HC Deb 06 June 1884 vol 288 cc1688-722

Order read, for resuming Adjourned Debate on Amendment proposed to Question [26th May], "That the Bill be now read a second time."

And which Amendment was, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."—(Mr. J. G. Hubbard.)

Question again proposed, "That the word 'now' stand part of the Question."

Debate resumed.


said, he was of opinion that this Bill was a most modest demand on the part of the Chancellor of the Exchequer in regard to a very great question, for all that he asked to be empowered to do was to issue certain Stocks for the purpose of making bargains with the holders of Three per Cents. It was, he thought, abundantly clear that the Chancellor of the Exchequer could not pay off these Three per Cent Stocks without another Act of Parliament. He wished to call the attention of the right hon. Gentleman the Member for the City of London (Mr. Hubbard) to the Act of 1870. The right hon. Gentleman in his speech referred to a variety of topics of ancient history; but the real question they had to consider was the state of the law at present, and not the state of the law a long time ago. It appeared to him to be so plain that Three per Cents Stock were redeemable by Act of Parliament that he was at a loss to understand how the right hon. Gentleman opposite could be so puzzled on this matter. [Mr. HUBBARD: No, no.] The right hon. Gentleman interpreted the Act of Parliament in a most extraordinary manner. It provided that "all the Annuities mentioned in the Schedule are to be redeemable at the times mentioned in the Schedule," and it stated that they were to be redeemable after the passing of the Act. He could not understand, therefore, the difficulty as to the question of redemption.


called the hon. Member's attention to the fact that there was a provision for one year's notice, and it was on that provision that the whole contention rested.


said, he had never said that the Stock should be paid off without notice. The Funds were made redeemable by Act of Parliament in certain ways which were mentioned. He agreed with the right hon. Gentleman opposite when he said the redemption of the Stock would be unpopular. That was a different question altogether; but when he said it was illegal and not according to Act of Parliament, he confessed that either his own head or that of the right hon. Gentleman must be screwed on the wrong way. Whether the plan now proposed was a prudent one was altogether another question, but it was obvious that they could not object to the Bill because it treated the Funds as a redeemable Stock. He was quite aware that in many quarters the proposition was unpopular. It was unpopular with trustees because it would give them trouble; it was also unpopular with those who received incomes from the Funds because it would reduce their in- comes, and likewise with many people who feared that in future they would get less for their savings. But he denied that that was a reason why the House should not endeavour to reduce the interest on the Debt if they possibly could. As the protectors of the taxpayer it was their duty to take care of him and to get money at a cheaper rate if they could. The right hon. Gentleman opposite (Mr. Hubbard) had said something about the hardship which that would involve. Now, the Chancellor of the Exchequer would say to the fundholder—"If you do not take this offer I may have to pay you your money;" but if the man received his £100, that could scarcely be considered any hardship, though it might possibly be awkward for him. The number of the fundholders as compared with the whole nation was small. He had a Return of the number of accounts in the Bank of England, and he found that in the whole of the Three per Cents there were only 180,000 accounts. Of course, many of these were joint accounts in which more than one person might be interested; but it was a remarkable fact that out of those 180,000 accounts nearly 150,000 were under £100 a-year. Another curious thing was, that there were only 216 accounts over £4,000 a-year. Those figures were not an absolute indication of the number of persons interested, because the Paymaster General of the Court of Chancery had one account, the Savings Banks had one account, and there was one account for charitable trusts; but it must be admitted that the taxpayers were the multitude and the fundholders a comparatively small number of persons. The other day he was surprised to hear a man of great experience in finance say he objected to that reduction because it did not matter much what interest was payable on the Funds; that the taxpayers and the fundholders were all one family and one nation; so that if the taxpayer paid more the fundholder received it, and it did not much matter. That was so extraordinary and so absurd an argument that he hardly knew how to meet it. It amounted to this—that even if they paid 5 per cent it was of no consequence, because they were all one family. Ever since the Debt had existed there had been repeated reductions made in the interest; and the Chancellor of the Exchequer now only proposed to continue that pro- cess. So much for the principle of the measure; but when he came to the details, the difficulty connected with the matter was far greater. The right hon. Gentleman proposed to create two Stocks —a Two-and-Three-Quarter and a Two-and-a-Half per Cent Stock—-and he proposed in both cases to make an offer that involved an increase of the capital of the Debt. Now, he was much puzzled to know why they should increase the capital of the Debt. It would be a far simpler business to issue a Two-and-Three-quarter per Gent Stock at par, which, if the right hon. Gentleman was right in his calculations, would float. The right hon. Gentleman said that if irredeemable the Three per Cent Stock would be worth 111; the present price of the Two-and-a-Half per Cent Stock was 93, and the middle point between themwas102. According to the right hon. Gentleman's own showing, a Two-and-Three-Quarter per Cent Stock would be worth 102 at this moment. The Chancellor of the Exchequer told them the other day that the saving on a Two-and-a-Half per Cent Stock, giving £108 of Stock to the fundholder, or £100 of Three per Cents, would be £1,337,000, after allowing £500,000 a year for a Sinking Fund to cover the additional £8 in 51 years. He did not think it was quite fair to take the Sinking Fund for 50 years to test the operation. The saving from a Two-and-Three-Quarter per Cent Stock, issued at par without any Sinking Fund, would be £1,530,000 at once. What would be the result at the end of 20 years if the Sinking Fund was made for 20 years to cover the 8 per cent—or £49,000,000 of fresh Stock—upon the £612,000,000? Supposing they took all the Two-and-a-Half per Cent Stock at 108, it would require a Sinking Fund as large as the whole annual saving to cover the 8 per cent premium in 20 years. The Chancellor of the Exchequer would have absolutely done nothing, and would gain nothing, unless he made his Sinking Fund extend to 50 years. And he failed to see why it should be for 50 years. If they issued a Two-and-Three-Quarter per Cent Stock at par the saving would in 20 years be more than £30,000,000. It would, he thought, be far better to issue a Two-and-Three-Quarter per Cent Stock at par without any Sinking Fund. If the Chancellor of the Exchequer said he could not issue such Stock at par, but must hold out some further advantage, he would consider what the right hon. Gentleman said with the utmost respect; but he submitted that it would be far simpler or intelligible and more profitable to the present generation of taxpayers to issue a Two-and-Three-Quarter per Cent Stock at par. The objections to increasing the capital of the Debt had been well stated in a pamphlet which Mr. Hamilton published in 1818, and which was republished by Lord Over-stone, in which the whole doctrine of a Sinking Fund was combated, and the position of the National Debt was described. Mr. Hamilton had used these remarkable words— If the money were never to be paid, it would be proper to borrow in the manner in which money could be raised at the least interest, as the capital in that case would be merely nominal. But under such a view the lenders would not accept of less interest in one fund than another… The only inducement which the lenders can have for preferring a 3 per cent capital yielding a less interest is the prospect of ultimate gain by the rise of the funds. This he expects will more than recompense the present loss he sustains by accepting any inferior interest. If he be right in his expectation the public is a loser; and the lender in this case is more likely to conjecture right than the financier. On the whole, we are of opinion that the capital funded should never exceed the sum raised. He would vote for the second reading of this Bill, because he thought that the principle of it was a sound one; but as to the details of it he doubted whether it was a wise or right thing to increase capital. How would this affect the operation of last year? Last year they had entered upon an elaborate scheme for cancelling a large amount of the Debt, and he supposed that the result would be that the conclusion of that operation would be deferred, as the Chancellor of the Exchequer would not be able to get through it at anything like the rate which he had expected. He did not think that the Chancellor of the Exchequer had explained this in his speech. Another point upon which he felt a little troubled was the question of small holders of Stock. A man died and left an annuity to be paid to an old servant; the whole estate was divided, and nothing was left but this annuity going on for some years. Then down came the Chancellor of the Exchequer and practically imposed a heavy Income Tax upon this annuity. Such cases of annuities were very common. Another case was where a definite amount of Stock was left in the hands of trustees with directions to pay the income The Chancellor of the Exchequer would, perhaps, say that the trustee could change the investment if he liked, because under recent Acts of Parliament a trustee might sell out and buy certain other Stock. He would have liked, however, to have seen the power of trustees made more clear, so that everyone might know that they could obtain some other investment. He differed, therefore, from the Chancellor of the Exchequer as to some of the details of his proposal, although he thought that a great deal of dust had been thrown in their eyes about the hardships and difficulties that would result from the action of this Bill. He thought that greater licence should be given to trustees who held small amounts of Stock for others. The fact that they were proposing to borrow at under 3 per cent showed how high the credit of the country had become; but he thought that the mode of doing so was certainly a matter of great importance, and he hoped that the Chancellor of the Exchequer would give some consideration to the points which he had suggested.


said, he thought that this was not a question in which the term "on this side of the House" or "that side" should be heard, because the national credit and the national finance were matters of equal importance to all Members, whether on the Government or the Opposition side of the House. Whatever criticism, therefore, he wished to offer on the proposal of the Chancellor of the Exchequer would be offered in the most friendly spirit. He had considered very carefully to what length he could travel along with the right hon. Gentleman in his proposals. In the first place, he cordially agreed with him; and he thought that everyone who was interested in finance must agree that when it was possible to largely reduce the interest on the Debt it should be done. On that point there could not be two opinions. The questions which they had to consider with the utmost attention were the time, the opportunity, and the method of doing it. He fully agreed also with the Chancellor of the Exchequer that he had the power to redeem the Debt. The right hon. Gen- tleman (Mr. Hubbard) had never said there was not power by Act of Parliament to redeem the Debt; but the point at issue was what that power exactly was. Statutory power to redeem the Debt was very fully pointed out by the hon. Member for Cambridge (Mr. W. Fowler) as existing in the Schedule of the Act of 1870. What, however, had struck him (Mr. Salt) very forcibly in the proposal of the Chancellor of the Exchequer, and to which he thought attention had not been called, was the enormous magnitude of the financial operation which the right hon. Gentleman was proposing. He did not believe that anyone had yet grasped the prodigious idea of the right hon. Gentleman to deliberately transfer the whole of the Three per Cents into a Two-and-a-Half per Cent Stock. The right hon. Gentleman had said that he did not expect in the first instance to convert the whole of the £600,000,000 with which he proposed to deal, but that he did propose to do it by a course of operations. He also said that the profit to be derived by the State would be £1,800,000, or, allowing for Terminable Annuities, £1,310,000 a-year; and, lastly, the right hon. Gentleman said that if there was any reluctance to exchange to Two-and-a-Half per Cent or Two-and-Three-Quarters, he had some means by which he could—he would not say compel—but encourage them to do so. Therefore, he was correct in endeavouring to impress on the mind of the House and of the country that this was to be a financial operation of the greatest magnitude that the world had ever seen. Then how was this vast operation to be carried out? If the Chancellor of the Exchequer was in a position to say—"I am ready to carry this out by one single operation; I will give you either New Stock or cash," all very well; but it was not so. This tremendous operation was not a simple and clean operation of which they knew the beginning and could see the end. They could see the beginning very well; but he defied anybody to say what the ending would be, and that seemed to be the really weak point of the proposal. The Chancellor of the Exchequer offered to the various holders of Three per Cent Stocks an exchange either of Two-and-Three-Quarters per Cent Stock at 102, or Two-and-a-Half per Cent Stock at 108. A calculation had been made that if a holder of Three per Cents took the Two-and-Three-Quarters per Cent Stock he would get in future instead of 3 per cent £2 16s. 1d. per cent, while if he took the Two-and-a-Half per Cent Stock he would receive £2 14s. per cent. He could not see what the inducement was to take £2 16s. 1d. or £2 14s. for 3 per cent. There might be a reason, but it did not appear on the surface. The next part of the operation was founded on the expectation that this course would be followed by a very great rise in the value of Two-and-a-Half per Cent Stock, and that those who did not accept the first offer of £2 16s. 1d. or £2 14s. per cent per annum would hereafter be offered something less. But here came the question—they were dealing not with the present but the future, and assuming that the price of these Stocks would be maintained in the future. In 1866 the price of Three per Cent Stock was as low as 84⅝, and its highest price during that year was 90⅜, and it was by no means impossible that in 1886, though he trusted it might not be the case, the Funds might fall as low as they did in 1866. The Chancellor of the Exchequer, was, therefore, founding his scheme, not merely on the past, but on the future, and in relying upon the fact that in two years' time the Two-and-a-Half per Cent Stock would stand at par, he was making an assumption which might turn out unfounded, and he ought to explain how he would deal with the case which would arise if the Stock fell to 80. In his (Mr. Salt's) opinion, the proposal of the right hon. Gentleman violated the first principle of great financial operations, inasmuch as it not only dealt with the present, but it speculated as to the future. There had been great financial operations in the past, and it appeared to him they might well form a precedent for the operation the Chancellor of the Exchequer was now proposing. The new Three per Cent Stock it was well known originated in this way. In 1822 the Navy Five per Cents were converted into Stock, which was called New Four per Cents; in 1830 the New Four per Cents were converted into Three-and-a-Half per Cents; at that time the holders of Stock were offered either £70 of Stock at 5 per cent, or £100 of Stock at 3½ per cent. In 1844 the same Stock was again dealt with, the holders were offered either a New Three-and-a-Quarter per Cent Stock or to be paid off at par, and Stock to the amount of £103,000 was paid off. Now, that was a complete and distinct operation, and it saved the country in interest something like £600,000 per annum. The question of the power of redemption had occupied considerable attention. The power of the Chancellor of the Exchequer rose upon the scheme of the Act of 1870, which he (Mr. Salt) need not read. Under the Schedule there were four things to be done, and, of course, in saying this, he was speaking of Consols and Reduced; because the New Three per Cents stood upon a different footing, and might be redeemed at any time. According to the Schedule of 1870, 12 months' notice must be given of redemption; secondly, the redemption must be made in sums of not less than £500,000 at a time; thirdly, an Act of Parliament must so passed in order to regulate the method in which the payment was to be made; and, fourthly, all the arrears of Annuities must be paid off. When those conditions had been properly and fully satisfied, the Capital Stock in regard to which the transactions had taken place ceased to exist as part of the National Debt. The introduction of the Proviso respecting repayment in sums of not less than £500,000 was an historical curiosity. The reason, as it appeared to him, why this £500,000 was put in as a limitation in the Act of George I. was that they should not harass the stockholders until sufficient money was ready to make substantial repayment. That was his explanation. But how did it bear on the question now? It was perfectly true that the Act of George I. had been repealed. It was repealed by a subsequent Act; but in the Schedule of the Act of 1870 there was a clear and distinct reference, at all events, to the principle of that Act; and if they were to take legal opinion, he thought it would be found that they must construe the Act of 1870 with reference to previous Acts, including the Act of George I. This fact bore very much on the present question, because they ought to ask the Chancellor of the Exchequer, when dealing with a matter of such enormous magnitude, concerning not only the interests of individuals, but also the national funds and credit, to bear in mind the importance of understanding the tenour of the Acts of Parliament relating to the subject. He hoped he had not discussed the proposals of the right hon. Gentleman in any unfriendly spirit; he should have been glad to accept them from first to last; but he was sound to say that he regarded with the greatest anxiety—even some alarm—a proposal of such magnitude, which would not depend on the arrangements of the present Chancellor of the Exchequer, but on future chances of financial prosperity. There were also to be considered some matters of detail; Often in business details were of the highest importance. Now, he wanted to know why Two and Three-Quarters per Cent Stock was created at all. There must be some reason, and they ought to have the reason. There was a very serious objection to it. The whole tenour of our financial system during the past 50 years had been wisely, prudently, and economically tending in the direction of simplicity. Why should that simplicity be destroyed by the creation of two Stocks when one would suffice? He did not quite see the advantage, but he saw the danger of Two and Three-Quarter per Cent Stocks. However carefully the operation might be carried out, it might be a failure. The matter was, at any rate, one on which the House had a right to ask for explanation. One of the great causes of the value of Consols was that in this country, which was the great financial centre of the world, there should be an immense amount of Stock in which everybody could deal, and to which they could always trust, for purposes of purchase and sale, so that operations of magnitude might be carried on without any difficulty. In considering the effect of this proposal, they must be careful not to create too many little Stocks, and thus reduce the amount of the great leading Stock, so as to make it lose its character of magnitude and negotiability. Again, they must, as prudent men, face the question—what was to be done in certain eventualities, such as would arise when the Three per Cents were totally converted to Two and a-Half? What was to be done with the savings banks under these circumstances? The savings banks' investments amounted in the whole to about £80,000,000, of which £44,000,000 belonged to the old savings banks, and £36,000,000 to those of the Post Office. In many cases, the old savings banks allowed 2½ per cent, others 2¾, and others 3 per cent. These banks were sound to invest. How were the old savings banks to be dealt with when they could not invest in the Three per Cents, but must invest in the Two and a-Half per Cents, and so would have no margin for expenses? As far as the Post Office Savings Banks were concerned, he was of opinion that the position of the depositors in those banks would be quite peculiar, in that they would have a great advantage over persons who invested in the funds outside, for the reason that persons depositing, say, £200 in the Post Office Savings Bank must, on withdrawing their deposits, be paid at par, no matter what the price of Consols might be; but the investor outside accepted the price current at the time of the transaction. The case, therefore, would be that the Government, besides paying 2½ per cent, would be giving a number of advantages afforded by the facilities offered by the Post Office. He was anxious to know whether the interest on the Post Office deposits was to be reduced, and also where the money was to come from for the management of the Post Office Savings Banks? Information ought also to be given as to how the whole system of Government Assurances and Annuities was to be dealt with. The whole of the present calculation must, of necessity, be altered when the Three per Cents were reduced to Two and a-Half. Again, this alteration must, of necessity, affect the scheme of Terminable Annuities, which had been introduced for the purpose of reducing the Debt. Again, how were the investments in the Three per Cent Stock, held largely by the great Corporations and the Charity Trusts, to be dealt with? In these cases the interest had been calculated to meet particular annuities and allowances agreed upon, from year to year. He did not say this was an insuperable difficulty; but he failed to see how they were to deal with these cases in which large sums were invested by Corporations holding funds not on their own account, but for the benefit of many poor and deserving people throughout the Kingdom? And, lastly, he came to the case of that much-injured and harassed individual, the ordinary trustee. This last-named functionary sought Stock, knowing that under certain conditions it was liable to be reduced in value; but there were also circumstances with reference to his transactions, mainly owing to wills and marriage settlements, in which he deserved some sort of relief. What would be the position of the trustees, or of those holding and dealing with the estate when, instead of getting 3 per cent, on which their calculations were made, they received one-sixth less? He did not say the Chancellor of the Exchequer was doing wrong; but he put the case forward as one which showed the difficulties under which trustees would labour. He approved of much of the scheme of the Chancellor of the Exchequer; but there were connected with it essential questions of time and opportunity, and, while he knew what the present was, he did not know what the future might be. He was aware that the Chancellor of the Exchequer had said that this year a permanent Three per Cent Stock would be worth 111 in the market, and that, therefore, he ought to make some attempt to reduce the interest upon the redeemable Debt. That was perfectly true; but that argument was good for this year, and for this year only. Financial affairs were uncertain, political affairs were critical; and he defied the most sanguine Minister, with the greatest knowledge in the world, to say that next year, or even next month, those Three per Cents would stand at the prices they now held. It was on these grounds that he questioned the proposal of the Chancellor of the Exchequer; and he could not but regard with terror and alarm great financial operations which, while relying upon the prosperity of the present, speculated on the fortunes of the future.


said, he did not share the apprehensions of the last speaker with regard to the conversion of the Three per Cent Stock. The proposed operation was intended to be self-acting. If it should succeed, it would be well for the country; if it should not, the country would be none the worse. The cause of the Bill was that the value of money had fallen. People need not fear that the measure itself would make it difficult for savings banks to pay their depositors and would reduce their incomes, the fact being that the reduction of their incomes would be due to external causes which constituted in themselves the reasons for the Bill. He should be sorry to hear any arguments adduced with a view of diminishing the responsibility of the Government with regard to the reduction of the National Debt. It was their duty to reduce that Debt whenever they possibly could, care being, of course, taken to deal fairly by the lender. The only argument which ought to be used for or against any reduction of the Debt was whether the condition of the Money Market warranted it. If the value of money was less than they were paying, let them proceed with a measure of this kind; if more, let them put the Bill on the shelf and say no more about it. There were three ways of dealing with this question of conversion—compulsorily, voluntarily, and voluntarily with compulsion behind. In his opinion, the last mode of dealing with the question was the worst. Compulsion in matters like the present presented a difficult problem for solution. It might, he thought, be taken to be legal. At the same time, it might not be expedient, and perhaps not even possible. In 1853 the operation for the conversion failed, because external circumstances were not in its favour. The value of money had been high, and fell suddenly. The Chancellor of the Exchequer argued that the circumstances of the present day were very different from the circumstances of that time. Consols had now been above par for four years, whereas then they had only been at par for a very short time. That was true; but were the circumstances so very different now as to admit of the operation being carried through successfully? The operation must be carried out either with money sorrowed at the market rate, or with Stock given at that rate. That rate was indicated by the price of Consols—2 per cent above par, equal to 1s. 2d. in the rate of interest. That was the advantage the public possessed at the present moment. It might reasonably be thought that an operation based upon so small a change as that was not a very safe one. The practical application of the scheme for compulsory conversion was what the House must consider. The best authority on the subject was the Prime Minister. In 1853 the right hon. Gentleman spoke of the voluntary conversion of the great Three per Cents, saying— I mean voluntary in the strictest sense, for no other conversion can be thought of. The right hon. Gentleman also said— In approaching the great phalanx of the Three per Cents defended by its amount, its rate of interest, and 12 mouths' notice, we must direct our steps with the utmost caution. Those words of the right hon. Gentleman pointed clearly to a preference for a voluntary instead of a compulsory conversion. It had been said that the proposed operation would be perfectly simple. That he doubted. The subject to be dealt with was £600,000,000 of Stock, in lots of £500,000 each. How could a change involving 1,200 operations of £500,000 each be simple? The Government could never rely solely upon a paper operation; they must have a sufficient sum in money to meet all possible claims. Suppose an operation was advertised on the Exchange and a number of holders were ready to exchange their Stocks, some convulsion on the Continent or elsewhere might occur; and then the holders might, and no doubt would, withhold their Stock or demand their money. Money which was used for the purpose contemplated was for the moment practically dead, and the result must be a considerable disturbance and derangement in the market. He was slightly incredulous that an operation involving £600,000,000 of Stock could be either a simple or easy one. Then the right hon. Gentleman the Chancellor of the Exchequer, in moving the second reading of the Bill, made use of an expression which, he confessed, somewhat alarmed him. He said that he did not feel called upon to disclose his plan. Now, if there was one thing more than another to be deprecated in finance it was concealment. If anything was hidden, somebody would be sure to find it out. By perfect openness and publishing to the world what they intended they would retain the confidence of their creditors, and get better terms. He believed that the phrase to which he had alluded had caused very considerable alarm, and that the right hon. Gentleman could not do better in the interest of the country and of his own scheme than to give such an idea of his plan as would relieve people's minds from the fear that some coup d'état of the funds was in contemplation. The words of the Prime Minister, that in dealing with public credit we must direct our steps with the utmost caution, were here very applicable, and, if the occasion had arisen, he would have added with the utmost plain dealing. There could be no earthly use in hiding what was to be done. The country had in prospect an operation which might benefit the taxpayer very considerably, but which, in some quarters, would be very naturally opposed. What, however, would be still more and generally resented would be the depreciation of its own securities in order to gain a momentary advantage. Anything done to depreciate the value of Consols in order to carry out the scheme would have the worst possible effect, and frustrate the object of the Bill. His hon. Friend the Member for Cambridge (Mr. W. Fowler) had very forcibly pointed out the serious consequences the operation would have in increasing the National Debt. His right hon. Friend pleaded in extenuation that last year we had written off £70,000,000 of Debt. But writing off a debt was not paying it off. Whole classes in the country who had a difficulty in making both ends meet would be still further squeezed. For some years they had some with extraordinary courage and equanimity heavy burdens to pay off the Debt, because they felt that the country could not be strong so long as the Debt remained at its present figure. What would their feelings be when they learnt that by a stroke of the pen £48,000,000 had been added to the National Debt? He believed it would cause considerable dissatisfaction, and the supporters of the reduction of the Debt in that House also would feel very much weakened. The principle of the Bill—speaking of the Two and a-Half per Cent Stock, and putting aside the Three and Three-Quarters per Cent Stock as out of the running—was that on every £100 the taxpayer was to save 6s. per cent. Of that 6s. he was to reap the advantage of 4s. 4d. for he was to pay 1s. 8d. towards a Sinking Fund. That was to be the payment by the taxpayer for the 4s. 4d. he was to gain. Then, Terminable Annuities were to be created which were to be redeemable out of the growing produce of the Consolidated Fund —that was to say, a lump sum was to be paid representing the capital of the Annuity. But the growing produce of the Consolidated Fund was already appropriated to the redemption of the Debt, and the effect would be to saddle upon posterity for 50 years the relief to the present taxpayer. The scheme of the Bill, he could not help thinking, was based upon a fallacy. It was to save £5,000 on each £1,000,000, less the interest on the extra Debt, £2,000, and the payment into the Sinking Fund, leaving a net saving of £2,200 a-year. The whole plan rested on the assumption that this Debt would last 50 years. If it did not last 50 years the profit to the country would be in a corresponding proportion reduced. If they made a rough calculation, they would find that for each £1,000,000 affected by this Bill, unless it lasted unextinguished for 35 years, the country would suffer a loss; and unless it lasted for some years over 35 they would derive no profit whatever. He was, therefore, of opinion that the discount at which the New Stock was to be issued was too large; that the consequent addition to the capital of the National Debt was excessive; and that the bargain in this respect was not a favourable one for the country. He hoped that upon the second reading of the Bill there would be practical unanimity, and that when it reached Committee some parts of it would be modified.


said, his hon. Friend who had just sat down had, in his very able speech, drawn a distinction between three forms in which the proposal for the transfer of Stock could be carried out; either voluntarily, compulsorily, or voluntarily with compulsion, and as he had stated that the inducement offered to holders of Stock was very small, and also had expressed his objection to anything like compulsion, it was difficult to see how his hon. Friend thought that the scheme could possibly succeed; and, indeed, he had gathered from his speech that he did not think it would succeed. Moreover, he appeared anxious to take away from the Chancellor of the Exchequer the means by which it could succeed, because he had pressed him to lessen the inducements by decreasing the rate of discount offered by the right hon. Gentleman. Nor were the other speeches very encouraging to the Chancellor of the Exchequer. He saw the force of many of the arguments of his hon. Friend (Mr. Magniac); but it appeared to him that if he was correct, the passing of the Bill would simply be brutum fulmen. The hon. Member for Stafford (Mr. Salt) called attention to the hardships which would be inflicted upon various classes of the community by the reduction of the interest on the National Debt; but he was bound to say that he thought his hon. Friend (Mr. Magniac) had completely answered that objection by pointing out that if all these interests were to suffer, they would suffer, not from the reduction of interest, but because of the general decrease in the value of money. Upon that point he thought the hon. Member's argument was practically conclusive. But the main argument raised by the hon. Member against the scheme was that which dealt with the question of the increase of the Debt by £48,000,000. He was bound to say that there was a fallacy running through the speech of his hon. Friend, and also through the speech of the right hon. Gentleman the Member for the City of London (Mr. Hubbard); and that was that the £48,000,000 were to be created and paid off at par, and that the liability was undertaken by this country for the payment of the principal of that sum. If in the future they were able to undertake another operation, and again lower the interest, that, to his mind, was the only contingency under which they should have to pay for the additional capital. He did not think they need be alarmed at this additional Debt in the sense in which it had been put before them by some right hon. and hon. Gentlemen, because it was not the capital which they could ever be called upon to pay off. It would only have to be paid off under the favourable circumstances of money being so cheap that they should again be able to lighten the burden put upon the taxpayer. If this view were correct, then the whole of the argument as to the reduction of the Sinking Fund from the gain to the taxpayer was a fallacy, and there remained over a clear gain to the taxpayer of the interest which he saved. The only reduction which it seemed to him must compulsorily be made from the taxpayer was the additional interest on the £48,000,000 created. Therefore, the matter presented itself to him in this broad form—Could the Chancellor of the Exchequer offer any less advantageous terms to the public with the probability that they would be accepted? He did not think the right hon. Gentleman could offer less favourable terms than those contained in the Bill. The question then arose, was the Chancellor of the Exchequer justified in offering those terms to the public? It appeared to him that they were bound to carry out a reduction of interest if they could do so; and if the Chancellor of the Exchequer proved that there was a fair chance of the public accepting his terms, he hoped the right hon. Gentleman would stand by them, and not allow a favourable opportunity to pass without making this great experiment, for an experiment this Bill must be. The hon. Member for Stafford (Mr. Salt) objected to the proposal because it was experimental; but the hon. Member for Bedford (Mr. Magniac) had disposed of that objection, and the hon. Member for Stafford did not point out a single danger that would accrue to the State from the failure of the experiment. There might be inconvenience and a slight disturbance of the funds; but nothing that would cause any kind of alarm, apprehension, or public calamity. In fact, they knew what the result of failure would be, because, unfortunately, there had been failures before; similar transactions had been attempted and did not succeed; but, beyond the resulting inconvenience, he did not know that anyone had suffered. He trusted the Chancellor of the Exchequer would go forward with the measure, and would receive the support of both sides of the House in carrying it through, and that the bugbear of having to pay off 48 additional millions, would be disposed of to a great extent, if not by the explanations he had attempted to give, at all events, by the further explanations which would be offered by the Chancellor of the Exchequer.


said that he agreed with the view taken by the right hon. Member for Ripon (Mr. Goschen) as to the increase of the National Debt by £48,000,000, there being a reduction of interest on the whole. Sufficient attention had, however, not been paid to the effect that the reduction of the interest would have on the coun- try. It was admitted that there were 180,000 fundholders; and, including Chancery trusts, the number might be 200,000. Many of these were heads of families, so that the number of persons interested was probably not fewer than 1,000,000. The House had been told that £1,300,000 would be saved annually to the taxpayer by this process; but even if that were so, it represented less, he believed, than a farthing per week upon the whole population of the country, while the interest of the fundholders would be reduced by 10 per cent. Two classes of persons, the thrifty and the helpless, would be seriously affected in order that we might reduce the interest on the National Debt, and that at the time when the National Expenditure was at the highest point. The proposed reduction would fall most heavily upon trust funds, and upon the monies of widows and orphans. If the Government was really economical, the country might regard with equanimity the reduction of the interest on the National Debt; but by reducing the interest instead of the expenditure the Government were beginning at the wrong end. The Government ought to show some signs of economy in their general expenditure before they began reducing the interest on the National Debt.


said, there seemed to be unanimity in the opinion that the Chancellor of the Exchequer was right in endeavouring to reduce the interest on the National Debt, and the objections based on difficulties of detail had been answered. Some spoke as if this were only a fundholder's question; but if the Chancellor of the Exchequer succeeded in reducing the interest on a considerable portion of the Debt from 3 to 2½ per cent, there would be a corresponding, or even a larger, reduction in the rates of interest payable for money borrowed on mortgage in land and houses. This would tend to promote railway extension; and thus, by increasing enterprize and employment, would confer the greatest benefit on the country. As to the alleged hardships to charities, probably they would not be compelled to convert their Stock, and would continue to receive 3 per cent as now.


said, he thought no one would dispute the proposition that, in so far as the Bill repre- sented the principle of the desire and attempt to reduce the interest and burden of the National Debt by means of voluntary exchange, it would meet with unanimous approbation in the House. It was unnecessary to add anything to the exhaustive speeches on both sides of the House, which had dealt with the beneficial effect which such a conversion would bring about. He wished, however, to speak of the fundholder, and while he did not mean to put him forward as an object of special pity, he thought his case had not yet been sufficiently considered. He was sorry to hear the hon. Member for Cambridge (Mr. W. Fowler) make a comparison between the number of fundholders and the number of taxpayers. Even if the former were only units as compared with millions, it was not only the duty, but the interest, of the Government and of the country that they should be treated with justice and equity. Any dealings with the fundholders would affect the general credit of the country. It was, therefore, only right to expect that the Chancellor of the Exchequer should do all that had been suggested by the hon. Gentleman behind him (Mr. Magniac), and explain very clearly, and in a way that could not be misunderstood, the whole intention and mind and object of the Government in introducing this scheme. He was certain that the House did not desire that the fundholder should be either cajoled or bullied into surrendering what he would rather retain. The right hon. Gentleman would advance the most important part of the Bill—namely, the process of voluntary conversion into Two and a-Half per Cent, if he were to cast aside all these mysterious allusions to something which might happen hereafter, and explain to the House the precise stages by which he proposed to put the Act into complete operation. Unless he did that, they would have a great deal of confusion, uncertainty, and heartburning pervading large masses of the public. It was not fair that the Government should, as it were, play with loaded dice in, that manner. Yet that was somewhat of the position which the Chancellor of the Exchequer, of necessity, occupied. As the Controller of the National Debt, he had the manipulation of enormous portions of the Debt which he could use as a fuudholder to the advantage of his scheme. That seemed to be an exercise of double functions on the part of the Chancellor of the Exchequer which would always be watched, naturally and properly, with great jealousy by the House and the public. The savings banks were said to be the holders of £80,000,000 of Stock, and to that had to be added the funds in the Court of Chancery. Who had the control of these latter funds? No less a person than the Lord Chancellor, who, as well as the Chancellor of the Exchequer, was a Member of the Government. It was, therefore, incumbent on them, acting in a double capacity, that a more free and open statement should be made on the subject than had as yet been made. A familiar case in which hardships might arise was that of an annuitant under a will of, say, £100, whose claims were usually settled by the trustees or executors out of a fund invested in Consols. Disputes might easily arise in such cases. He trusted, therefore, that the right hon. Gentleman would clear himself from all possible imputations which might arise in that manner.


said, that large sums of Consols were held in trust under which the tenant for life received the interest for his life, while the capital went to those who were entitled in remainder. The interests of the two respective parties were not identical, and he did not think conversion would in those cases be voluntarily accepted. On the other hand, large amounts of Stock were held by public Companies and Corporations as a voluntary act, and without the operation of the present Bill the conversion of Consols into Two-and-a-Half per Cent Stock had been going on; but he did not think it would be accelerated by the present Bill. Again, it was important to remember that owing to the much larger powers of investment now granted to trustees there would not be so large a portion of trust property in Consols as was formerly the case. Trustees were now authorized to invest in Railway Debentures, Metropolitan, Stock, and other investments. The consequence of this was that parties might be more inclined to be paid off with a view to investment in securities of this nature. There was another matter dealt with by the Bill which required careful consideration. The Chancellor of the Exchequer had obtained practical jurisdiction of the £50,000,000 Stock in the hands of the Paymaster General. In the case of a large proportion of that Stock the dividends were accumulating for the benefit of infants and others under disabilities, who would have no voice in respect of conversion. He presumed the Lord Chancellor would exercise proper supervision in such cases, and have regard to the persons beneficially interested. But he was a Member of the Government for the time being, and it was necessary that his action in the matter should be carefully watched, as he would necessarily be open to the suggestions of his Colleague the Chancellor of the Exchequer. For his own part, he protested against any such power of directing conversions being vested in the Lord Chancellor, who would thus have double and mutually adverse functions to exercise. Speaking generally, they had only half of the scheme before them, and knew nothing of the way in which it was to be carried out. In his opinion, the Chancellor of the Exchequer would not obtain the benefit he contemplated from the scheme. And there would be more difficulty in the conversions of Stock than the right hon. Gentleman anticipated.


said, he did not profess thoroughly to understand the Bill. With reference to what fell from the hon. Member for Stafford (Mr. Salt), he might mention that many savings banks which were conducted for the benefit of the thrifty poor gave interest at the rate of 7d. in the pound, or £2 18s. 4d. per cent, and the slender difference between that and 3 per cent defrayed the expenses of the banks. Last year the Government slipped into a big Bill a little clause which would have had the effect of reducing considerably the interest paid to friendly societies. The hon. Member for Preston and he (Mr. Warton) objected to that provision, which the Government ultimately withdrew; but they now proposed to do what was then intended, for no answer had yet been given by the Government to the hon. Member for Stafford's question. As a condition precedent to any conversion of Stock, a notice ought to be posted at the Royal Exchange a year before such conversion took place. The Bill apparently limited the conversion to £500,000 at a time; but from the Chancellor of the Exchequer's speech it seemed that there was to be no limit to the operation of the measure. He was surprised at the right hon. Gentleman telling the House that there was some mode of compulsion which he could use. He thought that in all matters of finance there ought to be the utmost candour on the part of the Government, and therefore he would ask him to state boldly what kind of compulsion he would use. There ought to be no hocus pocus about the matter, and he might remark that there was nothing which frightened people so much as the unknown.


said, hon. Members ought to see what could be done in the way of decreasing the burden of the National Debt and its pressure on the taxpayers. There was no reason why the Chancellor of the Exchequer should not divulge more of his plans than he had done. He could not see that there were any difficulties in the way of the right hon. Gentleman carrying out the scheme he had put forward. Confidence would be inspired if the right hon. Gentleman gave an assurance, at the earliest opportunity, that he had the power and the intention to carry out the scheme. He entertained no doubt that in a very short time the Two and a-Half per Cents would take the place of Consols in popular estimation. If the Chancellor of the Exchequer could get his new Two and a-Half per Cents established as a popular Stock he would considerably raise the price of it in proportion to the Three per Cents which would be still left in existence, and he would steady the price of the Stock, an important matter in any conversion operations.


said, he thought the time had arrived when he ought to reply, although not at too great length, to the remarks that had fallen from hon. Members in the course of the discussion. He was glad to find that those remarks had not exhibited anything like Party feeling. Still, it was to him a matter of regret that in some respects the nature of his proposals had been misunderstood by several hon. Members opposite. He had, however, to thank several other hon. Members for the pains they had taken to set them right upon the points at issue. At the same time, he should not seek to take refuge behind the plea that some of the arguments which had been put forward had been answered, although he would not have more to do on the present occasion than to meet the articles of criticism which had not been met by others. It was, however, not unlikely that he should fail to meet every argument that had been put forward in the course of a three hours' debate. He would first deal with two small questions which had been just raised by the hon. and learned Gentleman the Member for Bridport (Mr. Warton). The hon. and learned Gentleman had asked, in the first place, why the Bill did not provide for the affixing in the Royal Exchange of a notice announcing the proposed conversion? The answer was a simple one. They did not in this Bill deal with any compulsory powers, and therefore it would be unnecessary to introduce any formal notice. The hon. and learned Gentleman then asked him why it was he had referred in his account of the former payments in sums of £500,000 to none later than 1751? The reason was that for nearly a century Consols were at a discount, and could be purchased in the open market, instead of being compulsorily paid off. He hoped he had satisfied the hon. and learned Gentleman by this short explanation, and would now pass on to deal with earlier speeches. The right hon. Member for the City (Mr. Hubbard) had certainly been very hard upon the Bill. The right hon. Gentleman had said that it was the worst Bill he had ever seen, and that its title, "to give facilities for the conversion of Three per Cent Stock into Stock of a lower denomination," was enough to shock him. For his own part, he thought the title harmless enough; but the right hon. Gentleman went on to ask — What Finance Minister could congratulate himself upon such a scheme? The right hon. Gentleman said that last year a proposal had been brought in for the redemption of the National Debt which was satisfactory in every respect; but the proposal made this year was one of which he was ashamed. Last year, however, the right hon. Gentleman had described the scheme proposed by the National Debt Bill as impracticable, unworkable, and essentially wrong in principle, and said that it would bear most harshly and unjustly on the taxpayer. He, therefore, hoped that next year the right hon. Gentleman would take a more favourable view of the present measure. But not only did the right hon. Gentleman say, in respect to the proposal now made, that it was one of which he ought to be thoroughly ashamed, but he added that his 24 colleagues on the Board of the Bank of England considered it thoroughly detestable.


explained that he had only assumed his colleagues on the Board of Directors regarded the measure as he did.


said, he considered the right hon. Gentleman had no right to make any such assumption. That was a very easy way of tacking on to his own opinion that of others— that is to say, gratuitously to assume that they agreed with them, and then to quote their authority. Certainly he had last year read with some consternation the right hon. Gentleman's disapprobation of the scheme of reduction he then proposed, and he was now surprised to find that it was his intention all the time to approve of it. Speaking on the 7th of August last year, he said the scheme was impossible and unworkable.


said, he was at the time referring to a proposal which had been made by the Prime Minister.


replied, that he was the person named at the time, and he hoped that by this time next year the right hon. Gentleman would be converted to a more tolerant view of what was now proposed, and that after the Recess he would come round to be a warm supporter of it. Before parting with the right hon. Gentleman, he had to complain that he had misrepresented what he (the Chancellor of the Exchequer) had said. He certainly never said the proposal met with a favourable reception in the City. He had looked through all the reports of his speeches, and through his own notes of them, and was unable to find any such expression. What he did say was— I have been able to consider suggestions which have been made in different places, and particularly in the City, as to several parts of the measure. I attach importance to the criticisms which have been passed in the City, where, of course, public opinion is directed most sharply to questions of this kind. Passing on, he had to thank the hon. Member for Cambridge (Mr. W. Fowler) for his friendly criticism of the scheme. The hon. Gentleman, however, asked why he (the Chancellor of the Exchequer) did not propose to the holders of Three per Cent Stock to accept at par a Two and Three-Quarters Stock so as to avoid any Sinking Fund, as he thought it imprudent to increase the capital amount of the Debt. The fact was that such a plan would not work. He had made inquiries on the point, and he was satisfied that had the Government gone to the public with such a proposal it would not have been accepted. His hon. Friend had also referred to the old controversy, whether it was as a question of finance better to raise money in low interest Stocks at a discount, or in high interest Stocks at par or at a premium. That was an important controversy, and had from time to time engaged the attention of the ablest political economists; but it had no reference to any process of conversion, but only to the best, method of adding to Debt when large additional amounts were required, say, at a time of war. With reference to the effect of this measure upon the operations sanctioned by the Act of last year, he might say that the two schemes were perfectly distinct, and that the effect of the present proposal, if any, upon the previous scheme would be beneficial. The hon. Gentleman then asked how this Bill would affect small holders of Stock and trustees; and also whether it would not be desirable, under certain circumstances, to extend the facilities of investment by trustees in other than Government Stocks? He agreed that when it should become a question of compulsorily paying off the Debt at par this matter might have to be considered. He had next to refer to the speech of the hon. Member for Stafford (Mr. Salt), to which he had listened with great interest. The hon. Gentleman stated that the operations of this scheme were not fully appreciated by the public, and doubted if even the Chancellor of the Exchequer had sufficiently considered what two years hence would be the state of the Two and a-Half per Cent Stock. The hon. Member had asked why should anyone under the operation of this Bill take £2 14s., or £2 16s., instead of £3 interest upon his £100 Stock? The answer was that the person who exercised the option would do so because his nominal capital would be increased, and because the £2 10s. Stock would be the Stock of the future. The hon. Member had said that they were wrong in the foundation of their scheme; but his hon. Friend who had spoken behind him had explained that the operation could hurt nobody, and was a good one in itself with the Funds in. their present position. He had said, and would repeat it, that, in his opinion, it was the duty of a Chancellor of the Exchequer, if he found the value of money was at a point at which the interest paid by the public could be reduced, to take advantage of it. His hon. Friend had also gone into the history of certain Stocks, and had given to the House a very elaborate history of the New Three per Cents; but, in doing so, the hon. Gentleman had omitted a material part of that operation in forgetting to mention that in that operation the nominal capital was greatly increased. In referring to the powers of redemption, the hon. Gentleman had asked how it came to be the case that those powers were not made more simple, and he had gone back to the Act of 3 Geo. I, in which there was a reference to the power at that time of reducing the Stock pro ratâ. But that told in exactly the opposite direction froth that which the hon. Gentleman had intended. It was perfectly true that in that Act, when loans were raised by public Companies, as in the case of the South Sea Company, there was a clause introduced enabling the Government to pay these pro ratâ but the Act of Geo. II, passed in the year 1751, did not convey that power, for the reason that at that time the present system of funds had been come to; and, therefore, the conditions of the loans having altered, it was no longer necessary to introduce either the words or the system of a pro ratâ reduction. The hon. Gentleman, too, had spoken of the Act of Geo. I. as having been repealed in the year 1870. That was not so. Certain clauses in that Act were repealed then; but, so far as redemption was concerned, the Act was repealed by the Act of 1751. Then the hon. Gentleman had asked why a Two and Three-Quarter per Cent Stock should be created at all, and, no doubt, there was a good deal to be said on that point. He (the Chancellor of the Exchequer) had put that question very carefully before those who wore concerned with him in framing the present scheme, and had urged the point on the ground that it might be expedient, instead of creating two Stocks, to create only a Two and a-Half per Cent Stock, which standing I alone would be a larger Stock, and therefore more convenient at any time of pressure. But the answer he had received was that it was to many people more convenient that the fall in interest should be only by a quarter per cent. On that ground he was satisfied that, having regard to many whose interests he most wished to consult, the present scheme was the best. The hon. Gentleman had also made some observations about the Post Office Savings Bank Fund, and pointed out that money would come into the hands of the Commissioners on which they would have to pay 2½ per cent, and asked what was to be the margin when money was only worth 2½ per cent. The answer to that was that if it became necessary to reduce the rate of interest on Savings Bank moneys it would be not on account of the present Bill, but because the value of money had fallen. If the value of money permanently fell, it would be impossible to keep it up artificially, and it must be remembered that a Bill of this kind was not a cause of the fall in value of money, but a symptom of it. The hon. Member had said that redemption of premium was only another plan of Terminable Annuities, which did not reduce the Debt, but left it hanging round their necks. The system of Terminable Annuities, however, did reduce the Debt from year to year; for the difference between the Annuity and the regular interest took so much debt off the market. The case of settlements on daughters, and the remainder to be received after payment of charges, had been referred to; but he would point out that where the investment was in land the remainder had been much more largely interfered with by the diminution of rent than could be the case under this Bill; but no one contended that on that account rents should not be reduced. His hon. Friend (Mr. Magniac) had expressed regret that he did not at once state what plan would hereafter be adopted if it was necessary to bring compulsion to bear. He said there might be a coup d'état, and that all uncertainty ought to be removed on this point. But a coup d'état was out of the question, for as to compulsfon nothing could be done without an Act of Parliament; and he did not think, that any Act of Parliament was likely to pass with a coup d'état. He could not conceive anything more rash than for him to state at the present moment the exact method of compulsion that would have to be employed in the event of its becoming necessary, especially as it was not known with what amount they would have to deal. Circumstances might entirely alter between now and then, and it would be most incautious and unwise now to lay down a particular line of action. He desired to thank his right hon. Friend the Member for Ripon (Mr. Goschen) for the very clear way in which he met the objection taken by hon. Gentlemen opposite to the increase in the nominal capital of the Debt which might follow the present proposal, and at that hour he could only say that he endorsed every word of his right hon. Friend's argument. He hoped the House would now consent to read the Bill a second time.


said, he did not wish to detain the House after the statement of the Chancellor of the Exchequer. He was very well contented with the discussion which had taken place, because he thought it had been one of a most valuable character, and from both sides of the House a great deal of interesting matter had proceeded, which, no doubt, would be well appreciated by the public. There was, however, one particular point on which he wished to say a few words. It was one which went to the root of the whole proceeding—he meant mixture of the compulsory with the voluntary process. He did not think the objection on that score had been answered, and what had just been stated by the Chancellor of the Exchequer did not carry them much further towards a proper solution of the difficulty. If they were dealing with a proposal to establish a new Stock, for which anyone who now held Three per Cent Stock could exchange at his own pleasure on certain terms, there would probably be no objection to be made, for the principle was now fully recognized that it was the duty of the State to reduce the interest on the Debt when the price of money permitted that operation. The question was whether the terms offered were sufficiently good to induce people voluntarily to make the exchange, or whether there were other inducements to be added besides the value of the Stock? The Chancellor of the Exchequer had stated that if those to whom this offer was made did not voluntarily avail themselves of it, they would not be allowed to remain in their present position, but that they must take the probability, and almost the certainty, of having compulsory legislation brought against them. They would, therefore, not be free agents in the matter. They would have hanging over them the prospect of compulsion being exercised; and he thought the matter would not have been put in a satisfactory position if it were left on that footing. If certain persons should be induced to exchange from the higher to the lower rate of interest through fear of compulsion—a well-founded fear—and if the Government, after all, did not choose to bring in a Bill, and did not exercise that compulsion, then those persons who had made the exchange would have been led to do so by something approaching to false pretences. He thought they had a right to ask the Chancellor of the Exchequer to tell them, before they proceeded to discuss the Bill in detail in Committee, whether he really did or did not intend to use compulsion, and to give the House a clear idea as to the nature of the compulsion which he intended to use. The right hon. Gentleman said this was an imprudent thing to do; but he would remind him that he was undertaking an experiment which could not be said to be other than a bold one. Undoubtedly, the suggestion had been made that no harm would result if it failed. This suggestion, however, could not hold water, because an experiment of this kind, if it failed, would not leave things as they were before. It would shake confidence in our great Stock, the Stock of Consols. If the measure failed, all that would be said would be that it was a disappointment, and reflected, to a certain extent, upon the position which had been taken up by the Government; but, on the other hand, if they were to have the compulsory process, they ran, as had been shown by the hon. Member for Stafford (Mr. Salt) a great risk indeed. The right hon. Gen- tleman had answered his hon. Friend by saying that there would be no risk, because if the values of money were seriously altered, all that would happen would be that this voluntary process would stop and go no further. But the question was as to the compulsory, and not the voluntary process. He thought they had a right to ask that a clear idea should be given as to the whole scheme of the Government. The one proposal was not independent of the other. The voluntary scheme depended for its success, in a great measure, upon the compulsory force behind it, and which was to be used as a lever to carry through, the voluntary process; but they were not told anything about it. In these matters it was of the highest importance that they should act trustfully with the creditor, and tell him exactly what it was he had to expect; and if they made a great change they should explain to him the nature of their proposals, in order that he might regulate his proceedings accordingly. There could be no doubt that the position of Consols was one of an exceptional character. There was an exceptional confidence in Consols, and among other things that confidence was due to the expectation which, up to the present year, everyone had been encouraged to form that that Stock could not be made the subject of compulsory commutation. They were now going to destroy that confidence, and he thought it was a serious thing to do to shake the confidence in that great Stock. He thought they would shake that confidence still more if they held out in an indefinite way the prospect of some compulsion being used at some future time. They did not know how long this option was to be left open.


I stated the other day that the option would be open for a month or more.


said, he must impress upon the Chancellor of the Exchequer, and upon the House, the importance of considering, before the Bill got into Committee, what the whole proposal was to be. They ought to know how long the option was to be exercised, what the real position of the creditor was to be, and what was to be the action that was to follow. He admitted the principle of the reduction of the interest whenever there was a pro- per occasion to do so, and he was not disposed to make any objection to proceeding with the Bill; he did not even wish his right hon. Friend to divide the House; but before the Bill got into Committee they ought to insist upon a fuller explanation being given with reference to the compulsory power.


said, he wished to make a few remarks in support of the Bill. He had been engaged in commerce most of his life; and he was, therefore, apt to take a more thoroughly commercial view of this question than some of those who had previously spoken. He found that the value of money had been declining in this country for years, and that merchants and bankers now paid a much lower rate of interest than they used to do—securities with a fixed interest had also risen greatly in price. He thought that hon. Members must admit that, being sent to Parliament to administer the affairs of the nation, they must look at these matters as they would look on their own interests in business. If it was a fact that all borrowers for commercial purposes were paying much less than previously—and it undoubtedly was— then it was our duty to see that the nation secured for itself a like advantage, and this the Bill of the right hon. Gentleman the Chancellor of the Exchequer was likely to effect. The general impression among commercial men in the City, so far as he had been able to gauge it, was that the new Two and a-Half per Cent Stock would, within a reasonable number of years, be worth par, and would become a favourite investment thereat. The issue of this Stock at a discount was an inducement to men of speculative ideas to buy very largely, not so much with the view of receiving 2½ per cent for their money, as with that of making a profit within a short time. This speculative quality would materially assist the Chancellor of the Exchequer in making the conversion. He would suggest to the right hon. Gentleman the advisability of dispensing altogether with the Stock paying 2¾ per cent. He had noticed that where there were several denominations of Preference Stocks in Railway Companies they were not easily negotiable, but that when they were all consolidated into one large Stock they rose in value, although the security was in no way increased; and in the same way he believed that one denomination of Consols—namely, the Two and a-Half per Cents, would simplify the conversion and add to its value. He was rather inclined to think that the price of conversion might be raised from £108 to £109 of New Stock in exchange for £ 100 of Three per Cents. This would increase the inducement for conversion and insure the rapid success of the scheme. He had listened attentively to the speech of the hon. Member for the City of London (Mr. Alderman Lawrence), who sat on the Government Benches, and with much of it he thoroughly agreed. There could be no doubt that when the interest on Consols was reduced it would re-act on the sorrowing powers in other directions, and thus make the charges on commerce and on investments somewhat smaller. When, however, the hon. Member went so far as to claim that cheap money always made trade good, he begged to differ from him. He supposed we never had a more serious depression of trade than now existed, although the rate of money had been for years declining. He, however, believed the converse of the proposition—namely, that depression of trade made cheap money; and it was greatly owing to this that the Chancellor of the Exchequer now had such an opportunity of carrying out his scheme. He merely made these remarks to prevent hon. Gentlemen—who were not engaged in commerce—running away with the idea that the ability to borrow at so low a rate meant an increase of national prosperity. With regard to the compulsory powers, he was very sorry to differ from his Friend and Leader, the right hon. Member for North Devon (Sir Stafford Northcote), on this point. He thought that the compulsory powers ought to be left in the hands of the Chancellor of the Exchequer. There had been much discussion as to their being legally able to pay off the Debt; but he thought that had been set at rest by previous speakers. Of course, it behoved the Government to be fully assured of the legality of every step they took, as the credit of a country was even more valuable than any scheme of this sort could be. With that qualification, he hoped the House would not ask the right hon. Gentleman to bind himself down to any particular scheme or to any particular time for applying the compulsory powers. He thought it was impossible for him at the present time to foreshadow what he would do, or when he would do it. It was impossible for him to know what the state of the Money Market might be when he saw the time had come for bringing in a Bill for compulsory payment. He believed the compulsory powers, which were legally possessed, were the main feature in the success of this measure. Without they existed no one would be tempted to convert; with them everyone would be anxious to do so, and thus they might never be applied. With regard to the increase in the nominal amount of the Debt, he did not attach any importance to it. He agreed with the right hon. Gentleman the Member for Ripon (Mr. Goschen) that it was more important to look at the annual sum which the nation had to pay than at the capital amount of the Debt. An hon. Member had spoken about the hardship to daughters; but he thought daughters must, in a matter of that sort, take their chance along with other people. When their fathers or guardians invested their money in Consols they knew perfectly well what they were doing, and the contingencies which were attached to the investment. If, instead of Consols, they had chosen Railway Shares, or investments in land, they would have been subject to many more contingencies than the operation which was now about to take place. Moreover, it must not be forgotten that for each £100 of Three per Cent they would have in exchange £108 of the New Stock; and thus they might, when the Stock reached par— as he believed it would—sell out and invest the money elsewhere, if the conditions of the settlement allowed. He hoped hon. Members would not think that he had any want of sympathy with daughters; he would, on the contrary, regret their suffering any detriment; but he thought that such an important saving to the nation, as was now proposed could not be set aside for the sake of a small class. Assuming that the law allowed the Chancellor of the Exchequer to apply the compulsory powers, he believed the Bill would produce a great gain to the finances of the country, and he wished it every success.

Question put.

The House divided:—Ayes 117; Noes 34: Majority 83.—(Div. List, No. 106.)

Main Question put, and agreed to.

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