§ Order for Committee read.
208§ Motion made, and Question proposed, "That Mr. Speaker do now leave the Chair."—(Mr. Chancellor of the Exchequer.)
§ MR. J. G. HUBBARD, in rising to move—
That it is inexpedient, with a view to the reduction of the burthen of the Public Debt, to effect such Conversions of Stock as will add to the capital values which must be redeemed if the Debt they represent is to be extinguished,said, that the Motion was not of his originating, but it was a repetition of a principle strongly insisted upon by the hon. Member for Cambridge (Mr. W. Fowler) last Friday; it was a recognition of a lesson he (Mr. Hubbard) had learnt. And there was more than one lesson to be learnt from the discussion which took place on this Bill on Friday last. In the Division which took place on that occasion there was remarkable unanimity on the part of the followers of the Government. With hardly an exception they all voted in favour of the second reading of the Bill; but the arguments of the speakers for the Bill were of an absolutely mutually destructive character. The hon. Member for Cambridge insisted upon this point—that instead of a Two-and-a-Half per Cent Stock, the Stock which ought to have been introduced by way of an innovation was a Two-and-Three-Quarter per Cent Stock. The hon. Member for Bedford (Mr. Magniac), however, scouted a Two-and-Three-Quarter per Cent Stock. The hon. Member for Bedford was followed by the right hon. Gentleman the Member for Ripon (Mr. Gosehen), who took a very remarkable line of argument—a line of argument which he had since followed up by a letter to the Press. The right hon. Gentleman's argument amounted to this—that it was utterly immaterial whether they added to the nominal amount of Debt or not, because, upon his theory, an alteration of the denomination of the Stock would not at all alter its value. But the right hon. Gentleman seemed to forget that, although the statement he made was a perfectly accurate one in figures, it placed the Chancellor of the Exchequer in the most curious predicament, that it destroyed absolutely and wholly the entire consideration he proposed to give to the fund holder to induce him to accept the terms offered. As calculated by the 209 right hon. Gentleman the Member for Ripon, the matter was strikingly convincing, and he (Mr. Hubbard) would state it to the House in a minute. The right hon. Gentleman imagined that the £600,000,000 of Three per Cents converted into £648,000,000 of Two and a-Half per Cent Stock would remain at the same nominal value; and so it might if it were never to be operated upon in the way which the Chancellor of the Exchequer had in years past been labouring to operate upon it—that was to say, in the way of reduction by purchase. It was impossible to suppose that they could operate to the extent of millions a year upon Stock limited in amount, without raising its value. The only way that they could account for the recent rise in the price of Funds was the persistent notion of the Government in redeeming it out of the Surplus Revenue; but for that they would not see the Consols at their present price. A very curious conclusion was to be drawn from the statement of the right hon. Gentleman the Member for Ripon. According to the statement of the right hon. Gentleman, the fundholders, under the operation of the Chancellor of the Exchequer, would acquire £600,000,000 of Stock, which would be worth £552,000,000, and £48,000,000 of extra Stock, which would be worth £44,000,000, making altogether £596,000,000 against £600,000,000. It was perfectly true there was really no sensible difference one way or other; but where was the consideration to induce the fundholder to accept the change? The hon. Member for Cambridge (Mr. W. Fowler), in the course of his very interesting speech, alluded to the opinion which had been expressed at different times upon the subject of adding to the nominal value of Stock, and he quoted the opinion of Mr. Hamilton—a very eminent financier at the beginning of this century, whose works had been recently republished. Mr. Hamilton was clearly of opinion that they ought never to add to the amount of Stock; and what he said on that subject had been repeated emphatically, in still stronger terms, by his commentator, Mr. M'Culloch. Now, one of the largest operations of late years in the way of reduction of the interest on Debt, was the operation made by Mr. Goulburn in 1844—an operation which was made in the simplest and 210 clearest manner. Mr. Goulburn argued that Three-and-a-Half per Cents were at such a price, and the rate of interest was such as to satisfy him that the public fundholder would be willing to take diminished interest, and if he did not, money could be raised wherewith to pay him, and, therefore, without scruple, Mr. Goulburn undertook to reduce the interest on £250,000,000, or to make good the amount which might be claimed. As it happened, Mr. Goulburn was peculiarly fortunate, because out of the £250,000,000, the interest on which he undertook to reduce, very little was cash claimed. What he (Mr. Hubbard) desired to do was to produce Mr. Goulburn as an authority upon the very important question with which the House was now called upon to deal. Mr. Goulburn had to consider whether, in the operation that he contemplated, he should connect with the reduction of interest any increase in the nominal value of the Stock, and the expressions which he used upon the point were so very strong and clear, that he (Mr. Hubbard) would venture to read them to the House. Mr. Goulburn said—I do not think it would be just to purchase great present advantages to the country at the expense of burthens to be sustained by those who come after.And, again, he said—To incur additional Debt in times of peace, and thus burthen those who are to come after us.… is a course which I do say I myself reprobate.…To create a Two-and-a-Half per Cent Stock, and give an equivalent in that so as to make it produce Three per cent, per annum, the augmentation of the capital of the Debt must have been increased by such a plan not by £10,000,000 but by £50,000,000, and although the saving by that arrangement to the public would have been £1,200,000 a-year, yet on the principle which I have laid down, I do not think that saving would justify or compensate for an addition to the mass of our Debt by a capital of £50,000,000 to be paid hereafter."—(3 Hansard, [73] pp. 737–8.)It was curious that the concluding sentence he had read recited the exact figures which the right hon. Gentleman the Chancellor of the Exchequer had now in mind. The Chancellor of the Exchequer meant to create exactly £48,000,000 of Stock, in order to effect an annual saving of interest of £200,000, so that he (Mr. Hubbard) most appropriately quoted the authority of Mr. Goulburn, which he trusted would prevail with the Chancellor of the Exchequer and the 211 House, and dissuade thorn from taking a step which was unprecedented in financial operations. The House of Commons received the scheme of Mr. Goulburn with general acquiescence. Mr. Francis Baring, who was then one of the chief financial authorities in the House, said—The first great advantage of the plan was.… that it did not create any additional Debt. That in itself was a great public advantage."— (Ibid. 748.)He (Mr. Hubbard) would only say that, having looked through all the authorities upon the subject, he found that it was the opinion of Mr. Hamilton, a great authority in his day, that it was not only the opinion but the action of Mr. Goulburn, and that that opinion was corroborated by Mr. Francis Baring, that it was bad policy to create additional Debt by way of diminishing the yearly interest. He was aware that the Chancellor of the Exchequer conceived that, by creating Terminable Annuities, he would cancel, as it were, the disadvantage and the loss attending the creation of additional Debt. He (Mr. Hubbard) said most decidedly that it would do nothing of the kind. The creation of Terminable Annuities which the Chancellor of the Exchequer had undertaken to mix up in this financial operation was absolutely irrelevant to its merits, and had nothing to do with the question as between the State and the fundholder. The creation of Terminable Annuities was a question between the State and the taxpayers, because every Terminable Annuity was a cause to the taxpayers of a so much larger contribution towards the National Revenue. He must insist upon the fact that Terminable Annuities in no degree whatever cancelled the disadvantage of creating an additional amount of Debt. In these matters the House and the country were always anxious to give every possible support and to place all possible confidence in the administration of the financiers of the time. It was a confidence they had a right to claim; but, on the other hand, it was a confidence that the country had a right to ask them to prove they were entitled to. He frankly admitted that he did not place confidence in the present administrators of the Treasury in this matter, and he would give the House an instance of why they ought also to hesitate before they placed full 212 confidence in the present management of the Treasury. Only as late as last autumn the Government brought in a National Debt Bill, and that Bill was passed for the purpose of enabling them to convert a certain amount of Consols into Two-and-a-Half per Cent Stock, the Consols being in the hands of the National Debt Commissioners. The object of the Bill was couched in these terms—A Bill to enable the National Debt Commissioners to surrender £4,000,000 of Consols, and to receive in exchange £4,000,000 of Two-and-Half per Cents, and to receive the difference of value between the two Stocks in a Terminable Annuity of equivalent capital value.But, for some reason or other, the Treasury altered their minds during the Recess, because they dropped the Bill and brought in another which differed from the previous one in a way he would now notice. In. the new Bill, brought in in the month of March, the following words were added to the words—"In a Terminable Annuity of equivalent capital value:"—With such addition to the said difference as the Treasury, in agreement with the National Debt Commissioners, may determine to be necessary in order to secure the Commissioners from any loss by reason of the conversion.It was to him a perfect novelty in finance to find that, after having established between two values a certain equivalent, they should then require to make an addition to the consideration to make the equivalent perfect. In this Bill the Treasury undertook to give an extra consideration to the Commissioners in order to secure them from loss. Let the House see how that operation had worked out. The £4,000,000 of Consols were valued, he found, according to the price of the day, at about 102¼. The Two-and-a-Half per Cents were valued at 90⅞, and the difference between the two prices being £11 7s. 6d, the Treasury added 2 per cent to the equivalent to secure the Commissioners from loss, so that £13 7s. 6d. was the full amount of the difference they were going to pay. The consequence of that was, the Commissioners would receive as income-interest—on £4,000,000 Two-and-a-Half per Cent Stock, £100,000; interest on £535,000, at 3 per cent, £16,050; total, £116,050, instead of the £120,000 which they surrendered. 213 That he mentioned as an exhibition of Treasury finance. They passed two Acts of Parliament in order to make an operation which was to save the Commissioners from loss; but, instead of their being saved from loss, they were actually exposed to a loss of £3,950 a-year. He maintained that, upon their own showing, it was not safe to put absolute trust in the present financiers of the Treasury; and, in his opinion, the House would not be doing its duty if it did not require a full and explicit account of the operations which were to be carried out. There were many points connected with this question which he abstained from touching upon, because they would lead him to take up too much of the time of the House. He simply wished to move a Resolution which he thought was a safe and legitimate one, and one which was in accordance with the opinions and practices of all financiers in past years; it was to the effect that it was not a wise financial operation to add to the nominal value of the Debt to make an annual saving of interest. It was not necessary that there should be such an addition at the present time, because, if the Chancellor of the Exchequer wished to act in this matter with straightforward justice to the fundholder, all he had to do was to follow the example of his great Predecessors, and Mr. Goulburn in particular, ascertain what the excess of interest was, and, instead of altering the capital value, leave the capital value alone and diminish the rate of interest. That was the course pursued by Mr. Goulburn; that was a course simple and straightforward, requiring no complications, requiring none of the mystification surrounding Terminable Annuities, which had nothing to do with the subject, and which only served to throw dust in the eyes of the public. In finance simplicity was the truest policy, for the more simple they made their operations the more customers they found willing to deal with them. He could not look forward with any satisfaction to the Bill as it now stood, and, therefore, he moved the Amendment which stood in his name.
§
Amendment proposed,
To leave out from the word "That" to the end of the Question, in order to add the words "it is inexpedient, with a view to the reduction of the burthen of the Public Debt, to effect
214
such Conversions of Stock as will add to the capital values which must be redeemed if the Debt they represent is to ba extinguished," — (Mr. J. G. Hubbard,)
—instead thereof.
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. SCLATER-BOOTHsaid, that no doubt the right hon. Gentleman the Chancellor of the Exchequer would answer his right hon. Friend before Mr. Speaker left the Chair; but it would be greatly to the advantage of hon. Members, and he himself especially should be very much obliged to the right hon. Gentleman, if he would give some explanation as to the course he proposed to pursue, or as to the power he possessed in regard to setting up fresh Terminable Annuities. He (Mr. Sclater-Booth) was under the impression that the greater part of the available fund from the Savings Banks had been already appropriated for the purpose of the Annuities which had been granted of late years. Assuming for a moment, and they might fairly do so, that the right hon. Gentleman's proposal would be ultimately successful, half of the whole —that was to say, some £30,000,000— would be required in the course of the next 12 months. He wised to know by what means, and under what power, the right hon. Gentleman Bought to set up these Terminable Annuities?
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, he had hoped that some hon. Gentleman would have followed his right hon. Friend, because, by requiring him to speak at once, he should not be in a position to answer any arguments which might be adduced later on. However, as no one rose, he would do his best at once to meet the case which had been put by his right hon. Friend (Mr. Hubbard), and to answer specifically the questions which had been put to him. He must remind the House that the right hon. Gentleman came before them as a distinct opponent of the Bill and everything connected with it, and not so much as desiring that the reduction of the Three per Cents should not take place. The right hon. Gentleman argued strongly against the reduction, under any circumstances the other day; therefore, in the proposals he made now they must take him as one who did not wish 215 to see the Three per Cents reduced, and who put forward arguments in favour of his present Amendment, having that view before him.
§ MR. J. G. HUBBARDsaid, he did not wish the subject to suffer on his account. It was true he was an opponent of the Bill altogether; but in his opposition to it he had been beaten, and he was only now endeavouring to improve the measure.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, he was not at the present moment going again over the discussion they had the other night as to the effect of the Government proposals. The case had been put very fairly by the hon. Member for Cambridge (Mr. W. Fowler) and the hon. Gentleman the Member for Bedford (Mr. Magniac), who was not here to-night, and it had been so conclusively answered by the right hon. Gentleman the Member for Ripon (Mr. Goschen), that it was not worth while going over the matter again. Since the debate, the same case had been put in great detail in one of the public journals, and he had read with care the figures put before them. But they had contained nothing new; the case was exactly as he had stated it on a previous occasion. If they succeeded in making any reduction in the Three per Cents, and applied, as proposed, a certain part of the interest so saved to the reduction of the additional capital, not only the full amonnt of the reduction of the Debt under the Act of last year would go on, but either a larger amount, or such a rise in the value of Two and a-Half per Cents as would foreshadow further reductions. These arguments, so lucidly developed by the right hon. Member for Ripon (Mr. Goschen), had not been met. He would rather not go again over the old ground, but would endeavour to meet the new specific argument that the right hon. Gentleman the Member for the City (Mr. Hubbard) had stated that night. The right hon. Gentleman began by comparing the operations which he (the Chancellor of the Exchequer) proposed to undertake—namely, this large advantage to the taxpayer and increase of the Sinking Fund—with Mr. Goulburn's operations in 1844 in regard to the Three-and-a-Half per Cents. What was Mr. Goulburn's position? He was able to convert the Three-and-a-Half per 216 Cents, which stood at a very high premium, into Three per Cents, by two steps; these Three per Cents standing at a premium also. Therefore, the cases were not at all analogous. Her Majesty's Government, at the present moment, had to convert Three per Cents ultimately, and he believed mainly, into Two-and-a-Half per Cents. Two-and-a-Half per Cents were not at the present time at par—they were only at 92, or something of that kind; and the cases, therefore, were totally different. They could not apply the same method now which Mr. Goulburn was able to apply in 1844; and if the right hon. Gentleman saw any analogy between the present and any past transaction, that analogy must be drawn from the Navy and Irish Five per Cents, which were reduced to Four per Cents—an operation carried through in 1822 with perfect success, and by which £100 of the old Five per Cents were converted into £105 Four per Cents. That was an operation somewhat analogous; but there was this difference—that in the operation of 1822 no addition was made to the Sinking Fund in order to pay off the increase in the capital of the Debt. The Government were now proposing to add to the Sinking Fund a sufficient amount to pay off the augmented Stock; therefore, they were following the operation of 1822, but improving on it. When the right hon. Gentleman opposite, therefore, said that the transaction proposed by the Government was unprecedented, he quite forgot what had taken place with regard to the Five per Cents in 1822. Then the right hon. Gentleman had said that in the plan which the Treasury were carrying out, the operation of the Terminable Annuities only affected the taxpayer, and had nothing at all to do with the Debt. On the contrary, if they created a Terminable Annuity, they ipso facto reduced Debt. The right hon. Gentleman had imported into this subject a wholly different question. He spoke of some special power given by law to convert £4,000,000 of Three per Cents into Two-and-a-Half per Cents, and he said we had mismanaged this. He was entirely mistaken from first to last. There was no reference in any Act to £4,000,000. But the Act of last year continued the old powers of the Commissioners for the Reduction of the Na- 217 tional Debt to convert any amount of Three per Cents held for the Post Office Savings Banks into Two-and-a-Half per Cents, obtaining a Terminable Annuity for the difference in value between the Three per Cents and the Two-and-a-Half per Cents. The Government had thought that the words of the Act, when they spoke of the difference of value, intended a difference in the market value. But, on reference to the previous Act, they were advised during the autumn that the word "value" meant not the market value, but the nominal value, and that they would have to give to the Commissioners for the Reduction of the National Debt, in respect of the change proposed, an Annuity equivalent to 10s.—the difference between £3 and £2 10s. This certainly was not the intention of the framers of the Act. In order to correct that, the Government introduced a Bill at the beginning of the present Session, by which the difference of value was set forth to be the difference of market value; and to make the transaction perfectly safe, there was to be added to that difference of market value such amount of margin as might be agreed to. He thought he had explained this at the time. The result of the operation was exactly the opposite to what the right hon. Gentleman supposed. It had been, so far as any exchange had taken place, profitable to the Savings Banks by a considerable sum, which would be augmented by any further transactions at present prices. These were all the grounds upon which the right hon. Gentleman asked them to reject the Bill by the Amendment which he now proposed.
§ MR. J. G. HUBBARDsaid, he did not know whether the right hon. Gentleman doubted the correctness of his calculation, which was that, under the arrangement he had made with such care, the Commissioners for the Reduction, of the National Debt would be losing £4,000 a-year?
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, that was not so. It was just the reverse. The right hon. Gentleman did not understand that if they had acted under the old Acts, as interpreted by their legal advisers, the loss would have been serious; but under the present Act the Commissioners would, he thought, gain more than £4,000 a-year. He had not ex- 218 pected this question to be imported into the present debate, and he could not give the exact figures. He had replied to all the new matter introduced by the right hon. Gentleman.
§ SIR STAFFORD NORTHCOTEwished to know whether the right hon. Gentleman the Chancellor of the Exchequer could give the House any idea of the plan by which he contemplated carrying out the compulsory arrangement?
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, that he had stated the other day that he did not think it would be expedient or wise to give any such information, because the nature of the compulsory process would depend entirely on the amount of Stock to be operated upon. Suppose they had a large amount of Stock to be operated upon, the method of operating upon it would be quite different from what it would be if they had only a small amount of Stock to operate upon. Therefore, to produce to the House the details of an operation the terms of which they had no knowledge of would be very inexpedient. Of course, when the compulsory process was taken in hand, it would have to be the subject of a distinct Act of Parliament in which the details would have to be set out.
§ MR. J. G. HUBBARDsaid, that nothing but the knowledge of the terms of the compulsory power would induce people to assent to the arrangement.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)Not at all. It was the knowledge of the compulsory power, and not of the manner in which it would be put in operation, which would affect the public. No Minister could, with due regard to the public interest, declare now what he would do in a contingency which had not arisen, and which, when it did arise, might give a perfectly different complexion to the matter from that which it at present bore.
§ SIR STAFFORD NORTHCOTEWhen will the right hon. Gentleman be in a position to bring in his compulsory Bill? During the present Session?
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)I have already stated that we do not intend to bring it in during the present year. We have asked for sufficient time to carry out the 219 present operation before we go into the compulsory question.
§ MR. H. H. FOWLERsaid, he did not wish to renew the discussion which had taken place the other day, and would only suggest to the right hon. Gentleman opposite that he should not divide the House on his Amendment. He must say to the Chancellor of the Exchequer that at that hour of the night they had better not go into details in Committee. It was too late to discuss all these elaborate points. They ought to have the freshness of an earlier hour in the day before they brought their minds to boar on the matters presented to them in the Bill; and he should think that if they got the Speaker out of the Chair it would be quite sufficient for tonight, and that the details would be better reserved for another day.
§ MR. W. H. SMITHtrusted that the right hon. Gentleman the Chancellor of the Exchequer would agree with what had fallen from the hon. Member who had just down. No doubt, that discussion in Committee would occupy a considerable time; and, no doubt, the announcement which the right hon. Gentleman had made that it was not his intention to explain to the House the compulsory proposals which he contemplated putting into effect, would cause the discussion in Committee to take place at greater length. It would be impossible, he thought, to proceed without very considerable discussion on the 6th clause. It was clear that that was a clause of very great importance, which would be greatly affected by the operation of this compulsory power. A great many things would have to be explained at some future time, and it would be impossible for anyone occupying the position of Trustee to discharge his duty satisfactorily pending such explanation.
THE CHANCELLOR OF THE EXCHEQUER (Mr. GUILDERS)said, that the right hon. Member who had suggested that it would be desirable that they should not proceed with the 6th clause that night, was perfectly right; but he certainly should prefer disposing of the preceding clauses and the Amendment of his right hon. Friend before reporting Progress. If the Amendment were carried—that was to say, if the only conversion were to be from Three per Cent to Two-and- 220 Three-Quarter per Cent at par—it would mean the entire destruction of the Bill. When they came to Clause 6, he should be very glad to agree to the adjournment.
§ MR. J. G. HUBBARDI shall be glad to withdraw my Motion—or, I would rather it were put, and negatived.
§ Question put, and agreed to.
§ Main Question, "That Mr. Speaker do now leave the Chair," put, and agreed to.
§ Bill considered in Committee.
§ (In the Committee.)
§ Clause 1 (Creation of new 2¾ per cent, stock, and of additional 2½ per cent, stock).
§ MR. W. FOWLERsaid, the first Amendment on the Paper stood in his name; but he should like, with the greatest deference and with the utmost friendliness, at half-past 1 o'clock in the morning, to propose that they should not go into a question involving Stock to the value of £500,000,000. It seemed to him to be hardly the right way of conducting Business of such importance to proceed with it when the House was exhausted. The right hon. Gentleman said, truly enough, that the Amendment he (Mr. W. Fowler) had on the Paper was fatal to the Bill. But that was the very reason why the Amendment was so important, and rendered it unsatisfactory to him that they should discuss it under present circumstances. Of course, if the House desired it, he would move the Amendment; but, at the present moment, he thought it his duty to move to report Progress.
§ Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."— (Mr. William Fowler.)
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, he would appeal to the Committee on this matter. They had had a long debate on the second reading, during which the hon. Member had elaborated his proposal. At the time he had stated that such an arrangement would be absolutely fatal to the Bill. It was, that the only offer should be to the present stockholders to take Two-and-Three-Quarter per Cent Stock at par. That, as he had al- 221 ready stated, was an offer which no one could dream of accepting, and, therefore, if that were inserted in the Bill, the Bill would come to an end. The House had accepted the principle of the measure on the second reading, and the hon. Member wished to move what was tantamount to the proposal of the right hon. Gentleman opposite (Mr. Hubbard), who had said that the nominal amount of capital, should not be increased. If they did not increase the amount of capital, the only way to avoid it was by adopting the plan suggested by the hon. Member. He had had an opportunity of confirming what he had told the House on the last occasion—namely, that if that were the only option to be given, he had the highest authority for saying that the Bill would be at an end. It was useless to make that offer. It was useless to say to people—"You now receive Three per Cents, and you can now take Two-and-Three-Quarters per Cents or not as you like." The answer would be—"Of course we will keep the Three per Cents. Why should we take less when we can get that amount?" Surely, if that were the case, it was much better to settle the matter at once, and settle it, as they had already practically done, in negativing the proposal of the right hon. Gentleman opposite. With regard to the hour, half-past 1 was not too late for them to go on with a discussion of a financial Bill of this kind. Measures of this sort were purposely exempted from the Half-past 12 Rule. He had known questions like this to be discussed at a much later hour than half-past 1, and to be discussed with great advantage; and he therefore hoped that the hon. Gentleman would withdraw his Motion, and would make his proposal, and allow the Committee to discuss it and decide upon it.
§ MR. J. G. HUBBARDsaid, that if the hon. Member brought forward his Amendment, he (Mr. Hubbard) should feel it his duty to express his opinion upon it, probably at some length; and he did not think that, seeing that there were £600,000,000 worth of Stock at stake, that he should be called upon to do that now. The proposal of the hon. Gentleman came to what he (Mr. Hubbard) believed to be a proper way of dealing with the matter, and, therefore, he should have to express his opinion upon it at great length.
§ SIR STAFFORD NORTHCOTEconsidered the remarks of the hon. and right hon. Gentleman to be perfectly justifiable, looking at the hard day they had had. To his mind the Motion was a very reasonable one.
§ MR. WARTONsaid, that they had not only had a very hard day's work, but they were to have an early day's work to-morrow.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)still maintained that the hour was not an unreasonable one, seeing that the principle of the Bill had already been adopted by the House. If the hon. Gentleman would proceed with his Amendment, which he must say on the face of it was a practical absurdity, the Committee were perfectly capable of dealing with it; and, as he had said, there was nothing unusual in discussing measures of that kind at that hour.
§ MR. W. FOWLERsaid, the right hon. Gentleman had made a very strong statement when he had declared that his (Mr. Fowler's) proposition was practically an absurdity; but as that might lead to some discussion, and as it might be necessary to go into the principles of the Amendment, he would not deal with the question now. What, however, he should be prepared to say hereafter, would be this—that the Amendment would be an absurdity if the right hon. Gentleman were to offer something far better to the fundholding interest.
THE CHAIRMANI must point out that the hon Gentleman is not in Order in referring to the Amendment, or to any alternative.
§ MR. W. FOWLERI only wished to draw the attention of the Chancellor of the Exchequer to this point.
§ Question put.
§ The Committee divided:—Ayes 23; Noes 58: Majority 35. — (Div. List, No. 118.)
§ MR. W. FOWLERsaid, he wished to move, in page 1, line 12, to leave out the word "and." This was a small proposal; but it really had the effect of raising the whole question, as it was the first of a series of Amendments consequential one upon the other. The point before them was a very large one, and in one respect a very simple one. The Chancellor of the Exchequer had told them it was impossible to issue Two-and-Throe-Quarter per Cents at par. The 223 right hon. Gentleman had pledged his word to that; but he had said that his proposition in the Bill was to give them something much better than that. Why, then, did he come down and tell them that he could not depart from his original proposition? How did the right hon. Gentleman know that what he (Mr. W. Fowler) proposed was impossible? The right hon. Gentleman had asked the opinion of A, B, C, and D; but opinions differed upon these matters; and what he (Mr. Fowler) wished to lay down in this proposition was that if they could issue Stock at par without additional capital at diminished interest, that proposal would have his hearty support; but if there was at the same time diminished interest and increased capital, then he could not sympathize with the arrangement. He had pointed out, at considerable length, his reason for objecting to an increase of capital the other day, and he would not weary the Committee by repeating them now except in one point, which he had neglected to make perfectly clear the other day. He wished to point out the contrast between Two-and-Three-Quarter per Cents at par and what the Chancellor of the Exchequer proposed — Two-and-a-Half per Cents at £108. Two-and-Three-Quarter per Cents at par would save in 20 years about £30,000,000; and if the Chancellor of the Exchequer absorbed by his Sinking Fund the whole of his extra Stock in 20 years, he would not save the taxpayer 1s. in the course of 20 years. The whole of that saving would be absorbed by the Sinking Fund in 20 years. The right hon. Gentleman said he was going to give 50 years, and therefore he should be helping the present taxpayers by putting the burden on the future tax-payers; but if his (Mr. Fowler's) proposition was carried out, there would be an immediate benefit to present taxpayers and to all future taxpayers. The Chancellor of the Exchequer proposed that which he said he could do, as against that which he said he could not do; but he objected to what the right hon. Gentleman proposed, because he considered that it would be no benefit to the taxpayer to do what the right hon. Gentleman suggested, for he proposed to increase the capital to such an extent as to neutralize the benefit of what he was about to do. If the right hon. Gentleman would wait till he could 224 issue Stock at par with reduced interest, he would find that he had clone something worth doing; but he had better wait till then. According to the right hon. Gentleman's ideas, he had only to wait a very short time; but he had better wait rather than disturb matters at present, with the risk of meeting with a disagreeable failure. The right hon. Gentleman might succeed and he might not; but he very much objected to the proposition which dangled something "before the world which might be more tempting than Two-and-Three-Quarter per Cents at par. He protested against this proposed increase of capital, and he made his Motion also because he thought the time was very near when, unless there should be some great public crisis, Two-and-Three-Quarters per Cents could be issued at par.
§ Amendment proposed, in page 1, line 12, to leave out the word "and."—(Mr. W. Fewler.)
§ Question proposed, "That the word" "and" stand part of the Clause."
THE CHANCELLOR OF THE EXCHEQUER (Mr. GUILDERS)said, he felt it difficult to deal with his hon. Friend, because he took one view at one time and a different view at another. At one time the hon. Gentleman said the proposal was likely to be a very disagreeable failure, and now he urged that the only offer should be one still less advantageous. He had said that this offer would be accepted by no one, and his hon. Friend asked how he knew that? The only way in which the Chancellor of the Exchequer could know what the probability of any such plan succeeding was by consulting those who were authorities on the subject, and they told him that if he adopted the hon. Gentleman's proposal he might as well abandon the Bill. He hoped the Committee would not accept the Amendment, which would be fatal to the Bill.
§ MR. W. FOWLERpointed out that the right hon. Gentleman had not said anything about compulsion, of which a great deal had been heard. He greatly objected to the idea of increasing the capital fund, and he should certainly move his Amendment.
§ MR. GOSCHENsaid, he thought the Amendment had been put down in order to reduce the Bill to a reductio ad absurdum, and that the Chancellor of the 225 Exchequer had proceeded in a much clearer way than that suggested by the hon. Member for Cambridge (Mr. W. Fowler). He thought also that a great many people would rather wait for compulsion than have it now. The hon. Member wished to diminish the interest; but then the question arose, whether there was any sufficient inducement held out to the fundholders, if no fear of ultimate compulsion should exist? The question before the Committee was, whether they would look to get this reduction of interest at once, or wait for the chance of getting it? He should oppose the Amendment, because it would practically destroy the Bill.
§ SIR STAFFORD NORTHCOTEsaid, there was no doubt that the conversion might be more properly and effectually done when they were in a position by one operation to reduce the interest of the higher priced Stock to the lower priced Stock, giving a guarantee for a certain number of years against a further conversion. That could be done under circumstances similar to those of 1844. The House having passed the second reading of this Bill, he did not think it would now be consistent to support such an Amendment as this; but the fundholder had a right to know what was the nature of the pressure there would be behind the offer by way of compulsion. He did not wish to throw anything in the way of this experiment, for he thought it was desirable to make it; but he must urge the right hon. Gentleman to give some information on this point.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, he would always do his best to meet the right hon. Baronet; but it would be imprudent to state now what would be the nature of the Bill to be introduced next year or the year after. That would depend on the amount of Three per Cent Stock outstanding, and the condition of the market.
§ SIR STAFFORD NORTHCOTEIf the interest went to the payment of Debt, of course the loss would be nominal; but the effect would be that a larger proportion would go to the redemption of Debt. But the right hon. Gentleman said he did not mean that the larger amount was to go to the redemption of Debt, but that £1,800,000 was to be saved to the taxpayer. In that case an alteration of the law would be necessary.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)I think if the right hon. Gentleman refers to the terms of the Bill he will see that it has been, provided for.
§ MR. J. G. HUBBARDThe Chancellor of the Exchequer has not explained one of my points. I asked whether these Terminable Annuities would swell the amount chargeable for interest on Debt beyond what it is at present?
THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILLERS)No, Sir. The operation of the present Act would be unchanged, but some reduction in the amount paid for interest would occur, and an increase, although a smaller one, in the Sinking Fund.
§ MR. W. H. SMITHSir, I do not know whether anything I can say would induce the right hon. Gentleman to alter the position he has taken up with regard to the exercise of compulsory power in the matter of conversion of Stock; but I cannot help thinking that the refusal of any information on that point will place great difficulties in the way of the operation which he seeks to effect. The uncertainty, the mystery, and the fact that no one knows precisely how or when those powers will be applied—if, indeed, they are to be applied at all—are, in my judgment, likely to cause great indisposition on the part of the holders of Stock to accept the proposal of the Chancellor of the Exchequer. My belief is that, if he desires to expedite this operation, he should lay it as a complete scheme before the House—show his hand, so to speak—and then the holders of Stock would be in a position to judge for themselves whether it is right to submit to or resist a compulsory operation not yet brought into effect. The uncertainty which prevails on this subject has, I believe, depreciated the Stocks very considerably. Within my own knowledge changes of investments are being effected from the funds into Debenture Stock in various ways, simply because those interested in them are uncertain as to the extent and method of application, and the time when these compulsory powers will come into effect. Of course, the right hon. Gentleman is well advised, and my opinion probably will have little weight with him; but I repeat, that I hold the opinion most strongly that the effect of 227 the measure will be impaired, and that the saving to the public will be less than it would be if the whole intention of the right hon. Gentleman were now explained to Parliament and the country. There is one provision in this clause which I think will give a great deal of trouble without commensurate result—namely, that which relates to the quarterly payment of dividends on the Two and Three-Quarter per Cent Stock. My belief is that the holders of those Annuities do not desire quarterly payment of dividends. The holders of ordinary Railway Debenture Stock do not desire to obtain quarterly dividends; and the effect of the arrangement, I think, will be greatly to increase the charge so far as the Bank of England is concerned, and to set up a new Annuity which would be an addition to Debt for the time being—that is to say, the anticipation of the half-yearly dividend clue on the 5th of January by payment on the 5th of October next, as explained by the Chancellor of the Exchequer on a previous occasion, will necessitate the creation of an Annuity in order to extinguish the additional amount to be provided out of the Revenue of the year. That would be necessarily an addition to Debt, and the concession of a quarter's interest in anticipation will in consequence be a very small boon, if it be a boon at all, to the public.
THE CHANCELLOR OF THE EXCHEQUER (Mr. GUILDERS)So far as Consols are concerned, the quarterly payment of dividends will not affect the charge; because the anticipation of one quarter will leave the whole amount in the same financial year, because the payment of the whole amount comes within the same financial year. As regards the New and Reduced Stocks, the matter is a very small one, and is provided for by the 4th clause of the Bill. As to the quarterly payment of the interest on Two and a-Half per Cents—they are quarterly now—the immediate effect of the change was to send up the Stock. Then, as to the additional trouble at the Bank of England arising out of the payment of dividends quarterly, I would point out to my right hon. Friend that the Bank will be fairly remunerated under the Act. With regard to my right hon. Friend's observations on the application of compulsory powers 228 to the conversion of Stock, I may say that no one appreciates the importance of clearness in matters of finance more than I; and it would have been preferable to me, had it been possible, to state the course which we might take in the present instance; but to do so when the amount of Stock, on which the mode of dealing with it is dependent, is absolutely uncertain, would, in my opinion, be imprudent in the highest degree. All I can say, therefore, is that it is our intention and our desire that the conversion shall take place in the manner most convenient to the public, and that when the proper time arrives we shall state to the House the course we intend to pursue.
§ Amendment, by leave, withdrawn.
§ Clause agreed to.
§ Clause 2 (Exchange of 3 per cent stock into 2¾ per cent, or 2½ per cent stock) agreed to.
§ Clause 3 (Adjustment of accounts as to net saving from, exchange under Bill).
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ Motion made, and Question proposed, "That the Chairman do report Progress, and ask leave to sit again."—(Mr. Warton.)
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, he hoped the Committee would proceed until Clause 6 was reached. There were no Amendments on the Paper, and the intervening clauses were consequential.
§ MR. WARTONsaid, it was quite true that no Amendments appeared on the Paper; but he had an Amendment to move on Clause 3.
§ MR. R. H. PAGETsaid, if the question involved in the clause was as simple as the right hon. Gentleman considered it to be, it would be no less simple when the Committee met again; and yet, by proceeding hurriedly, they might do a serious injury to the finances of the country. It was, no doubt, right for the Chancellor of the Exchequer to appeal to Gentlemen on those Benches; but they had also a right to appeal to him.
The Committee proceeded to a Division.
229 THE CHAIRMAN stated that he thought the Noes had it; and, his decision being challenged, he directed the Ayes to stand up in their places; and, fourteen Members only having stood up, he declared that the Noes had it.
Original Question again proposed.
§ MR. WARTONsaid, he was about to move the substitution of the word "twenty" for the word "fifty" in line 12. It was, in his opinion, unfair to have a Sinking Fund extending over 50 years when the Stock was redeemable in 20. The Committee would perceive that there was a saving of about 6s. per annum in the interest on a Two and a-Half per Cent Stock at 108, as compared with a Three por Cent Stock at par. The question was not to be complicated by references to the £28,000,000 annually applied to the payment of Debt and interest, nor by referring to the £1,800,000 which the Chancellor of the Exchequer said would be saved. To simplify the matter, he would take £100 Stock, the saving on which would be 6s. per annum—the difference between £3 and £2 14s., which was the interest on Two and a-Half per Cent Stock at 108. Now, a Sinking Fund, to raise the £8 required, for 20 years, would cost, at 2½ per cent, 5s. 1½d. per annum, the amount of the saving being no more than 10½d, which was what it really amounted to. A Sinking Fund for 50 years required one-fourth of a 20 years' Sinking Fund, or about 1s. 4d. Thus there was an apparent saving of about 4s 8d., which was dishonestly obtained by throwing on their children by a 50 years' Sinking Fund what ought to fall upon us in a Sinking Fund for 20 years, the time at the end of which the Stock was redeemable.
§ Amendment proposed, in page 3, line 12, to leave out the word "fifty," and insert the word "twenty." — (Mr. Warton.)
§ Question proposed, "That the word 'fifty' stand part of the Clause."
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)The Amendment of the hon. and learned Member would, if it were adopted, have the effect of absorbing the whole of the saving we should make by the reduction of interest, and the present taxpayer would get none of it. I think, in view of that fact, that 230 the Committee will agree with, me when I say it is impossible for us to accept the Amendment proposed.
§ MR. WARTONsaid, he had no wish in this matter to relieve the taxpayer. It was useless to profess to make the taxpayer a saving, and then throw the cost of it upon their descendants. Every operation of the kind proposed ought to be complete in 20 or 30 years.
§ MR. J. G. HUBBARDsaid, he would not carry his objection further than expressing his protest against the principle which had been adopted in this clause of creating Terminable Annuities as a means of concealing the damage done by creating additional Stock. It was a process for which he could find no precedent in the proceedings of any previous Finance Ministers.
§ Amendment, by leave, withdrawn.
§ Clause agreed to.
§ Clause 4 (Provision as to increase of charge arising from earlier payment of dividends) agreed to.
§ Clause 5 (Adaptation of 43 & 44 Vict, c. 36, ss. 3 and 4, to 2¾ and 2½ per cent stock).
§ Motion made, and Question proposed, "That the Clause stand part of the Bill."
§ MR. WARTONsaid, that with regard to the clause he had only one word to say, and that was that the way this Bill had been hurried through the House was perfectly disgraceful.
§ MR. J. G. HUBBARDpointed out that this was the clause which invited the Savings Bank Commissioners to take part in these proceedings. He had already shown that the Savings Bank Commissioners had sustained a loss of £4,000 a-year under the admirable finance of the Treasury, and yet they were asked to take a further part in these unwise proceedings. As a matter of fact, the Commissioners would be reduced to a state of insolvency before long; but it was hopeless to protest against the right hon. Gentleman (Mr. Childers), who had got a large following at his back.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. CHILDERS)said, that all that was said to the Savings Bank Commissioners through this clause was—"If you like to have an investment in the 231 Government Stock you may have it at Two and a-Half per Cent."
§ Clause agreed to.
§ Committee report Progress; to sit again To-morrow, at Two of the clock.