellor of the Exchequer will be able to make a clear answer to my allegation—that according to all precedent, when our finance is in its present serious position, the Budget ought not to be postponed to the month of April. In every previous case when the finances have been in this position, the Government has come down to the House with the Budget either in February, or, at least, never later than the beginning of March; and considering the great effect which is produced on trade by the expectancy in which the country is kept when a Budget of such importance as this year's is delayed—to say nothing of other considerations my reticence as to which my right hon. Friend will appreciate — the Government ought not to delay it, not a mere week or two weeks, but, as it will turn out, for two months, from the commencement of the Session. The Budget ought to have been brought in within a week or two of the meeting of the House, as has been done under similar circumstances in previous years. My right hon. Friend, some years ago, published a valuable work, from which I have taken some facts which I will quote to the House. From that work it appears that Sir Robert Peel had a very serious deficit in 1842, and the Budget was produced on March 11. In 1845 great changes were necessary, and the Budget was produced on February 17. In 1847 it was necessary to raise a very large loan, amounting to something like £8,000,000, and the Budget was produced on February 27. In 1848 there was a very serious deficit, and the Budget was produced on February 18. In 1854 there were important financial operations rendered necessary by the possibility of war with Russia, and the Budget was produced on March 6. In 1860 there was a still more serious state of things, and the Budget was produced on February 10. The only very recent case of serious deficit was in 1867, at the time of the Abyssinian War, and the addition to taxation was made in the month of November. Those are all the cases since the time of Sir Robert Peel when there has been a deficit of serious magnitude, and in every case the Budget has been produced, not at the beginning of the financial year, but some time before the end of the previous financial year. I think I have shown to the House that the Chancellor of the Exchequer must explain why on the present occasion, when our financial position is so serious, the Budget is not brought in at once without waiting till the first week in April. And now let me sum up in a few sentences our present financial position. We concluded the year 1877–8 with a deficit of £2,750,000. We were told in the original Budget of 1878–9 that the new taxes would yield enough to give a surplus of from £710,000 to £1,210,000 to go in reduction of that debt, and that next year it would be entirely wiped out. The Chancellor of the Exchequer was allowed to amend his Budget in August. Instead of a surplus in 1878–9, he then estimated for a serious deficiency of £1,577,000, which, added to the deficit of the previous year, would compel us to begin 1879–80 with a deficit of £4,307,000, and he proposed no Ways and Means to meet it. We protested, but in vain. What is the case now? Last year we were charged with audacity in thinking that the Revenue Estimates were sanguine; but now we are told that they will fall short by something under £1,000,000. We are told that there is to be a deficit this year, exclusive of 1877–8, of at least £3,000,000, and that we shall not be safe unless we meet this to the extent of £3.500,000 by the issue of the Exchequer Bonds which the right hon. Gentleman now proposes; so that the years 1877–8 and 1878–9 are to close with an accumulated deficit of from£5,750,000 to £6,250,000. Has the House thoroughly appreciated the fact? I am not exaggerating, or giving a single figure which the Chancellor of the Exchequer has not given himself. Here we are at the commencement of a Zulu war, with a falling Revenue, with almost a certainty that the financial position of next year is going to be serious even in comparison with this, with an accumulated deficit of £6,000,000, and yet we are going to delay the Budget till April. Sir, there has not been a more serious deficit since the first Reform Bill. Therefore, I say it is the duty of the Chancellor of the Exchequer not to postpone intro- during the Budget. I will not suggest, or even hint, at the measures that must be I taken by the Government; but I would urge that the Budget should be at once brought forward, in order that the commercial public may see what the effect of the Government finance will be. With regard to the other question of the unfunded Debt, it is a very inconvenient time to discuss it now. There are many points which, I allow, it might be very desirable to raise, but which cannot be well raised or discussed with you, Sir, in the Chair, and when, after asking a Question, it is out of our power to rise again. I think the Chancellor of the Exchequer has done good by showing the difference which exists between what is popularly called the floating Debt and the unfunded Debt; but when he speaks of the unfunded Debt as, being of no importance, and would appear to regard the transactions of the last year or two in that respect with perfect satisfaction, let me remind him of this one fact—that while he has been adding very largely indeed to the unfunded Debt in the hands of the public during the last few years, the Government brokers have been at work all the time, and, partly by their operations, and partly in another shape, the unfunded Debt— exclusive of the Terminable Annuities —has been very considerably decreased in each year. Whether it is wise to increase the unfunded Debt in years of emergency is a matter of opinion; but nothing can be more undesirable than, at the same time, to increase your unfunded Debt, and to reduce your funded Debt. I hope, when the proper opportunity comes round, the House will discuss these matters and the effect in this respect of the finance of the last few years. For the present, I will content myself with pointing out that we are about to start a fresh year with the most serious deficit that I remember, and yet we are to have no Budget for five or six weeks. That is, I venture to say, a state of things with which the House ought not to be satisfied.