§ THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN) (St. George's, Hanover Square)
, in rising to move—That the Consolidated Three Pounds per Centum Annuities and the Reduced Three Pounds per Centum Aunuities shall be redeemable at any time after the expiration of one year from the date at which a Copy of this Resolution, having been inserted in the 'London Gazette,' is affixed on the Royal Exchange in London, by payments of not less than five hundred thousand pounds at any one time, in manner directed by any Act to be passed,said, this Resolution was necessary to enable the Government to redeem the balance of Consols and Reduced Three per Cents, which had not yet been converted. He had already given the House, in general figures, the amount outstanding. The amount of Consols was about £40,000,000, and of Reduced Three per Cents about £6,000,000. Following the Schedule in the Act of 1870, called the National Debt Act, he had prepared the Resolution so as to allow of the redemption of this balance of Stock after July 5, 1889. Section 5 of that Act referred to perpetual annuities described in the 1st Schedule, and provided that such Stock should be redeemable within the period, and in the manner set forth in the Schedule after one year's notice printed in The London Gazette, and affixed to the Royal Exchange, London.
§ DR. TANNER (Cork Co., Mid)
rose to Order. Would he be in Order in objecting to this Resolution being proceeded with after 12 o'clock?
§ MR. SPEAKER
said, the objection would not apply, inasmuch as the proceeding was taken in pursuance of a Statute, and was exempted from the 12 o'clock Rule.
§ MR. GOSCHEN
, proceeding, said, the Stock was redeemable at any time after one year's notice inserted in The London Gazette, and affixed to the Royal Exchange in London in such manner and within such period as Parliament by Act might direct, provided that not less than £500,000 was paid off at one time. The Resolution of the House being certified by the Speaker and advertised as he had mentioned, the requirements of the Act of 1870 would be fulfilled. If the House assented to the Resolution he should ask the Speaker to signify the 526 fact in writing, and then, in a year from to-morrow, these Stocks would be redeemable by Parliament in the manner directed by any Act subsequently passed, and in payments of not less than £500,000 at one time. He need not assure the House that he had consulted with the Law Advisers of the Crown as to the legal aspects of the question, and it was by their advice and assistance he had placed the Resolution on the Paper. It would be understood that the Act—the Acts he might say, for the Act of 1870 was but a repetition or consolidation of previous Acts on the subject—left the discretion to Parliament of fixing the manner in which the several annuities, or either of them, or any part there of should be paid off, only laying down the condition that the payments must be of £500,000 or upwards; and, notice having been given, it would then be for Parliament to decide in what manner they should be paid off. Next Session he would have the duty of proposing to the House a Bill laying down in formal and distinct terms the manner in which this Resolution should be carried out. He had no doubt that the resources that would then be at the disposal of the Government would enable them to carry out this redemption of Consols and Reduced Threes in a manner not costly to the State or inconvenient to the holders of the Stock.
Motion made, and Question proposed,
That the Consolidated Three Pounds per Centum Annuities and the Reduced Three Pounds per Centum Annuities shall be redeemable at any time after the expiration of one year from the date at which a Copy of this Resolution, having been inserted in the 'London Gazette,' is affixed on the Royal Exchange in London, by payments of not less than five hundred thousand pounds at any one time, in manner directed by any Act to be passed,"—(Mr. Chancellor of the Exchequer.)
§ MR. CHILDERS (Edinburgh, S.)
said, he thought the House would agree with him in congratulating his right hon. Friend on this last step, in the successful conversion of the Three per Cents which he carried out in the early part of the Session. He gave his right hon. Friend all the support he could, because he thought his plan a very excellent one and he was glad it had succeeded. He had only one suggestion to make now, and he was quite sure his right hon. Friend would be willing to consider it, whether or not he approved of it. It 527 was this—Under the arrangements he had explained to the House the Chancellor of the Exchequer gave this Notice now, and next year he would introduce a Bill to give effect to the Resolution. Now, the right hon. Gentleman was dealing with £40,000,000 of Stock; and though there was every hope that the state of things in this country and in Europe would be satisfactory next year, of course the delay of 12 months in carrying out an operation of this kind made this somewhat a matter of speculation, and it was possible—he hoped it would not be so—but it was possible, that it would a year hence be more difficult to carry out the operation than his right hon. Friend anticipated. The suggestion, therefore, he ventured to make was that as money was now nominally to be had at 2½ per cent. and was really very much cheaper, not being worth more than 1½ per cent—whether it would not be well to pass an Act this Session, taking power to anticipate payments with the consent of holders of Stock, so that instead of the whole amount of the £40,000,000 odd being paid off a year hence, with the consent of the holders, some of it—he hoped it might be a large portion—might be paid off now when money was so cheap, and it would be extremely easy to raise the necessary amount in Funded or Unfunded Stock? If the Chancellor of the Exchequer could agree to that; if he made a cash offer to the remaining holders of 3 per cent Stock in which allowance would be made for that right to 3 per cent till next April, he might induce a considerable number to take advantage of his offer at once, and he would find it easier to carry out his operation now than he might find himself able to do a year hence, and, at any rate, then he would have a less amount to deal with. He therefore suggested that the right hon. Gentleman should pass an Act this Session, and he could not conceive that there would be any opposition to it, for it would be an Act everybody would be anxious to pass to free the hands of the Chancellor of the Exchequer as much as possible next year by redeeming as much of the Stock as holders were willing should be redeemed at present prices. That was the only suggestion he had to make in reference to the present proposal. He could hardly ask his right hon. Friend to give a definite answer at once; but perhaps he 528 would take the point into consideration, and a few days hence say if he would carry out the suggestion. There could be no harm in adopting it, and his right hon. Friend might save himself from having to deal with so large a sum as £40,000,000 next year.
§ SIR JOHN LUBBOCK (London University)
said, the Chancellor of the Exchequer, in moving the Resolution, said this Stock would be redeemable at any time after the end of the year's notice; but he did not clearly say that it actually would be redeemed. He supposed it might be assumed that when notice was given holders of Stock might understand that they would be paid off at the expiration of that time or shortly after? It would not be fair that a notice should be given that might be used against them, but upon the execution of which they could not absolutely rely. The right hon. Gentleman the Member for Edinburgh (Mr. Childers) said truly that the rate of the interest in the City was below 2½ per cent; but, at the same time, it should be remembered that this was merely for short loans and not for long transactions. Still he thought there was much force in the suggestion made, and he hoped the Chancellor of the Exchequer would take it into consideration. He recommended it on another ground, because there was some doubt as to what was meant by the expression "by payments of not less than £500,000 at any one time." Although it might certainly be the intention of the Government to bring in a Bill next year, yet if they did it at once it would be only fair to holders of Stock who might reasonably desire to know the Government proposal as soon as possible, and how they proposed to exercise their option of paying off these amounts. The meaning of the Resolution was not in itself quite clear.
§ MR. HENRY H. FOWLER (Wolverhampton, E.)
said, the effect of the Resolution if passed, and if the right hon. Gentleman carried out his intention, would practically be that the Debt of the country would only bear 2¾ per cent. He wished to call the attention of the Chancellor of the Exchequer to a point which he raised with the full approval of his right hon. Friend the Member for Mid Lothian (Mr. W. E. Gladstone), and to ask what the Government proposed to do in reference to the Debt due to the Bank of England which now bore 529 interest at 3 per cent. It did not seem to be a defensible position that the Bank of England should continue to receive 3 per cent upon £11,000,000, while all the rest of the public fundholders had their interest reduced to 2¾ per cent. The subject was raised the other night in the form of a query addressed to the Chancellor of the Exchequer, and in his reply the right hon. Gentleman said there were corresponding advantages derived from the Bank of England. But this was a moot question, and there was much to be said on the other side as to the costs paid to the Bank of England for the management of the Debt. When, on the last renewal of the Bank Charter, the question was raised as to the interest to be paid to the Bank, Sir Robert Peel was of opinion that 3 per cent was too high a rate to pay, and that there were no corresponding advantages to the country to justify the payment. Ultimately, in adjusting the terms of the Bank Charter Sir Robert Peel withdrew his insistance on the point, and kept it in reserve. Now, after 45 years, and when the rest of the fundholders were compelled to accept 2¾ per cent. he did not believe that the Chancellor of the Exchequer intended that the Bank of England should continue to occupy that specially favoured position. Therefore, it was that, at the request of his right hon. Friend the Member for Mid Lothian, he put the question.
§ MR. COURTNEY (Cornwall, Bodmin )
said, he had a very few observations to make. He called attention to the conditions under which Consols were redeemable at the time when the Chancellor of the Exchequer produced his great scheme. He was not quite sure from the language used just now, and from the wording of the Resolution, that he quite agreed with his right hon. Friend in his view of the case. The Schedule of the Act of 1870, the right hon. Gentleman said, did not make the conditions of redemption; it simply reproduced them, beginning by saying that these funds should continue to be redeemable as follows. The case he would put to the right hon. Gentleman was this. Supposing 12 months' notice given of the intention to redeem, did the Chancellor of the Exchequer suppose that at the end of that 12 months' notice Consols would be redeemable at any time thenceforward, or did he conceive 530 that he was forced to redeem them on the expiration of the 12 months' notice? He confessed he had not had the opportunity of looking up the earlier Act since he saw the Notice of the Resolution; but he was strongly of opinion that the Chancellor of the Exchequer had not the option at the end of 12 months of redeeming at any time thenceforward; in fact, that it did not convert the Stock into Consols redeemable at any time, but at the end of 12 months, as to the funds of which he gave notice, he must redeem. In fact, the Schedule of the Act of 1870 declared that Consols and Reduced should continue to be redeemable on the conditions laid down by 12 months' notice, and in amounts of not less than £500,000. At the end of 12 months, as he read the Act, the Chancellor of the Exchequer must redeem the Stock in reference to which notice had been given. So the difficulty had always been that Chancellors of the Exchequer feared to run the risk of what might happen at the end of the 12 months' notice, when they would be compelled to redeem, however bad the terms might be. The right hon. Gentleman had, by his scheme, reduced the amount very considerably; but was it his opinion that the remaining Stock was redeemable at any time after the 12 months, or was it his view that it must be redeemed when the 12 months expired? His own opinion was that the latter was required by the state of the law.
§ MR. GOSCHEN
said, he would reply to the various points raised. In the first place, as regarded the Bank of England Debt, the right hon. Member for Wolverhampton (Mr. Henry H. Fowler) would remember that he not only said there were counterbalancing advantages derived from the present arrangement with the Bank, but that he thought that the arrangement with regard to the payment of 3 per cent on the £11,000,000 ought to be revised.
§ MR. HENRY H. FOWLER
explained he only referred to an answer to a Question put to the right hon. Gentleman which he read in the newspaper.
§ MR. GOSCHEN
said, he had stated in the discussion of the Conversion proposal that he acknowledged it would be perfectly right to reduce the rate of interest on the £11,000,000 Debt due to the Bank. But the position was this. When he spoke of corresponding advan- 531 tages, he referred to the bargain that the profit beyond a certain sum made by the Bank upon its issue should be returned to the State. So that if the payment of 3 per cent interest were reduced, the profit made by the Bank would be so much less. While, on the one hand, the interest would be reduced, on the other hand the revenue of the Bank would be diminished. The terms of the bargain made between the State and the Bank would be so altered that the whole arrangement would have to be revised. He thought it was necessary there should be a revision of the relations between the Treasury and the Bank, and one element in that revision would be the reduction of the rate of interest. On the other hand, it would have to be taken into consideration bow far the profit on the issue would affect the general arrangement. However, in the autumn he proposed to go into the whole question. The arrangements with the Bank were practically in suspense, and had been, as right hon. Gentlemen knew, for a year or more, no conclusion being come to in 1885–6. It would be the duty of the Treasury to look carefully at the whole arrangement; but practically the point was not so important as it appeared for the reasons he had stated. Then he was glad that the hon. Baronet (Sir John Lubbock) and the Chairman of Ways and Means (Mr. Courtney) had challenged him to explain his meaning whether he contemplated the payment of the whole of the £40,000,000 immediately after the expiration of the notice or not. He would ask his hon. and learned Friend the Attorney General to say a word or two on the question, for he was more competent to deal with the legal aspect of it; but perhaps he might, mean while, throw some light on the matter by reference to what was done in 1824. The Chancellor of the Exchequer of that day acted on similar powers—parallel powers—to those that would be asked for under this Resolution. Mr. Robinson was Chancellor, and he gave similar notice, but that notice did not contemplate the payment of the whole of the amount of Consols as to which notice was given at one time. The payment was to be made according to the terms prescribed by Parliament, and the condition enacted was that a third, or £33 6s. 8d., of every £100 should 532 be paid at the end of the term of notice, and the remaining two-thirds were liable to payment at such a time or times or in such proportion as might be fixed by the Treasury, provided that six months' notice was given, and not less than half of the remaining two-thirds paid off at one time. It was not held on that occasion that the whole of the £75,000,000 must be paid off at one time; power was reserved to spread the payment over such time, and to make it in such proportions as might be fixed by subsequent Act of Parliament.
§ MR. GOSCHEN
said, the conditions were not absolutely identical. But this matter had been investigated by the Law Officers and other gentlemen specially familiar with the subject, and they considered that the precedent of 1824 would be a safe one to follow. But he referred to it rather to illustrate his meaning than to rest his case upon it. The words of the Act of 1870 provided for the payment after notice of the whole sum or any part thereof not less than £500,000 in the manner directed by any Act to be passed. Clearly, therefore, there was reserved to Parliament the freedom of paying off in one sum or not, for that was implied in the words "in manner directed by any Act to be passed." The phrase would have no meaning, and the obligation of paying off not less than £500,000 would not be imposed, if it were necessary to pay off the whole at a given time. In reply to the hon. Baronet (Sir John Lubbock), he did not propose to bind the State to what he should consider the dangerous liability of having to pay off the whole of the £40,000,000 on any given day, though he had no doubt that, with the large resources at the disposal of the State and of the banks who would, no doubt, be willing to cooperate, the operation would be perfectly feasible. But it would be a risky undertaking to which he could not pledge himself 12 months in advance. Therefore, he reserved to himself the freedom which he contended was implied in the language of the Act regulating the redeemability of these Stocks—if he might use the word. It was safer not to commit themselves to any definite proposition at the present time, but to leave themselves free to settle the manner by a subsequent Act. He 533 quite admitted the force of the suggestion of his right hon. Friend the Member for Edinburgh (Mr. Childers) that it might be desirable to take power to pay off this year as much of the Stock as might be voluntarily offered; but he was bound to say the House had treated him with such confidence and kindness in reference to the Conversion Scheme that he scarcely liked to trespass upon the House with another Bill of the same kind within a very short time. He would, however, consider the point which had been raised. But the cheap Money Market referred to by the right hon. Gentleman was not of such advantage as he could wish. The Treasury might borrow at 1 per cent or 1½ per cent. but only on short loans, and it might be that they would find themselves a year hence in the position of having to redeem those loans on disadvantageous terms.
§ MR. CHILDERS
said, he did not in the least suggest that the money should be borrowed for a few weeks or months only; he only pointed out the remarkable state of the Money Market, and that it might be taken advantage of.
§ MR. GOSCHEN
said, that one of the advantages was that Two-and-Three-quarter per Cents stood at 99⅝; but he had been considering in vain how he could avail himself of this cheapness in order to meet the difficulty. On the other hand, too, as his right hon. Friend would see, this very cheapness might make it undesirable for holders of Consols to come in and be paid off, because they might fear that they would be unable to employ their money except at very cheap rates during the interval. Two-and-Three-quarter per Cents stood now very nearly at par, and if it were possible, without any further sacrifice, by any means to induce a large number of Consol-holders to be paid off, it would be a great advantage to the State; but he was not able as yet to say that he would offer better terms—and, as the holders stood out before, it was to be presumed they wanted better terms—he was not prepared to say that he would offer better terms to those who stood out than to those who accepted the previous offer. It was a difficult point; but he was obliged to the right hon. Gentleman for his suggestion, and still more for the extremely kind way in which he had spoken of the Conversion proposed.
§ SIR ROBERT FOWLER (London)
said, in regard to what the right hon. Gentleman opposite said of the cheapness of money, though he seemed to think the state of the Money Market was phenomenal it had really been in the same state for years past at this period, and barring the outbreak of war or any foreign complication, it would probably be on the same footing this time 12 months.
§ THE ATTORNEY GENERAL (Sir RICHARD WEBSTER) (Isle of Wight)
said, he would not intervene, except that he deemed it right to add a few words in support of the view taken by the Chancellor of the Exchequer. He quite agreed with the Chairman of Ways and Means that an argument might be raised in regard to the matter; but if the hon. Gentleman had had the opportunity of studying the previous Act, and of seeing how the Schedule came to be inserted, he believed he would come to the same opinion with himself, and which was shared by the Solicitor General and others of the Profession with whom he had considered the point. That view was that it was contemplated in the Act that all holders of Stock should be put upon an equality, and that it was not intended to pick out, in the first instance, holders of £1,000,000 or £500,000 of Stock and say—"We will pay you off by some arbitrary method and leave others as they are." What was intended was that, differing from other Stock, Consolidated Three per Cents could not be paid off except on a year's notice; but when that notice was given, then the stockholders became in the same position as other stockholders, redeemable without any notice at all. The first thing to be done was to take away the bar of one year, and that was intended by the Resolution. Then, if this was the intention of those who drafted the Schedule, the next thing was to provide for the payment; and if it had been intended that in the notice the amount to be paid off should be specified exactly, there would be no reason whatever for the words "or any part thereof," or for the words "in manner directed by any Act to be passed "—it would simply have been necessary to say the amount stated in the notice. His opinion was that it was not contemplated that when the notice was given the whole amount should be paid off at once; but the notice 535 was required to make the Stock redeemable at all. Nor could it be maintained that stockholders could say, "You must pay us all off at once or not all," else there would be no object in the reference to the manner in which Parliament might direct and to the limit of £500,000. Bearing in mind the principle that underlay the scheme of payment that the bar of a year's notice should be first removed, the opinion expressed by the Chancellor of the Exchequer was sustained by his reading of the Act.
§ MR. COURTNEY
said, he had no right to speak again, but he only desired to know whether the right hon. Gentleman the Chancellor of the Exchequer understood the meaning of the Act to be that any time in the present year, by giving 12 months' notice, all Consols could be put in a position to be redeemed?
§ MR. GOSCHEN
said, yes; he thought that was its meaning. It seemed to him that it would have been possible to place the whole of the £400,000,000 Consols and Reduced in that position; but to have done so originally and to have left stockholders in a state of uncertainty, and with the practical possibility of not being able to deal with the matter at all at the end of the 12 months' notice, would have thrown the funds of the country into an inextricable state of confusion. But now, with the great bulk of the Stock put on a permanent footing, and when the amount to be redeemed was reduced to such comparatively small proportions, and when there was a bonâ fide intention of paying it off rapidly in a manner that would cause no inconvenience, as a matter of practical policy the conditions were wholly altered.
§ Question put, and agreed to.