HC Deb 26 May 1884 vol 288 cc1408-29

Order for Second Reading read.


, in moving that the Bill be now read a second time, said: It is more than four weeks since, at the conclusion of my Financial Statement, I dealt briefly with the proposals of the Government in connection with the reduction of interest on the National Debt; and I think it would be well, so long a time having elapsed, if I were to repeat a part of the Statement I then made, and give some further details in explanation of the plan. I have had one advantage in so long a time having elapsed since the original suggestion of my plan; for I am aware of the criticisms which have been addressed to certain conditions of the measure, and I also have gained information as to the manner in which it has been received in the City, where, of course, public opinion is directed closely to questions of this kind. With these advantages I will now state as clearly as I can what are the outlines of my plan, and I will refer especially to one or two points of criticism which I can now deal with better than I could before. Now, what is the proposal? The amount of Three per Cent Stock at the present time is some £612,600,000, and we propose to commence the conversion of that Three per Cent Stock into Two and Three-quarter per Cent and Two and a-Half per Cent Stocks. At present we do not propose to apply towards that conversion any compulsory process whatever. I will explain later on what the compulsory powers are under the existing Statutes, and how possibly they will be at some future time applied, but at the present moment we only ask Parliament to authorize us to make offers to present holders of Stocks—which they may or may not accept at their own goodwill. As to the Two and a-Half per Cent Stock, we propose to offer to the present holders of Three per Cent Stock £108 of that Stock. As to the Two and Three-quarter per Cent Stock we propose to offer them £102 of that Stock, so that all the holders of Three per Cent Stock will have the option as soon as practicable, after the Bill is passed, of receiving £102 of Two and Three-quarter per Cent Stock, or £108 of Two and a-Half Stock. I do not expect that so large an amount of the Two and Three-quarter per Cent Stock will be taken as of the Two and a-Half per Cent Stock. Some holders will doubtless prefer it. It will be agreeable to those who prefer a moderate reduction of interest with a moderate increase of principal to a larger increase of principal and a larger reduction of interest. But we believe that there will be a lesser application for the Two and Three-quarter per Cent than for the Two and a-Half per Cent, and that the main reduction will be made into the Two and a-Half per Cent Stock, which, we hope, will be largely increased, and which, as I have said before, is already considered in the City the Stock of the future. The House will observe that in Clause 2 of the Bill we ask for power to carry out this operation, from time to time, within two years. Our object in doing that is that we do not expect that in the first instance anything like the whole of the present Three per Cent £600,000,000 will be converted into Two and a-Half or Three and Three-quarter per Cent Stock; but we ask Parliament to allow us to reserve to ourselves power to make after the first offer a second offer, when the Two and a-Half per Cent Stock will have obtained a certain magnitude, and when it will be possible to repeat the operation we propose now.


Does the scheme apply to all the three denominations of Three per Cent Stock?


I am going to explain that. We propose to make an offer to the holders of the three classes of Stock—Consols, New, and Reduced Three per Cents. The £600,000,000 includes all these three Stocks. If we should make a second offer, of course it will not be expected to be so good as the one we propose to make now. The effect of the first offer will, in my opinion, be to appreciate the Two and-Half per Cent Stock; and if we find that later on it is desirable to make a second optional offer to the remaining shareholders of Three per Cent Stock, they must not expect that that offer will be either at the rate of £108, or £102. [An hon. MEMBER: Why not?] Because we expect the Two and a-Half per Cent Stock to be appreciated by the first operation. Then I ask the House and the public to take note that in addition to the conversion of £100 Three per Cent into £108 Two-and-a-Half per Cent—and I will deal especially with that offer—those who take advantage of the offer will have one advantage, which has already been recognized as a great been by the present holders of Two-and-a-Half per Cents — namely, that payments of dividends will be quarterly instead of half-yearly. For instance, those whose dividends are now payable in July and January will have quarterly dividends payable in April and October, as well as the two other quarter days; and in that way they will have the advantage of half their dividends being anticipated by three months. The Reduced and New Three per Cents will obtain the same advantage. As to these, we propose that the dividend payable in October next shall be a whole half-year's dividend, and that in January next they shall take half the dividend falling due in the following April; and I will explain later on how that would operate with reference to the charges for dividends falling due in the first financial year. But, postponing that for a moment, I come to the general effect of the proposed conversion on the interest on the Debt. I said before that the exchange into Two-and-Three-quarters per Cent Stock will not be quite as advantageous to the public. But I also said that, from the information we had received, I did not expect that so many would exchange into Two-and-Three-quarters Stock as to Two-and-a-Half Stock; and, assuming for the moment that the whole conversion would ultimately be made into this Stock at no better terms than 108 for 100 Three per Cents, the gross saving of interest on the £600.000,000 will be £1,800,000 a-year. But I stated last month that we proposed to establish a Sinking Fund to pay off the nominal addition to the capital of the Debt; and, assuming that it is invested in Two and a-Half per Cents at par for 50 years, the Sinking Fund necessarily required will be £490,000 a-year, so that the net reduction of the annual interest on the Debt, setting aside this sum to pay off the additional nominal capital, will be £1,310,000 a-year, when the whole of the £600,000,000 had been converted. If Two and a-Half per Cents are purchased at under par for this Fund, the term will be proportionately less than 50 years. In my opinion, it is right to set aside that Sinking Fund of £490,000 a-year, and not let the taxpayer have the benefit of the entire £1,800,000 a-year; but I am bound to say that in both the conversions of modern times in which a larger amount of Stock of a lower denomination was given for a smaller amount of Stock of a higher denomination, a Sinking Fund was not insisted upon. In 1822 the Five per Cents were reduced to Four per Cents by giving to the owners of the Five per Cents £105 of the new Four per Cent Stock, but no Sinking Fund was established for the increased capital; and in the same way, when my right hon. Friend the present Prime Minister in 1853 proposed the conversion of certain Three per Cents into Two and a-Half per Cent Stock at £110 instead of the £108, which I now propose, he did not, at first, accompany that with any proposal for a Sinking Fund, although ultimately Five per Cent was so applied. But in my humble judgment it would be wise and prudent for Parliament, when increasing the nominal amount of Debt, to set aside at the same time a Sinking Fund; and, although the taxpayer gains less now, the operation is equitable for posterity. But let me point out that so great has been the recent reduction in the amount of the Funded Debt, that even if the whole of the £600,000,000 of Three per Cent Stock were converted into £648,000,000 of Two and a-Half per Cent Stock, the Debt will stand considerably below the amount last year. The amount which was written off the Funded Debt last year under the plan of Terminable Annuities which the House adopted was £72,000,000, so that this increase of £48,000,000 would still leave the nominal Funded Debt £24,000,000 less than it was in 1883. At this point, perhaps, it would be convenient that I should explain how we propose to deal with the quarterly payment arrangement, which in the first year would, to a certain extent, add to the amount required for paying the interest of the Debt. So far as Consols are concerned it will make no difference. Consols are payable in July and January, and the financial year ends on the last day of March. If you anticipate half the July dividend by a quarter's payment, it will be made on the 5th of April, and therefore in the same year as the July payment, and if you similarly anticipate half the January dividend, it will be made in October, also in the same financial year; so that by converting into quarterly interest Stocks, the interest of which is payable in January and July, you do not affect in any way the charge on the financial year. That, however, is not the case with respect to Stocks, the interest of which is payable in April and October, and five quarterly payments will be made in the first year. Now, the total amount of Reduced and New Three per Cents is about £267,000,000. What we propose in the 4th clause is, that if in any year there should be five quarterly payments of dividend, one of them should be converted into a 20 years' annuity, always, however, liable to be redeemed. Thus there will be no appreciable increase in the total charge for the year in consequence of the five quarterly payments occurring within it. Let me say a word or two as to the general policy of this measure. I think the House, as responsible for the interests of the taxpayer, will admit that as a matter of general policy it is advisable to take advantage of the reduction from time to time in the general rate of interest to reduce also the rate of interest on the public funds. That has always been the policy of Parliament. Whenever the funds have permanently risen above par, it has always been the policy of Parliament to endeavour to reduce the rates of interest. I may go back as far as 1749, when the Four per Cents were at a considerable premium, and when Mr. Pelham carried through Parliament his well-known measure for reducing the interest on the then Four per Cents, first to Three and a-Half per Cent, and afterwards to Three per Cent. In 1822 the Five per Cents were at a considerable premium, and the interest was reduced to Pour per Cent. In 1830 these Four per Cents were at a premium, and were converted into Three and a-Half per Cents; and finally, in 1844, the Three and a-Half per Cents, which were also at a considerable premium, were reduced first to Three and a-Quarter per Cent, and then to Three per Cent—the three last operations—those of 1822, 1830, and 1844—making together the great operation, under which what are now called New Three per Cents were created. I have seen remarks about the hardship to persons of small means—widows, and annuitants, and others, who believed that the Stocks they held would be perpetual, and who it was supposed were hardly used by the necessity of the interest on these Stocks being reduced, or the capital being paid in full. That sort of complaint is not new. It was vigorously, and I am glad to say unsuccessfully, urged more than 100 years ago. There is a very amusing description of the objections which were taken in the last century to the proposal to reduce the Four per Cents in Francis's well-known book, Chronicles of the Stock Exchange. The author of that work says— Reasons which time has since repudiated, fallacies which almost repudiated themselves, evils which had no existence save in the brain of the prophet, were freely circulated. It was said that the landed gentry and the noble families of England would be ruined, and their children would become beggars; that the interest of younger sons' portions would not enable them to associate with the cooks and coachmen of their elder brothers; and that merchants, shopkeepers, and tradesmen would be ruined. The farmers would lose their farms; families would be undone; and such a deluge of distress be brought upon all ranks that the consequences would be fatal to the 'free and happy Constitution,' which has been so often ruined in the brains and in the prophecies of partisans. Well, that was the style of argument with which Mr. Pelharn and Sir John Barnard had to deal in the last century, and, fortunately, it did not prevail then, any more than I am confident that it will now. The real fact is that it is in the interest of the nation, with a view to the reduction of taxation, to maintain a steady reduction both of the principal and interest of Debt if the state of the Money Market justifies such operations being carried out. But, Sir, an attempt has been made to injure the proposal which I am now making by reducing Fundholders to refuse our offer on the ground that compulsion cannot take place. That is a very serious statement, and one which I feel it my duty to deal with very plainly. I freely admit that it was stated by my right hon. Friend (Mr. Gladstone) in 1853 that the mass of Three per Cent Stock was so enormous as to exclude the possibility of any immediate extensive compulsory operation, and that any attempt to give notice to the entire holders of Three per Cents would have been, then hazardous, if not impossible. My right hon. Friend (Mr. Gladstone) referred, in the debate in 1853, to the aggregate amount of the Three per Cent Stocks—not Consols only, but the whole—and he recoiled from any attempt upon the mass of those Stocks, as I should do now, if the circumstances were the same as then. But the circumstances of that day were very different from the circumstances of the present day. At that period Consols were only at par, or about par, for a very short time. There existed no Two and a-Half per Cent Stocks; and when you looked outside the Government Stocks to the first-class Stocks of the country, you would have found that they stood at a very different price to what they stand at the present time. Railway Debentures at that time produced about 4 per cent. I think our modern Railway Debenture Stock did not exist; but ordinary Railway Debentures could be bought to produce 4 per cent. [An hon. MEMBER: More!] Well, I am on the safe side. Indian Railway Stocks, at fixed interest, hardly existed, and Municipal Stocks were at that time unknown. But at the present time matters are in a very different position. For four years Consols have been above par. My right hon. Friend's (Mr. Gladstone's) prophecy about the effect of the creation of the Two and a-Half per Cents upon the Minister who might have to propose some such plan as I am now proposing is so remarkable that I will venture to read it to the House. My right hon. Friend, speaking on the 5th of April, 1853, said— Give us the Two and a-Half per Cent Public Stock, and then I say we shall have made solid ground where now is only morass; then we may tread where we could not before; and then we shall have a fixed point down to which we can work; and we shall have something by which to direct our operations in future with certainty, where now all is comparatively speculation and suspense."—(3 Hansard, [125] 833.) I mentioned just now the rate at which Railway Companies borrowed at that time—namely, at 4 per cent, or something over. But the London and North-Western Company's Four per Cent Debenture Stock stands to-day at 121; the Great Western and North-Eastern Debenture Stocks stand, I think, at about the same price — that is to say, our Railway Companies at this moment are borrowing at 3¼ per cent. The Metropolitan Board of Works' Three per Cent Stock has been issued lately at par; and in the same way the great cities of the country, which some time ago could not have borrowed at less than 5 per cent, have now borrowed at 4 per cent and 3½ per cent, and I should not wonder if their fortunes followed those of the Metropolitan Board of Works. The Two and a-Half per Cent Stock, to which my right hon. Friend (Mr. Gladstone) with a prophetic eye referred, is now at 93, which is the equivalent of Three per Cent Stock, were that Stock irredeemable, at something over 111. Therefore the circumstances are entirely different from what they were then; and an operation, which my right hon. Friend looked forward to as impossible, on a great scale, without the existence of a Two and a-Half per Cent Stock, now comes within practical performance, and I hope the House will allow me to carry out the experiment. Still, as I said before, there remains the question—Does the power of compulsorily paying off these Stocks at par in manageable quantities really exist? It has been said that that power is an illusory one, and does not exist. The right hon. Gentleman the Member for the City of London (Mr. Hubbard) has been so kind as to help me in this matter by writing letters to the newspapers, in which he has put forward the line which he intends to take. There is no question that in the Act of 1870, which consolidates all the existing Acts relating to the Public Debt, the words are very plain that Consols and Reduced Three per Cents can be paid off in parcels of not less than £500,000 at a time, with due notice, and under Acts to be passed by Parliament. As to that there can be no question. I know it has been said that this provision is only to be found in a note; but, as a matter of fact, it is the substance of the Schedule to the Act. But I will go a little further back, and I will explain to the House the origin of that condition of redemption and how it applies. I will not weary the House by references to the earliest Stocks created in the times of William III. and Queen Anne and George I. The great Acts consolidating the Public Debt commenced to have a clear shape about the year 1716, when Parliament was employed in bringing together the different funds which in a very confused manner had been raised to provide for the wars of William the Third's and Anne's time. The object was to bring them into a focus, as it were, so that they could be more satisfactorily dealt with, than if each one had to be dealt with separately. The custom during the Reigns of William III. and Queen Anne was this — a certain amount of money was borrowed, and a tax was imposed out of which the interest on the sum borrowed was to be paid, and the principal was to be paid off by degrees; but it almost invariably happened that the tax imposed for a short period was not sufficient first of all to pay the interest, and then to pay off the principal. By degrees, then, those small funds charged on particular taxes were brought together, and the taxes themselves were also brought into one account. In the year 1749 the first of two great operations was successfully carried out—namely, the bringing together of all the then existing Four per Cent loans, the interest of which was reduced, first to 3½ per cent, and then to 3 per cent. That operation was followed, in the year 1751, by the great Act passed by Mr. Pelham, which is the foundation of our Consols and Three per Cent Stock, and which is the law applicable at the present time to their interest and their redemption. The Act is 25 Geo. II., c. 27, passed at the end of 1751, or the beginning of 1752; and it is, I may say, the starting point of our modern finance in reference to the Public Debt. By the 1st clause of the Act, Consolidated Three per Cents, now called Consols, were formed by the consolidation of five or six different Three per Cent Funds. By the 11th section Reduced Three per Cents were formed in their present shape by the consolidation of a number of former Four and Three and a-Half per Cents. The 24th section of the Act, as I have said, provided for the manner of redemption of these two great Stocks; and I will read at length, if the House will forgive me, that section. It says— At any time upon one year's notice, to be printed in The London Gazette and affixed upon the Royal Exchange in London, and upon repayment by Parliament, according to such notice of the said several and respective sums, or any part thereof, for which the said several and respective annuities, or any of them, shall he payable by payments not less than £500,000 at one time in such manner as shall be directed by any future Act or Acts of Parliament in that behalf; and also upon full payment of all arrearages of the same annuities; then, and not till then, so much of the said several and respective annuities as shall be attending on the said principal sums so paid off shall cease, determine, and be understood to be redeemed; and any vote or resolution of the House of Commons signified by the Speaker in writing to be inserted in the said London Gazette and affixed on the Royal Exchange in London, as aforesaid, shall be deemed and adjudged to be sufficient notice within the words and meaning of this Act. Now, Sir, let me repeat that this clause of redemption is part of the very Act which created Consols and Reduced Three per Cents. There is in it nothing new, nothing obscure. Consols and Reduced Three per Cents owe their authority to the same Act which constitutes the method of paying them off, and on this subject there ought not to be a shadow of a doubt. Now, ever since 1716, the year which I explained to the House was the year when consolidation commenced, the practice was introduced of providing for repayment in sums of £500,000 a-year. This practice was applied to all loans that had been made. Some of those loans were loans from Companies, some were called general Stock, just as Consols were called afterwards. What is more, I have taken great pains to inquire whether that law of paying off in sums of £500,000 or £1,000,000 was ever put into operation, and I think I have found that it was put into operation in nine different years—in 1728, 1730, 1731, 1732, 1733, 1736, and 1749, and other years which I need not enumerate to the House. Now, this has been the law of Parliament ever since that time—ever since the time of the formation of Consols and Reduced Three per Cents. I need not refer to New Three per Cents, because they are of very modern construction, being derived from the Navy and Irish Five per Cent Stocks which were reduced in 1822. But as to the £428,000,000 of Consols and Reduced Three per Cents, there is no question whatever that they can be paid off at the rate of not less than £500,000 at a year's notice, unless the holders accept commutation, and they are absolutely subject to that condition by the same law which constitutes the Stock. I therefore say that it is cruel to the actual holders of Stock to delude them by the notion that they are not liable to be paid off when by law they are liable, and by such representations to induce them not to accept a good offer on the strength of the idea that Parliament has not the power to pay them off if it thinks fit. It is not for me at present to disclose the method of applying this compulsory power, although I shall, of course, be prepared to do so at the proper time. As I have said before, I have no desire to apply it. But the operation is a perfectly simple one which I contemplate, and which I shall not hesitate to propose to Parliament. By giving successive notices to the holders of manageable amounts, although a simultaneous extensive process would be perilous, the whole might be commuted within a reasonable time. What I now desire to point out to the House is that when Three per Cent Irredeemable Stock would be worth £111, it would be dereliction of duty on the part of a Minister not to propose to Parliament to deal with Redeemable Stock, and it is because we feel this very strongly that we ask the House to pass this Bill. I am sorry to have been obliged to detain the House at this late hour; but I believe I have placed before them a feasible and practicable plan for commencing the reduction of the interest upon the Debt, leaving intact the working of the Acts of 1876 and 1883, under which the Debt is paid off from year to year. We have been pressed to make large remissions of local burdens at the cost of the taxpayer, besides reductions of taxes and other increases of charge. This is, I think, then the time, considering the value of money, to propose a simple method for the reduction of the Debt expenditure. I hope that the arguments which were brought to bear against Mr. Pelham and Sir John Barnard on the reduction of the Debt carried out in the last century—130 years ago—will not have greater weight with the present House of Commons than they had with the House in 1750. Sir, apologizing again for the length at which I have detained the House, I beg to move the second reading of the Bill.

Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Chancellor of the Exchequer.)


said, he assured the House that it was with extreme pain that he found himself obliged to move the rejection of the Bill, which his right hon. Friend had asked the House to read a second time. He would give, as briefly as possible, the reasons which had been convincing to himself in this matter, and which, he trusted, would enable hon. Members to follow his advice. He would, in the first place, go back to the Financial Statement of the right hon. Gentleman, in which, after introducing what he rightly described as a very important measure, he said— There are three classes of Three per Cents all liable to be redeemed, but under different conditions. (1.) Consols and Reduced under the Act of 1870 at one year's notice may be paid off in quarterly parcels of not less than £500,000.


I did not say quarterly.


Then he presumed the report was not quite accurate. The right hon. Gentleman went on to say— Omitting the new Three per Cents which may be paid off without notice, but the whole at one time, the other Three per Cents—£400,000,000 in amount—can be paid off, however unwilling the holders, by giving a year's notice to the holders of manageable amounts, unless they accept the offer of a Stock of lower denomination. It must be remembered that the compulsory process lies behind these offers, and that it could without any practical difficulty be applied to Consols and the Reduced.… But, I repeat, we are not desirous of applying compulsion, if the same end can be obtained by voluntary agreement. Now he (Mr. Hubbard) said that with regard to Consols and Reduced the present possession of this compulsory power was an absolute illusion, and he would prove it. The right hon. Gentleman had cited the different Acts on which it was imagined that this supposed compulsion rested, and in the first instance he quoted the Act of 1870, and he read accurately from that Act the clause which stood there, and which had been translated from the Act of 1752; but here he must remark that the words which the Chancellor of the Exchequer read from the Schedule were entirely different from those which he read when he made his Financial Statement. However, he passed from the Act of 1870 to what had been properly described by the right hon. Gentleman as the birth Act of the Consolidated Fund—namely, the Act of 1752. That Act contained in its 24th clause the precise words which had been read by the right hon. Gentleman, and which were embodied in the Schedule appended to the Act of 1870. With the permission of the House, he would now read that Schedule, as he understood it, and in reference to the Stock to which it applied. The Act of 1752 began by reciting half-a-dozen minor Stocks, and said that they should constitute one Joint Stock of £8,200,000. It then went on to cite some other minor Stocks which were to form a Joint Stock of £17,570,000; and it was to those two combinations, each constituting "one Joint Stock of Annuities," that the 24th clause of the Act of 1752 applied. The Redemption Clause in the Act of 1870 ran thus— At any time, at one year's notice in The London Gazette affixed on the Royal Exchange. That was the first step; one year's notice was to be given with reference to one or the other or both of the Joint Stocks mentioned in the Act itself. The next condition was— And on repayment by Parliament according to such notice of the several sums or any part thereof, for which such several Annuities or either of them are or is payable, of Stock not less than five hundred thousand pounds at one time and in the manner directed by any Act to be passed.…. and also on payment of annuities. That seemed to mean that notice must be given before either of those Stocks were dealt with, which then stood at £8,000,000 and £17,570,000. These had grown very largely; but the law applicable to them now was the same as it was formerly. The Act of 3 Geo. I. was much more explicit, and he would summarize to the House the meaning of it, being, of course, open to correction in respect of any false gloss which he might place upon it. It said, in reference to the Stocks under consideration— Be it enacted, that if at any time or times notice be given…by authority of Parlia- ment for the redemption of the said Annuities by the Bank, and if payment after such notice be made by Parliament to the persons entitled to the said Annuities according to their interests in the said Annuities of any sum or sums not being less than five hundred thousand pounds to all the proprietors at a time in part of the respective principal sums for which the said Annuities be payable then so much of the said Annuities shall cease. The notice was not to be given to any in particular, but to all the proprietors interested in the Stock dealt with by the Act. The interpretation which he could not help putting on the Redemption Clauses of the Acts of 1716, 1752, and 1870, was that notice must be given in respect of all Stock under notice of redemption. The Prime Minister, when Chancellor of the Exchequer in 1853, had taken this view. Having spoken of the large amount of Debt and the power of redemption, the right hon. Gentleman said— A circumstance, which may not be so generally within the notice of the Committee, but which is yet more fatal in its bearing on the position of the public debtor and the public creditor in this—that of those great Three per Cent Stocks, which I have stated in round numbers as amounting to £500,000,000, the whole are secured by a provision requiring a Parliamentary notice of 12 months' duration before any measure of reduction or commutation can be applied."—(3 Hansard, [125] 811–12.) If that was not evidence of the truth of his proposition, he did not know what could be. The right hon. Gentleman proceeded to say— Therefore, I lay it down in the first instance that a large operation of a compulsory character is totally out of the question.… I come, then, to my plan, which consists of three portions. The first of these is certainly a minor portion of the scheme; and I will enter upon it first, in order to dispose of it and put it out of view. It is the liquidation of certain minor Stocks which appear in the Schedule of the National Debt.… (The whole amount of those Stocks is about £9,500,000 sterling.) It is proposed, with respect to them, that we should make what is called a compulsory operation—that is to say, that we shall offer certain alternatives to the holder of the Stock, and, at the same time, inform him that if he should not accept one or the other, he would, at the expiration of a proper period, be paid off.… I now come to the second and third. The second of these portions relates to the issue of Exchequer Bonds; and the third relates to a voluntary commutation dependent entirely on the option of the holders of the great Three per Cent Stocks."—(Ibid. 812–14–16.) He did not think that anyone could doubt the meaning of these words with reference to the Three per Cent Con- sols and the Three per Cent Reduced, which together made a total of nearly £500,000,000. But there was stronger evidence even than that of the Prime Minister. Parliament supported the financial experiment of the right hon. Gentleman by passing a Bill for the redemption of Stock and for the creation of new Annuities in 1853. The very distinct title of that Act confined the main purpose of the measure, at all events, to those Stocks which were capable of being compulsorily redeemed. The first 12 clauses referred to the South Sea Stocks doomed to redemption. Clauses 13 to 16 dealt with Consols and Reduced. He asked the attention of the House to the way in which. Parliament, in 1853, dealt with the Stocks which his right hon. Friend the Chancellor of the Exchequer now vainly thought he had under his thumb. The marginal note of the 13th section of the Act of that year said— The proprietors of Consols or Reduced Three per Cent Stock may commute on the same terms as proprietors in the aforesaid Stocks. Of course, they might do so. He was Governor of the Bank of England in 1853, and many persons asked him for his opinion to guide them in this matter; and to these he replied—"There are three classes of persons who will assent—Trustees, patriots, and idiots." Under the Prime Minister's scheme, out of the whole National Debt of £800,000,000, only £3,000,000 New Two and a-Half per Cent Stock was created in 1863, and of that £1,500,000 only came from Consols and Reduced; the rest came from Commutable Stock compulsorily disposed of. He did not suppose that the present Chancellor of the Exchequer would consider himself to be more persuasive than his Predecessor; and if the Prime Minister did not succeed with an offer in 1853 of £110 Two and a-Half per Cent Stock in exchange for £100 of Three per Cent Consols, was his right hon. Friend likely to succeed now with an offer of £108? He thought not; particularly when it was found there was no compulsion at the back of his scheme. His right hon. Friend said he wanted the country to be with him; the way to secure that was to make a fair offer and tell the people the truth; if he possessed a coercive power, let him tell them where it was. He had shown, first, that the Chancellor of the Exchequer had no power of compulsion in this matter; and, secondly, that the Prime Minister having failed to find acceptance for his offer in 1853, the present Chancellor of the Exchequer, with a worse; offer, would fail also. Now he came to the Bill itself; it was about the worst he had ever seen; its title was enough to shock one. It began thus— A Bill for giving facilities for the conversion of Three per Cent Stock into Stock of a lower denomination. Where would they find a Finance Minister who could congratulate himself upon such a step as this—a financial proposition not for the purpose of a loan, or for meeting a loan which was to be paid off, but converting Stocks with a given interest into Stocks with a lower interest by adding to their nominal amount? What did the Prime Minister say of such a scheme in 1853? The right hon. Gentleman said, when proposing the concurrent creation of a Two and a-Half per Cent Stock and of a Two and a-Half per Cent Stock— The objection urged against this portion of the proposal is, that, in order to reduce the annual charge, we are going to increase the capital of the Debt. Now, let us carefully weigh this objection, for, in my opinion, it is an objection to which considerable force attaches.… It is proposed to secure for ever, and absolutely to posterity, a reduction of J per cent upon the annual charge. … But I wish the Committee to understand—and I urge this as a plea on behalf of my proposition—that I freely assent to the general doctrine that it is not desirable to increase the nominal capital of the Debt. … The great object which Her Majesty's Government had in view was to establish, if it be possible, an irredeemable public debt, which will bear a respectable price in the market, and bearing an interest of not more 2½ per cent. It is for that purpose we propose to include these among the various forms of the conversionable Three per Cent Stock." —(Ibid. 830–32.) A motive was alleged in excuse for the combined conversions. The Two and a-Half per Cent Stock was to be an irredeemable Stock; to be representative of the credit of the country; it added nominally to the Debt; but it was to be irredeemable. The proposals of 1853 never aimed at what the Chancellor of the Exchequer now proposed. In the first place, the Bill required the Accountant of the Bank to create new Stock to such an amount as the National Debt Commissioners might deem suffi- cient for the purpose of exchange. As a matter of regularity, he had never before heard of Stock being created except for a specific purpose—either to replace Stock, or for some other purpose of State policy. But now he came to the point which was of more importance than phraseology. That was that the Chancellor of the Exchequer laid great stress on the gain to the country by this operation. He was quite aware that it was the duty of the Finance Minister, whenever he could fairly do so, to reduce the-interest on the National Debt; but he must take care that he was not working on two different tacks, and that one did not prevent the other. Last year the Finance Minister was full of enthusiasm upon a plan for redeeming the Debt itself; and in that he followed—and he could not have done better than follow—the lines of the right hon. Baronet the Member for North Devon (Sir Stafford Northcote). There was a definite step proposed, and he followed it with great alacrity; but now he proposed to cut the ground from under his own feet. If the operation was to be carried out as the right hon. Gentleman proposed, what would be the result? This proposal contemplated a conversion of Consols into Two and a-Half per Cent Stock, to be redeemed at par at the end of 20 years. He would tell the House how the operation would work. They took £5,000,000 Consols and turned it into £5,400,000 of the Two and a-Half per Cent at £108. The interest on the Consols would be £115,000; and the interest on the Two and a-Half per Cents £135,000; therefore, there would be an annual saving of £15,000, and £15,000 improving for 20 years at 2½ per cent interest would amount to £407,000. But what about the Stock not redeemed, and which at a month's notice had to be redeemed at par. Having realized a gain of £407,000 for interest, they had now to pay for extra capital, £400,000, so that they had just made £7,000 profit by an operation ranging over 20 years and occupying £5,000,000. There was one part of the scheme upon which the Chancellor of the Exchequer plumed himself, and that was the quarterly dividends provided in his Bill. In 1870 the then Chancellor of the Exchequer (Mr. Lowe) intimated to the Bank of England his desire to pay quarterly dividends; but the Bank sent in a remonstrance so strong that Mr. Lowe dropped his idea. They pointed out to him that the scheme was perfectly useless; that nobody could want it, because if anyone wished for a quarterly dividend he had only to vary his investment, and take the half dividends due in January and the half due in April. The effect of this proposal would be to double the labour of the Bank and increase the burden on the State, for they could not put a double duty on the Bank without some extra cost. Therefore, he thought that proposal ill-judged. Then the Chancellor of the Exchequer maintained, with reference to the obvious disadvantage of increasing the nominal Debt, this idea—that they counteracted that by a system of Terminable Annuities. These Annuities were described as correcting the evil of an increased capital Debt; but they could not alter the nature of things. They were only a mode of paying a Debt in which the capital and interest were combined. That made no difference to the profit or loss of the operation; and the conclusion was therefore this—that if they had to redeem Three per Cent Stock or Consols, for every £1 of Annuities they had to pay £33; and if they had to redeem New Two and a-Half per Cent Stock, for every £1 of Annuities they had to pay £43 4s. That was the real and formidable result which the Chancellor of the Exchequer would derive from this operation. He was going to make the future reduction of the National Debt more burdensome; therefore, he could not think that that was an operation which, deserved the approval and support of that House. He was, he knew, open to the remark that if, after all, the difference was so slight between what the Chancellor of the Exchequer won or lost, the difference to the community would be equally unimportant; and, therefore, he might be asked why he was so eager and anxious to protect the interests of the fundholders, and to guard them against accepting the offers of the Chancellor of the Exchequer? The difference was this—the holder whom the Chancellor of the Exchequer punished now was the present holder; but the holder whom he would benefit was of a different generation altogether; in fact, it was a case of robbing the present generation for the sake of future generations. His clients were the present generation, and it was on behalf of the present generation of widows and orphans that he protested against an operation which despoiled them of a portion of their income, and years hence, forced the Chancellor of the Exchequer to repay it all to other creditors of the State. The Chancellor of the Exchequer had remarked on the reception of this scheme in the City. He wished the right hon. Gentleman would tell the House who in the City had approved of it. He should like to hear their names. He could only say he knew some people in the City; he knew his 24 brother Directors of the Bank of England, and he could say with confidence that there was not one of them who did not consider this scheme as detestably bad. If the right hon. Gentleman had any countervailing authorities he should like to know where they were to be found. His brother Directors were absolutely adverse to this scheme; and, for his part, he was incredulous to a degree of there having been such a reception as to give it any standing or authority in that House.


asked whether these gentlemen had authorized the right hon. Gentleman to state that they considered the Bill detestably bad?


said, they had not done so; but when the right hon. Gentleman quoted the approval of the City he brought his knowledge of the City to bear on the matter. He had no authority to speak for anyone but himself. If, then, the Chancellor of the Exchequer had not found this support, how was it that he could submit this proposal to the House with such confidence? Some supporters of the scheme could always be found, and he noticed this eulogistic commendation with regard to the National Debt scheme in an important newspaper— Few Budgets of recent years are likely to exceed in permanent interest for economists the statement of Mr. Childers last week. Each of its two main proposals is certain to be considered memorable. The definite proposal for the conversion of the Debt into Stock bearing a lower interest than 3 per cent marks an era in the economic and financial developments of the country which is full of fascination for the economists. Full of fascination for the economist! Was that an authority upon which the House was to base its approval of the measure? Was it to be memorable that the Chancellor of the Exchequer had propounded this measure? The right hon. Gentleman had been memorable in reconstructing the Navy, and memorable while reorganizing the Army—he must be also memorable for his administration of the national finances. All he would say, further, was that he solemnly and earnestly protested against the further progress of this measure. He earnestly trusted that his right hon. Friend would forgive him if, in speaking on a matter upon which he felt strongly, he had said anything that might seem offensive. He would conclude by offering, on behalf of his constituents in the City, this entreaty—"Leave us alone." He begged to move the rejection of the Bill.


seconded the Amendment.

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

Motion made, and Question proposed, "That the Debate be now adjourned." —(Mr. W. Lowther.)


I must say I am extremely sorry that the discussion of the principle of the Bill cannot be carried on somewhat longer. It would have been very much bettor if, before the Recess, we could have adopted the principle of the Bill, so that after the Recess we might have gone further into it in Committee without delay. But if it is the wish of the House not to proceed further now, of course it would be folly on my part to resist the Motion. But I ought to say that it is proposed to take the adjourned debate on Thursday week.


said, he was glad the right hon. Gentleman the Chancellor of the Exchequer consented to the adjournment of the debate, because it was really impossible at that hour (1 o'clock) to enter upon such a discussion as the Bill required. He would remind the right hon. Gentleman that although his scheme was stated four weeks ago, and that although the Bill was brought in on the 2nd of May, it was not until the 17th of May that it reached their hands. There had been some loss of time, for which, of course, the House was not responsible. He did not hold the Government responsible for not bringing on the Bill as the first Order, yet it was a matter of such importance that it might well have deserved to have had that place. He remembered that in 1853 the scheme of the Prime Minister, who was then Chancellor of the Exchequer, had priority given to it over everything else; and he (Sir Stafford Northcote) thought the Chancellor of the Exchequer might have given the House the same advantage on the present occasion. He did not think the House would be prepared to take the Bill on Thursday week. It was generally understood that Supply would be taken on the day they re-assembled after the Whitsun Holidays; indeed, on reflection, he found it had been absolutely agreed that Supply should be taken on Thursday week. There was just one other point he wished to mention now, and it was that the House could hardly be expected to proceed with the Bill unless it received some information as to the nature of the compulsory process of conversion. It was the duty of the Government to give the House that information at the earliest moment.


said, he hoped the Chancellor of the Exchequer would give them some assurance that the Bill would not be proceeded with on Thursday week. He hoped so, because there was a distinct engagement with the House to take Supply on that occasion. Some hon. Members—he for one—had made arrangements which would prevent their being in their places on Thursday week. They, of course, had relied on the engagement made by the Prime Minister. Nothing could be more destructive of the due despatch of Public Business than that a distinct engagement with the House should be broken.


said, he would consult the Prime Minister upon the subject. he was not aware that an engagement of the kind mentioned had been made. [Mr. WARTON: Twice over.] He repeated, he was not aware of the engagement. His extreme anxiety that the Bill should be proceeded with as soon as possible was shared by a great many persons out of the House; but if there had been an engagement that Supply would be taken on the day the House re-assembled, he should not think of putting the Bill down for that day. He would confer with his right hon. Friend the Prime Minister, and state at the meeting of the House tomorrow on what day the Bill would be taken.

Motion agreed to.

Debate adjourned till To-morrow, at Two of the clock.

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