§ Order for Second Reading read.
§ Motion made, and Question proposed, "That the Bill be now read a second time."—(Mr. Chancellor of the Exchequer.)
§ SIR CHARLES LEWIS (Antrim, N.)
, who had given Notice of the following Amendment:—That, having regard to great loss and injury sustained by the very large number of persons who hold small amounts of Stock, the interest on which is proposed to be reduced, and to the small annual reduction in the public burdens effected by the proposed conversion, this House thinks it inexpedient to make the change proposed,said, his object in intervening at this stage of the Bill was to insure that the position of the smaller and poorer holders of Government securities should be considered by the House, and should be fairly treated. Although he had some particular points to mention, he might say at once that he had no general hostility to the Bill. He thought that nothing could be so unfortunate as to dispose of the Bill without due consideration being given to the interests of the class of holders just mentioned. From the large number of communications which, he had received he found that a very strong, not to gay bitter, feeling prevailed on that subject; and he thought that the circumstances in which it was proposed to carry out the measure of the right hon. Gentleman the Chancellor of the Exchequer (Mr. Goschen) ought in every respect to be fair, honourable, and considerate. That Bill would effect by far the largest conversion of Stock and lowering of interest that had ever taken place in this Kingdom, and he did not think that the interval of only a week allowed between the introduction of the measure and the second reading was sufficient for the 1454 purpose. He was aware that the right hon. Gentleman the Chancellor of the Exchequer had quoted as a precedent the course pursued in 1844, when about the same amount of time was allowed; but the circumstances connected with the earlier measure were entirely different from the present scheme. The amount of Stock then converted was not half as much as was now proposed by the right hon. Gentleman to be dealt with. Now, he (Sir Charles Lewis) would ask the House whether there was not in recent times a general belief that the Three per Cont Stock bore a fixed and unalterable rate of interest? That impression had been confirmed by the term "annuities" which was applied to them. In answer to a Question yesterday as to the number of small holders in the different Three per Cent Stocks, the right hon. Gentleman the Chancellor of the Exchequer told the House that there wore no fewer than 104,500 separate accounts not exceeding £1,000 in amount; that there were 13,000 other accounts between £1,000 and £2,000; and 10,500 accounts between £2,000 and £3,000. The maximum point of those small holdings only produced an annual income of £90. Nobody could be said to be passing rich with that amount; and it might be taken generally that those small holders belonged to the class where poverty was most distressingly felt—namely, those who were usually included in the lower middle ranks of life. Again, in addition to those persons who were direct holders of Stock, there were other classes who were also interested in small amounts of Consols. In one case, for example, which had been brought to his notice, a trustee of an estate in Consols stated that he had to divide the annual income among 15 different persons, the largest sum paid to any one of them being £56, and the smallest about £35. In fact, the sums held by trustees included the interests of a very large number of small holders. The investments also by the Court of Chancery were split up among a large number of persons, and represented a very great number of small interests. What effect would the Bill have upon this small class of holders? A person having £1,000 in Consols and receiving £30 a-year was asked to submit to a deduction of £2 10s. In the case of a person 1455 who lived upon a miserable income of £30,that reduction represented increased distress; and if they went up the scale to cases, say, of persons who were in the habit of receiving £90 a-year from their investments in Consols, the reduction in each case would be £7 10s. Thus the large class of persons who suffered from that direst of all distress, genteel poverty, would be ruthlessly deprived of an essential part of their daily income—he might almost say their daily bread. There were hundreds of those persons who had not yet appreciated what the consequences of the measure would be. He had received numerous letters upon the subject from various classes of holders. A poor old lady wrote that it was dire cruelty to reduce the rate of interest received by thousands of people who had nothing more to maintain them in their old age. It mattered little, she said, to those who had some hundreds of pounds a-year; but to those who, like herself, had only £1,000 invested, it was a serious matter. A clergyman writing from Yorkshire said that he was trustee for several small charities. In the case of one charity some old people received a weekly pittance of 5s. each, and the Bill would reduce this to 4s. 7d. or 4s. 2d., which meant that the old men would be deprived of their pipes and the old women of their sugar. He had received another letter from a gentleman who, in his official capacity, had to pay £1 3s. 4d. per week to a family, the father and mother being too old to work. To reduce this, as the right hon. Gentleman the Chancellor of the Exchequer proposed to do, meant, the letter said, starvation in the House of a worthy but helpless couple. If people who had made investments in Consols had had fair play, if more time had been given for the consideration of the matter, hon. Members would have heard such expressions of opinion from their constituents as would have induced them to regard the Bill in a very serious light. What was the reason for the desperate hurry of the Government? The Bill would not come into operation until 1889; therefore the Government could reasonably have given more time for the consideration of the measure. In the case of poor people the Bill would be oppressive. With regard to that large class of persons who, as trustees, had 1456 invested money in Consols, and had no power to change the investment, the Bill provided for application to the Court of Chancery. The only remedy, therefore, which this class of holders had in the difficulty thus presented was an application to the Court of Chancery, at the expense of the estate. He thought that a better provision than this, by which such cases might be cheaply and expeditiously disposed of, should be made. Then, again, it would be impossible to get the consent in the Court of Chancery before the 12th of April of the vast number of persons whose money was in trust, so that, in point of fact, the provisions of the Bill would actually deprive those people who needed the bonus of the opportunity of getting it. The hon. Member for Oldham (Mr. J. M. Maclean) yesterday asked the Chancellor of the Exchequer whether, under the Bill, provision would be made to protect trustees who had invested moneys in Consols to cover annuities under wills, or similarly to provide for ground-rents or rent-charges under wills where a distribution of the rest of the property had been legally made. The right hon. Gentleman replied that this was provided for by the Bill, and referred the hon. Member to Clause 19. In this answer the right hon. Gentleman had, in his opinion, carried the interpretation of the clause far beyond what it would really bear. It appeared to him that the proposal introduced a vicious-ness which required very serious attention. The conversion was not proposed on its own merits; but an inducement had been held out to bankers and brokers to employ their influence to induce persons to come in. It was no small matter, for he bogged to remind the House that they were dealing with £580,000,000 of Stock. He was told by the right hon. Gentleman the Chancellor of the Exchequer that £68,000,000 of that amount was held by Government Departments; but the right hon. Gentleman would not say that all the holders had the power to make the conversion. That left £512,000,000. They were told that the scheme was already a great success, and that the bankers and brokers, especially in London, were loud in their declaration and promises of support. If so, the scheme was already virtually carried. Out of the£512,000,000 he (Sir Charles Lewis) estimated that 1457 the Government would have to pay brokerage upon £400,000,000.
§ MR. GOSCHEN
The hon. Baronet is wrong in his figures. No commission is paid upon the £150,000,000 of the Now Threes, the reduction of which is automatic.
§ SIR CHARLES LEWIS
said, he would take it, then, that £250,000,000 would be dealt with, and that would amount for brokerage to about £175,000. That was a pretty big sum to pay for the launching of this scheme. It was worth a good deal of money to the bankers and brokers, and when they were told that the scheme had received the support of these two classes he put it to the House whether the £175,000 had not something to do with the proposal? They were not a large class, and £200 or £300 each, with the agency commission, had considerable influence in the formation of opinion. When the right hon. Gentleman the Member for South Edinburgh (Mr. Guilders) proposed his plan of conversion, he offered no such fee, and, though the terms of conversion were far bettor than those under this Bill, the brokers put their backs up and left the scheme rigidly alone; but now the assent of the great financial houses was bought with the conversion fee. There was another feature about the present scheme which was not very nice. Primarily sneaking, what ought the public to do as the debtor of the stockholders? What it ought to do was to say—"We are getting tired of paying you 3 per cent; we will not pay any more than 2¾ per cent; we will pay you off." But they did not do that. Assent was assumed; in that case dissent was not mentioned. That was not a fair way of dealing with the creditors of the State, who could not call upon the State to pay more, and were at the mercy of the State. The Chancellor of the Exchequer, however, would not take the responsibility of saying honestly—"We will pay you off." He said—"We are equal to the occasion." How? By the sinister provision in Clause 1, second paragraph, which declared that all holders of New Three per Cent Stock who signify their dissent—"Shall be paid off in such order and at such time and in such manner as Parliament may direct." Thus it was proposed to keep the sword hanging over the unfortunate 1458 stockholders. Mr. Goulburn did not go out of his way to offer the inducement of a commission; he allowed his scheme to float upon its own merits.
§ MR. GOSCHEN
said, he was sorry to interrupt the hon. Baronet, but the 5s. would not apply to the New Threes. He had strictly followed the precedent of Mr. Goulburn, and the New Threes represented a smaller sum than that which was converted by Mr. Goulburn.
§ SIR CHARLES LEWIS
said, that the way in which the scheme affected the smaller class of fundholdors was very remarkable. These people were not subject to Income Tax, but any relief which the scheme might afford to the taxpayers would be confined entirely to the Income Tax payers. Nobody pretended that the expected saving of £1,400,000, which was about equal to ¾ d. in the pound of Income Tax, was to be applied in altering any other tax. The effect of it would be, therefore, to lighten the burden of the Income Tax payers. In other words, the Chancellor of the Exchequer was proposing to take ¾s. in the pound of the burden off the Income Tax payer, and to levy 20 pence in the pound upon the unfortunate small holders who did not pay Income Tax at the present time. Mr. Goulburn did no such thing as that. They wore told to fool great delight at the improved credit of the country. It was said we could borrow now at 2½ per cent, whereas formerly we could only borrow at 3 per cent. He did not say that the public credit had not something to do with it, but it had very little. Had the decrease of foreign loans nothing to do with it? Had the depreciation of landed securities nothing to do with it? Why, if they looked through the returns of the large Insurance Companies, who had millions to invest, they would find that their great resort was to go into land. Would they go into land now? He was sorry to see these Communistic views cropping up on that side of the House as well as on the other. Whereas there used to be millions invested by the Insurance Companies in land, they now fought shy of it. Had that not something to do with the increase in the price of Consols? Had the badness of trade—the vast amount of money withdrawn from trade and commerce—nothing to do with investing in Consols and running the price up to 1459 what they had recently seen it? In 1844, when the capital of the country was much less, they had £100,000,000 more of public debt, because from that time to this the decrease in the National Debt exceeded £100,000,000. He ventured to think that the reasons he had given were sufficient to account for the cup running over so "brilliantly. He was rather amused to hear one sentence of the right hon. Gentleman. He said in his enthusiasm that he wanted to see this new Stock become the champion Stock of the future. He would like to see the champion Stock giving fair play, full consideration to a vast number of poor people who would be so seriously injured by this scheme. He had not wished to say it himself, but he had seen that it had been remarked, that there was a slight flavour of the Plan of Campaign about the scheme—only a slight one, but one he would have been glad to see absent. In this very serious matter, the conversion of nearly £600,000,000 of Stock, they ought to have had not only more time, but more equitable provisions. He was told the measure was a great success. The last fact he saw showing that it was a great success was that the provincial bankers had asked for more plunder out of it. They said 1s. 6d. was not enough for them and they wanted an increase. But he had no doubt it would be thrust through. He hoped they would not see what was witnessed after the conversion of 1844, a great rush of public investments and public Companies. It was after that they had the railway mania, from which some of them were still smarting. He asked the House to consider the case of the poor people who could not help themselves, many of them women who had little influence; and before sitting down he would read an extract of a letter from a clergyman. He wrote—His benefice was at one time worth.£265; now, through agricultural depression, it only brought in £82. He had investments in Consols or he should not be able to live at all, and his income was so small that a reduction of £10 or £15 per annum"—it might be supposed that he had £3,500 in Consols—would materially affect his financial position.The loss, he said, would be nothing to an opulent manlike the Chancellor of the Exchequer, but it was almost ruin to 1460 him. The next paragraph in the letter he should like to read sotto voce to his hon. Friends near him, but that was impossible. The rev. gentleman said—That at the last General Election he advised his parishioners to vote for the Conservative Party, because they were not likely to interfere with the rights of property."That argument," wrote this clergyman, "I can no longer adduce;" and he concluded by saying "that confidence in their leaders had been utterly extinguished." [Laughter.] He heard some hon. Friends laugh. If they would wait a month he thought they would find there was more in it than they supposed. They could not remove the impression by simply pooh-poohing it. He thought the case required serious consideration, and he begged to move the Amendment which stood in his name.
To leave out from the word "That" to the end of the Question, in order to add the words "having regard to great loss and injury sustained by the very large number of persons who hold small amounts of stock, the interest on which is proposed to be reduced, and to the small annual reduction in the public burdens effected by the proposed conversion, this House thinks it inexpedient to make the change proposed."—(Sir Charles Lewis.)
§ Question proposed, "That the words proposed to be left out stand part of the Question."
§ MR. HENRY H. FOWLER (Wolverhampton, E.)
said, he agreed with the hon. Baronet (Sir Charles Lewis) that the question was one which deserved the serious consideration of the House, but the test which they must apply to the proposals before them was, whether the Government, having regard to the present state of the money market and the credit of the Government, was in a position to go into the money market and operate a given sum of money at a rate of interest paying 2¾ per cent for 15 years, and then 1½ per cent for 20 years longer—practically meaning £2 12s. per cent for a period of 35 years. Although they might feel the sincerest sympathy with some of the cases to which the hon. Baronet had alluded, still it must be admitted that no large scheme of this kind could be carried out without inflicting a considerable amount of suffering on large classes of 1461 individuals, yet as trustees of the public purse and representing the public debtor and the House of Commons, the Government would not be justified in paying one shilling more than the market value on account of the National Debt. In discharging his duty, the Chancellor of the Exchequer had simply to make a perfectly fair and equal bargain between debtor and creditor. He took it that that was the first sound principle to apply to this Bill. The market must not be in any way prejudiced by the resources which the Government of the day might possess, and there should not be the shadow of a shade of suspicion of a stock-jobbing transaction. Justice ought to be done to both sides. The precedent of 1844 was not applicable to this case, and could not be a guide to the right hon. Gentleman with reference to the course which he now proposed to take. Mr. Goulburn's proceedings were taken on firm ground, which the present Chancellor of the Exchequer did not stand upon. Mr. Goulburn proposed to reduce Three-and-a-Half per Cents to Three-and-a-Quarter for a period of 10 years, and then to Three per Cents; but he had behind him £500,000,000 of Three per Cent Stock. With that large body of a lower Stock behind him, the operation was a perfectly safe one. We had no such standard now. The Chancellor of the Exchequer had truly said that it was not fair to quote the present value of the Two-and-Three-Quarter per Cents, because the amount was so small. Nor was there any indication, by means of the figure of its value, to speak as to the value of the new Stock, which a grateful Stock Exchange had denominated "Goschens." But there were two side-lights in the money market with respect to this Bill. He agreed with the Chancellor of the Exchequer that there had been a general fall in interest, and that there was an enormous amount of money seeking investment. Every year a large amount of trust and insurance savings had to be invested; and there was a general disinclination on the part of the great insurance and other Companies to invest in mortgages or land. Of that the public ought undoubtedly to reap the benefit. But there was another side-light to which the Chancellor of the Exchequer did not refer on Friday. He quoted many precedents of conversion; the precedent 1462 of 1822, the precedent of Lord Althorp in 1834, and that of Mr. Goulburn in 1844. But the right hon. Gentleman did not give the precedent of January, 1888, or inform the House of the terms upon which the latest loan of the English Government was raised. And yet that would have been the safest indication of the present state of the money market. What was the opinion of the Bank of England and the other banking authorities as to the rate of interest at which the Government could borrow? In January, 1888, the Chancellor of the Exchequer issued £37,000,000 of Local Loan Stock at 3 per cent, irredeemable for 25 years. That Stock could not be redeemed until 1913. The first operation under which that Stock was issued was an equivalent exchange of £7,400,000 of other Stocks. He (Mr. Henry H. Fowler) had asked the right hon. Gentleman what was meant by "equivalent," and the reply was—"the same amount, Stock for Stock." In January, 1888, knowing he was about to propose a conversion of existing Stock to Two-and-Three-Quarters and then to Two-and-a-Half, the right hon. Gentleman exchanged this Stock, pound for pound, for Three per Cent Stock, not to be redeemed for 25 years. There was a small sale of £600,000 immediately afterwards by the Government brokers. The people who held that Local Loan Stock were to be congratulated on their good fortune. On January 10 an advertisement was issued inviting tenders for this new stock at a minimum of £101 15s. Consols and £101 5s. Reduced or New Threes per £100 of the new Stock. On January 18, the tenders were opened. What was the opinion of the City on January 18? On the 18th of January, they offered to the Government for £100 of these Three per Cents, £101 16s. 7d. Consols, and £101 5s. 11d. Reduced. The tenders were—Consols, £2,466,000; Reduced, £1,117,000. These were the Stocks on which no conversion could take place without 12 months' notice. But of the Now Threes, which the Chancellor of the Exchequer could deal with at any time, the tender was £6,575,000. Therefore, at that date, the New Three per Cent Stock, liable to be reduced to 2¾ and 2½, was exchanged to the extent of £6,500,000 at a premium of 25s. The Chancellor of the Exchequer had said that no 1463 portion of this Stock was taken by a Government Department. He would ask the right hon. Gentleman whether the Bank of England was a Government Department, and would also ask him to deal with the report which was current that the Bank of England was taking £7,000,000 of that Stock out of £18,000,000.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN) (St. George's Hanover Square)
said, he would explain that the Bank of England had some of the Stock before. There was no question of taking £7,000,000 out of £10,000,000.
§ MR. HENRY H. FOWLER
said, that was not his point, whether the Bank of England was taking £7,000,000 out of £10,000,000; but that the Bank was taking £7,000,000 altogether of this Stock at 25s. premium. To get rid of £18,351,000 Three per Cents the Chancellor of the Exchequer gave £18,200,000 Three per Cents, irredeemable for 25 years, thereby only effecting a saving of £4,500 a-year. But what about the other £18,000,000? The right hon. Gentleman had only given the figures of £18,000,000, whereas he counted £37,000,000. He was not going to criticize whether this was a wise or unwise operation. The right hon. Gentleman the Chancellor of the Exchequer had made no statement to the House, and they were pledged to express confidence in the right hon. Gentleman that the course taken was the best for the country, but, tried by that test two months ago, it was not the opinion of the Chancellor of the Exchequer that the country could borrow at 2¾ per cent, or why did he then make a 3 per cent loan irredeemable for 25 years. He must draw a distinction between the compulsory and the optional parts of this Bill. The Chancellor of the Exchequer was dealing compulsorily with only one kind of Stock. The holders of that Stock had no grievance whatever. That was a pure matter of negotiation as between the Chancellor of the Exchequer and the Money Market. The holders bought the Stock, with the knowledge that after a certain date it might be redeemed at any moment at par. But the Chancellor of the Exchequer had complicated his scheme by the introduction of an optional conversion, as well as a compulsory conversion, and the very 1464 fact of its being optional almost implied a fortiori, that the Chancellor of the Exchequer could not make it compulsory. Therefore, there must be some terms which the Chancellor of the Exchequer thought would be sufficient to tempt the people into accepting this option. Every man must judge for himself. Even the poor holders must appreciate the possibilities of foreign complications and trade revival, and all the circumstances which might disturb the Money Market in the next 12 months, and they must act accordingly. They were told that this optional part of the scheme met with the cordial approval of the City, and especially of the bankers; and the late Lord Mayor loudly cheered that statement. What he (Mr. Henry H. Fowler) wanted to know was why the bankers of to-day were so strong in the support of an optional system, whereas they wore so steadily opposed, to the optional system which his right hon. Friend the Member for South Edinburgh (Mr. Childers) proposed in 1884. A Governor of the Bank of England pronounced an opinion that his right hon. Friend's scheme was detestably bad. The House of Commons had a right to know why it was unsound, unfair, and detestably bad in 1884 to accept the terms of the then Chancellor of the Exchequer, and why it was now the height of prudence and financial wisdom to accept a less favourable proposal when it was brought forward by one of his Successors. He would also ask the right hon. Gentleman if there was a precedent in the whole history of the British Treasury for the Treasury paying a commission of the nature of that which was now proposed? He hoped the right hon. Gentleman would answer the question at once.
§ MR. HENRY H. FOWLER
I will admit the Suez Canal may be brought in; but there was no precedent in 1844 in the case of Mr. Goulburn.
§ MR. HENRY H. FOWLER
said, the right hon. Gentleman seemed to think that that was in his favour; but to his (Mr. Henry H. Fowler's) mind it aggravated the objection. What was 1465 proposed amounted to a payment to the agent of a creditor by the debtor to promote the interest of the debtor, and till such debt was legalized by the Bill, he had no doubt that it would be an illegal payment, and was so at that moment. He would undertake that the House of Commons should have the opportunity of pronouncing an opinion upon 1s. 6d. per cent bribe offered to brokers and bankers. The phrase "recognized agents" was new in English law and Acts of Parliament. Were the bankers and the Bank of England to receive this commission as "recognized agents?" Why were the poor stockholders to be kept out of this commission? The greatest demoralization in our modern commercial system was produced by this giving of commission. If his hon. Friend the Member for Preston (Mr. R. W. Hanbury) had had an opportunity the other night of calling the attention of the House to a case of misconduct at Woolwich, this question would have been raised. How could we prevent people from taking commissions, when we gave commissions to bankers and other recognized agents? As he said, he would undertake that the House of Commons should have an opportunity of expressing a definitive opinion upon this subject. He would now ask the Chancellor of the Exchequer what he was going to do with the Sinking Fund? The whole theory of our Sinking Fund was that the money put into Terminable Annuities could be replaced by Consols at par. There were, however, no provisions in the present Bill for dealing with that. Again, there was the whole question of the Savings Bank, upon which he wished for some information. The bulk of the money was held by the Post Office Savings Banks, and we could not continue to pay the interest which we were paying now after an operation of this sort. The Chancellor of the Exchequer had told them nothing about that large item of the National Debt, consisting of upwards of £13,645,000 which was payable to the Bank of England and the Bank of Ireland, and upon which the interest of 3 per cent was payable. Did the right hon. Gentleman propose to interfere with that rate of interest, to reduce it to 2¾ per cent or continue the present 3 per cent interest? Those were questions which he thought the House ought to consider. The hon. 1466 Baronet assumed that the proposed reduction of interest would be a relief to the taxpayer. It would be nothing of the sort, because under Sir Stafford Northcote's Act, a certain fixed sum was appropriated as the charge of the National Debt, and the whole of the £2,800,000 must be borrowed. Hon. Members, therefore, must not suppose that the Chancellor of the Exchequer was going to repeat his operation of last year, and to again interfere with the repayment of the National Debt. His own impression was that the right hon. Gentleman had done well in grappling with, the New Three per Cents, and had he confined his proposed operation to them, he would have received the cordial and united support of the whole House. He, however, could not help deploring the right hon. Gentleman's attempt to bring about this optional conversion of Consols and Reduced, not upon its own merits, but by means of a commission to the agents of the holders of those stocks. He doubted whether that attempt would succeed; but whether it succeeded or failed, he thought the mode in which that part of the transaction would have been carried out, would not be one which would reflect much credit upon either the right hon. Gentleman or upon the Government of which he was a Member.
§ SIR ROBERT FOWLER (London)
said, the House was aware that by the financial economy of the right hon. Gentleman opposite (Mr. W. E. Gladstone), and by the Sinking Fund of Sir Stafford Northcote, the public Debt had been diminished. Since the proposals of the right hon. Member for South Edinburgh (Mr. Guilders), as was well known, the rate of interest on investments had become less and less, until the time had arrived when the Chancellor of the Exchequer might expect to make a more advantageous bargain for the country than could have been made four years ago. That was the reason why the present Chancellor of the Exchequer, had been more successful than his Predecessor. He sympathized with the clients of the hon. Baronet the Member for North Antrim (Sir Charles Lewis), the holders of Stock whose income would be reduced owing to the proposed conversion of the National Debt; but, at the same time, he did not think that this was a matter which the Chancellor of the 1467 Exchequer or the House could take into account. It seemed to him that it was the duty of the Chancellor of the Exchequer to make the best bargain he could for the country, and now that he found the interest on the Debt was higher than it ought to be, he was simply doing that which would tend to the discharge of the Debt ultimately, by bringing in a measure which would reduce the rate of interest. Much as they might sympathize with those who were in the position referred to by the hon. Baronet, he said that the Chancellor of the Exchequer was doing no more than was right in looking rather to the position of the taxpayer than to the holders of Public Stock. They had to look not simply to what might be the verdict of the House, because he could not think that the House would reject this measure of his right hon. Friend, but to the verdict of the Money Market; and considering the very high price which the Public Funds had reached, and that all other Stocks stood at a premium, he said they had in those facts the strongest evidence that in the Money Market the proposal of his right hon. Friend had met with approval. The Chancellor of the Exchequer was therefore, in his opinion, not only justified but bound to introduce this Bill. He had simply risen to thank his right hon. Friend for the lucid statement which he made to the House when the Bill was brought in, and to say that the measure would have his cordial support. He had received a letter from a solicitor, one of his constituents, who said that there did not appear to be in the Bill any provision for fixing the amount of new Stock which would be deemed equivalent to the old Consols, and that this was a matter of importance with regard to some mortgages on estates, which provided for the sale of an equivalent amount of Consols. His right hon. Friend would probably refer to that point in his reply, and also say whether some provision could not be made to supersede the necessity of going to the Court in the case of certain small funded amounts held in trust. By way of illustration he might take the case of a fund of say £500, which on the death of a widow had to be divided by the trustees among 20 grandchildren. It was obvious that it would be most expensive to go to the Court in a case of this kind, and he 1468 thought the point was one which his right hon. Friend should consider.
§ SIR JOHN LUBBOCK (London University)
said, he was sure that all hon. Members would sympathize with those who would suffer owing to the scheme before the House, but at the same time he thought they must agree that it was the duty of the Chancellor of the Exchequer to make the best bargain in his power for the public. Moreover, the change could hardly have been unexpected. For many years, with those who advocated payment of the National Debt, he had urged that in addition to other advantages it would enable the Chancellor of the Exchequer to reduce the rate of interest and thus diminish the burden on the taxpayers. He would not occupy the attention of the House for many moments, but he might perhaps be permitted to thank the Chancellor of the Exchequer for the care with which he had prepared his plans, and also for the lucid and interesting speech in which he had explained them to the House. The right hon. Gentleman the Member for East Wolverhampton (Mr. Henry H. Fowler) appeared throughout his remarks to be anxious to find as much fault as he could, but he did not think he had succeeded in pointing out any real flaw in the scheme of the Chancellor of the Exchequer, The right hon. Gentleman said that the conversion would be of no advantage to the taxpayers, on the extraordinary ground that when the conversion had taken place the saving of interest would probably go in reduction of the amount of the National Debt. But the amount payable for interest would be very much less. Surely the right hon. Gentleman would not deny that it was an. advantage to the country that a larger amount should go in reduction of Debt. The right hon. Gentleman also said that if the Chancellor of the Exchequer had only dealt with the New Three per Cents, he would have given him his cordial support, but that he could not help deploring the right hon. Gentleman's attempt to bring about this optional conversion of Consols and Reduced by offering a bribe to the holders of stocks. But it had always been the opinion of most of those engaged in financial operations that there should be one large Stock, and he was sure that he was expressing the general opinion in thanking the Chancellor of the Exchequer for 1469 carrying out that arrangement as far as he could. He, also, thought the right hon. Gentleman had used a wise discretion in not increasing the nominal amount of the Debt, but in taking a rate of interest at which he could borrow money at par. The time given for consideration also seemed to him to hit a happy medium, inasmuch as it allowed a fair time for consideration, and yet did not imperil the conversion by unduly postponing the completion. The hon. Member for North Antrim seemed to think the time allowed was too short, but he (Sir John Lubbock) believed that every one interested would receive fair notice of what was to be done. At the same time it had always seemed to him that Mr. Goulburn had adopted a rather arbitrary course in assuming the consent of those who did not dissent. Moreover, in the case of 1844 the time allowed was extremely short. But it was then urged that this was less material than it might seem, because the terms were so good that everyone was sure to accept them. This plan required, in fairness, that the terms offered should clearly be such as it was desirable to adopt. At the same time he was not sure that the precedent was a good one, because it might be adopted by a less scrupulous Government without the other circumstances which constituted its justification. They were all very glad to hear that the Chancellor of the Exchequer was confident in his expectation that, notwithstanding the melancholy event of last week, no foreign complications would endanger the success of his plan. At the same time, he should have been glad if the right hon. Gentleman had left himself some latitude as to the terms until the last moment. The margin was certainly not large, and a fall of even 1 per cent would seriously endanger his scheme. If, however, the right hon. Gentleman did not think this was necessary, it was not for him to press it. It was a curious commentary on the depression of which we had heard so much that the savings of the country should enable us to reduce the interest on the National Debt. It could not be said that this was owing to capital being taken out of business, because the volume of business was as large as ever—it was the profits that were reduced. Nor was it owing to capital being removed from other invest- 1470 ments, because in that case other investments would have fallen; and, on the contrary, as the right hon. Gentleman had shown, other investments had also risen. We must then recognize that, though no doubt some classes had suffered greatly, still the national savings, as a whole, had been so large as to raise the prices of all good securities, and thus render possible the reduction of interest. There were one or two points on which he would like to have some information. He asked the Chancellor of the Exchequer whether when Consols or Reduced stood in the names of two or more trustees the assent of all or a majority of them would be required, or whether one would be sufficient, as in the case of dividends? It often happened that one might be absent; it would frequently be difficult to get all the consents; and the amount standing in the name of trustees was so immense that the question was one of importance. Then there was another point which had caused some doubt and anxiety, on which he should like to know the view of the right hon. Gentleman. It had happened in a great many cases—indeed, in thousands of cases—that annuities had been left by will, and the trustees had purchased enough Government Stock to provide the annuity, and had then parted with the residuary estate. But when the conversion was made the Stock would be no longer sufficient to provide the annuity. Suppose, for instance, an annuity of £100 had been left—which was a very common amount—and the trustees had purchased £3,333 Stock. This sum would, of course, no longer produce the amount of the annuity; and, therefore, he asked on whom would the loss fall? The estate might have been wound up; would, then, the trustees be personally liable? Perhaps the right hon. Gentleman would say a word on this point, and consider whether he would not introduce into the Bill words, if necessary, to settle the difficulty. Before sitting down he might just say that while the last conversion proposed by the right hon. Gentleman the Member for South Edinburgh did not effect all that he had hoped for, it was only due to him to recognize that his proposals had materially helped to facilitate the operation now proposed by the Chancellor of the Exchequer. The right hon. Gentleman the Member for East 1471 Wolverhampton had been very severe on the clause with reference to recognized agents, and, he thought, also somewhat unjust to bankers. He seemed to imply that they would advise their clients to take Stock, which otherwise they would not do, for the sake of the small commission which would be paid. But in the case of small amounts it was obvious that a commission of 1s. 6d. was a meagre temptation, and when large Stocks were dealt with the holders of them were quite able to judge for themselves. The right hon. Gentleman objected to commissions altogether. It was not commissions that were objectionable in matters of business, but the secret commissions; commissions placed in Act of Parliament were known to everybody; and he thought it was going rather out of the way, under those circumstances, to express so large an amount of indignation. Bankers would not advise their customers to assent to the conversion unless they did so themselves. Moreover, what did it amount to? Supposing the 1s. 6d. commission were not offered, every holder of Consols or New Threes who wished to convert would certainly have to pay his agent some slight amount for the trouble of conversion. This was the more desirable because so much was held by trustees, who might well be prevented from converting if it involved a payment which it might be difficult for them to make. In fact, the Chancellor of the Exchequer was simply saying that the expense of conversion should not fall on the holder of the Stock, but upon the Government.
§ MR. TYSSEN AMHERST (Norfolk, S. W.)
said, he must congratulate his right hon. Friend the Chancellor of the Exchequer on the reception which had been awarded to his proposal. At the same time, he feared that under the measure as it now stood, not only great inconvenience but in some cases actual injustice might result from the scheme; first to those who saw in their investment in the Funds as they thought an unvarying income without any trouble of collection. To that class, perhaps, no consolation could be given, but there was actual injustice in the case of those whose incomes were derived from interest on trust money when that money had been invested, under special limitation, in the Funds only. This he believed was a very common case where moneys had been 1472 left for charitable purposes. Indeed, there were two cases in which he himself was trustee of such money, and where he knew the investment of the money was limited to the Funds on purpose to secure an unvarying income for annual distribution. He hoped, therefore, that his right hon. Friend would either bring in a Bill, or insert a clause in the present measure, to authorize trustees whose powers were limited to the Parliamentary Stocks or Public Funds to invest in what were known as "Authorized Trustees' Securities," and in that way save those persons whose incomes, as far as they arose from investments limited to the Funds, from a hardship which would amount to no less than a permanently increased Income Tax of 1s. 8d. in the pound, to be increased after a certain number of years, and that, too, in many cases where Income Tax was not now demanded.
§ MR. S. HOARE (Norwich)
said, that the right hon. Gentleman the Member for Wolverhampton (Mr. Henry H. Fowler) might have treated the bankers differently than he had done in supposing that they would recommend small holders of Stock to come into the conversion scheme of the Chancellor of the Exchequer for the sake of a commission of 1s. 6d. per cent. They were all aware that difficulty and hardship would arise from the lowering of the interest; but the fact that the bankers had agreed to the change appeared to him to have shown that the time had come for the change, and that there was little or no choice in the matter. It seemed to be forgotten that the bankers were the largest holders of the Stocks now to be dealt with, and would be the largest losers by the scheme of the right hon. Gentleman. Those Members who had examined the accounts of Joint Stock Banks would have found that those banks, independently of the Bank of England, must hold upwards of £50,000,000 of the Stocks now to be changed. The result would be, if they got 1s. 6d. commission, that they would lose something like £110,000 or £120,000 a-year, and in a very short time £225,000 a-year. It might, of course, be said that they could afford to lose the money; but did not the fact show that, at all events, the bankers accepted the change, and that any Chancellor of the Exchequer who protected the interests 1473 of the country was bound to act according to that financial thermometer, which bankers were considered to be. If they remembered that the bankers hold assets of £400,000,000 it would be seen that it was of importance to get outlets for the money; dividends had to be earned, and it was, therefore, absolutely necessary to find the best investments they could, and they did not want to see every good investment going up, as had been the case during the last few weeks. The hon. Member for London University (Sir John Lubbock) referred to the fact that while the volume of trade was increasing, we found, at the same time, so much money unemployed that this great Conversion Scheme could be carried out successfully, as there was no doubt it would be. There were several reasons which pointed to the solution of this fact. The great development of the Railway and Telegraph systems, almost more than anything else, had been the means of bringing distant countries into rapid and direct communication, and business organizations which required large amounts of capital only a few years ago could now be earned on with a comparatively small amount of capital. The vast increase, too, in joint stock enterprize had very much tended to lessen the general value of investments. In these days the bankers with those enormous deposits were obliged to find investments, with the result to those engaged in trade that they were able to lend at a cheap rate of interest merely because there was no other outlet. Even in trade itself money could be obtained very cheaply—indeed, at 1½ or 2 per cent. Surely, then, this country, with the best security any Empire of the world had over held, ought not to be put in a worse position than the ordinary traders. At present there was no doubt that the scheme of his right hon. Friend could be carried out. The present value of money was such that he saw no difficulty in its being carried out successfully. At the same time, he did not think that the House should sanction the scheme if it felt that we were living in a time when money was only abnormally cheap for the moment. On the contrary, looking forward to the future, we had every reason for expecting that the best securities would command higher prices and pay less interest. 1474 At the present moment, the Stock of the London and North-Western Railway was at a price which paid scarcely 3 per cent. When the scheme of the right hon. Gentleman the Member for South Edinburgh (Mr. Childers) was before the country, matters were, indeed, different; the rate of interest obtained on such securities was then 3¾ or 4 per cent; but during the last four years a great change had occurred. And why had the present change come about? Because the communication between country and country had tended to make business to be carried on at the least possible profit, and that resulted in money being lent to trade at the smallest possible rate of interest. So that, whether in mercantile or in other matters, they found that there were very few people or countries who were ready to borrow money except at a considerably less rate of interest than they could do a few years ago. The financial condition of moat foreign countries, and also of our Colonies, had immensely improved; and there was no reason to suppose that there would be such a change—unless it arose from some frightful calamity—as would put either the Colonies or foreign countries back so that they would have to borrow at a much higher rate of interest. As one who had been connected with business, he could not see that there was a prospect of seeing, for some years to come, our best securities very materially lower. Therefore, he felt strongly that no Chancellor of the Exchequer could have neglected the present opportunity. He felt that to have done so would have been an error on the part of the financial agent of this great country, as the right hon. Gentleman might be called, representing not only the Government and the country, but also representing those who were now stockholders, and who ought to be considered in every possible way. The hon. Baronet who proposed this Amendment was also a man of business, and might often be in a position in which he would have to negotiate loans for clients and otherwise; and if he employed an agent to obtain a loan, and afterwards found that it could have been obtained at ½ or ¼ per cent less interest, the hon. Baronet would probably think that the agent ought to have raised the loan at the cheapest rate. Then the taxpayers of the country had a right to the same ad- 1475 vantage; and if they found a great railway obtaining money at a low rate of interest, they had a right to demand that the Chancellor of the Exchequer should obtain money for thorn at the same rate or cheaper. For that reason, he rejoiced that the scheme had been brought forward. He regretted to hear an hon. Member say that it would not effect a saving to the taxpayers; but he thought that it would effect a very material saving. When the right hon. Gentleman the Member for Mid Lothian (Mr. W. E. Gladstone) introduced a Conversion Scheme, Mr. Hume expressed a hope "that they would also hear from the Chancellor of the Exchequer some scheme for the reduction of taxation." If that result followed from the scheme they were now discussing, they need not be afraid, as the hon. Baronet had suggested, that the Conservative Party would be held up to odium in the country. Hon. Gentlemen opposite might be equally held up to odium, because they had tried to do the same thing, although it was not their good fortune to carry their scheme through. It would be a great piece of good fortune if it were carried through now, and he rejoiced to think that it had been reserved for one who had been early connected with the City of London to bring forward that present scheme with every chance of success; and although some might suffer a little from the change proposed, he believed that in the future it would be felt that this Parliament had done a great work, and that 20, 30, or 40 years hence it would be found that it had led to great and very satisfactory results.
§ THE CHANCELLOR OF THE EXCHEQUER (Mr. GOSCHEN) (St. George's, Hanover Square)
Sir, I do not think that on the whole I can complain of the reception which the plans of the Government in regard to the conversion of the National Debt have met with from the House. I have now to allude to some general remarks that have been made, and to some particular and special questions that have been raised; but I should like first to make this preliminary observation. I am glad to think, from the absence of comment on this particular point, that in substance the terms that are offered in regard to the number of years and the progressive reduction from 2¾ to 2½ per cent interest have 1476 commended themselves to the House and the country; because, while objections have been taken to particular parts of the scheme, the general basis upon which it rests has not been assailed in the speeches to which we have listened. I think there is a general agreement in the House that it was the duty of the Government, if it saw its way to be able successfully to convert a large portion of the National Debt, to act and take that conversion in hand. I think that the right hon. Gentleman the Member for East Wolverhampton (Mr. Henry H. Fowler) agrees to that proposition. It is agreed to generally by right hon. Gentlemen opposite; and I may say that the public generally are, I believe, convinced that the step is one which it is the bounden duty of the Government to take. For I do not think that there are many who will agree with the hon. Baronet the Member for North Antrim (Sir Charles Lewis), who moved the Amendment, however painful the position of many annuitants and others may be, that the fact that £120,000,000 of the Debt is held by persons possessing Stock below £2,000 is sufficient ground for our not proceeding with this scheme. Painful as that may be, the question is really this—is it the duty of the Government of this country to continue to pay a higher rate of interest than that at which it can borrow, because a reduction of the present rate of interest would fall hardly on a large class of smaller fundholders? Surely that is not a proposition which can be maintained by argument. I say that it would be better, if the case of these persons be hard—and no doubt it is hard—to supplement their incomes out of a Vote of money by this House—if we look at the matter simply from a charitable point of view—than to allow the present state of things to continue, and to make the country pay 3 per cent when it can borrow at a cheaper rate of interest. I think it is very likely that the hon. Baronet really overstated the number of persons who are in the situation that he described; because he assumed it as a general fact that if a person has £2,000 in Consols, that is his chief or only source of income. Now, it is within the personal knowledge, I am sure, of hon. Members that many persons who have sums below £2,000 in Consols are per- 1477 sons who have got other sources of income besides, and that you cannot treat them as if the whole or a large proportion of that class are simply dependent on their revenue from Consols. But even if that were so, I fail to see that it would be the duty of the Government to continue to pay those persons a higher rate of interest than is necessary, because it might be hard for them to forego any part of their present income. The hon. Baronet said it was a general belief of society that the Three per Cents were inflexible, and that they never would be dealt with. But after the previous measures of conversion which have been repeatedly carried out, it is scarcely possible to see how such an idea could be reasonably entertained; and I do not, therefore, think that I need labour that point or press it any further, except to say that, however hard may be the case of individuals, I do not think that would be a sufficient justification to arrest us in the course that we have taken. The hon. Baronet alluded to those persons who have invested in Consols through the Savings Banks. They will still receive 2¾ per cent, which is a higher rate of interest than that which is paid in the Post Office Savings Banks, and I should be very glad that if they should still continue to invest in Government Stocks, they should receive a higher interest than is paid by the Post Office Savings Banks. I may add that every means is being taken to circulate full information among all depositors in Savings Banks on these matters. This leads me to a further point—namely, the question of celerity. The hon. Baronet asked why they should act in that rapid way. Now I think that most hon. Members will agree that if this matter is to be dealt with at all it must be dealt with rapidly, and that out of regard for all the great interests concerned. As I have said, every step will be taken to circulate all possible information, and every opportunity will be given to persons to ascertain precisely what is going on; but in a large operation of this kind it would be most detrimental to the credit of the country, and lead to fluctuations in all kinds of securities, if it should be kept long hanging over people's heads. It is unfortunate, but it always happens at any time of doubt, that there is a great deal of speculation; and the sooner Consols can settle down 1478 again and people can know precisely what they are, the better it will be for all parties. I can assure the hon. Baronet, in regard to applications to the Court of Chancery, that arrangements will be made to relieve persons from the difficulty which he pointed out—namely, that they will have to apply to the Court of Chancery before April 12, and also in respect to costs. To-morrow morning there will be on the Paper, and placed in the hands of hon. Members, a certain number of Amendments dealing with these subjects. The large correspondence I have had and the suggestions which have been made to me by many hon. Members have put me in a position to make some further proposals for meeting what I may call the legal and technical difficulties of the case. As to annuitants, there will be a clause giving power to trustees to sell Consols and to invest in what are called Chancery securities; and ample power will be given to the Lord Chancellor to deal with the difficulties that arise in these cases. A question was put to me as regards the number of Trustees. The hon. Baronet the Member for London University (Sir John Lubbock) asked whether the assent of all the Trustees would be necessary? There will be a clause providing that a majority of the trustees may signify their assent or dissent, as the case may be. I will now address myself to the speech of the right hon. Gentleman the Member for East Wolverhampton, who has frequently addressed us on this side in a somewhat threatening tone. But I trust I shall give no offence to him when I say that it is more in manner than intention. The right hon. Gentleman called me rather severely to account both in his direct statement and more frequently by innuendo. I will give him a full explanation with regard to the Local Loans Stock. I will frankly admit to him that I looked, to a certain extent, to this Local Loans Stock as giving a kind of test as to what securities might be worth in the Market. He will remember the real reason why the Stock was created. I believe it was a reason which commended itself to his judgment. It was to establish a Local Loan Fund which should be separate and different from the general indebtedness of the country. The right hon. Gentleman suggested that in January I was prepared to deal with the conver- 1479 sion of the National Debt, and to create Two-and-Three-Quarters per Cent and Two-and-a-Half per Gent Stocks. I may Bay that I had come to no such conclusion in January, and I had not at that time a sufficient indication as to whether the operation was feasible or not. The House will remember that the Local Loans Stock was substituted for an equivalent amount of Three per Cent Stocks and for an open debt of about £10,000,000 due to the Public Works Loans Commissioners; and the £36,000,000 or £33,000,000—the amount lies between the two—was put in the hands of the Trustees for the Savings Banks and the Post Office Savings Banks in lieu of the £37,000,000 which they held otherwise. That Stock was held by them in substitution of the Stock that was cancelled. The National Debt Commissioners held the Local Loans Stock for these two funds, which were under their control. The position was this—among their investments they held £37,000,000 of this new Stock, rightly described as running for 25 years at 3 per cent. Now, what was the value of that Stock? I think the right hon. Gentleman will be sufficiently just to say that past operations must not be looked at entirely from the point of view of the price at present, when conversion is within sight. No ex post facto judgment would be entirely fair in such a condition of things. In the beginning I always thought that the creation of this Stock would be a valuable indication of the Market. But I am bound to say that at the commencement—not because it was not a valuable Stock, but because it was a small Stock—the great operators of the Market did not look upon it with any favour, The right hon. Gentleman speaks as if the only test of the value of the Stock was the rate of interest at which it operates. That is entirely a mistake. It is the ready convertibility of the Stock which gives it in the Market a very great advantage, and many persons would prefer a Three per Cent Stock which was thoroughly current in the Market, but liable to conversion, to a Three per Cent Stock of a new character with which they were not familiarly acquainted. The consequence was that in the beginning there was a reluctance on the part of the Money Market to look with favour at the Stock. A high 1480 financial authority stated at the time that he did not believe he would be able to place £2,000,000 of this Stock. It was a somewhat serious matter to have £37,000,000 of Stock in the hands of the National Debt Commissioners which was not marketable and not rapidly saleable, and therefore the great object was to diminish the amount of the Stock. A good deal has been said of the fact that it exchanged Stock for Stock; but at the time it was considered that Consols were better than this new Stock, and some institutions of very high standing refused to exchange Stock for Stock. The Ecclesiastical Commissioners took a different view of the matter. They saw that the Stock guaranteed for 25 years answered their purpose admirably, and they were content to make an exchange Stock for Stock; and—looking to the fact that I was contemplating conversion—it was a great object, which I secured, to get by degrees the Stock into the hands of the National Debt Commissioners. Another transaction was made with the Bank of England, Stock for Stock, but not without difficulty; and as soon as persons heard that others had taken the Stock, then they suddenly began to grumble and say that they had not a chance of doing so. As soon as I understood that there was a desire for the Stock, I immediately gave instructions that it should be sold, and that the market value should be taken. Considerable transactions took "place, not in very large amounts; but it was the object of the Government broker to distribute the Stock among as many persons as possible, so that the public might become familiar with it. Considerable transactions took place, and when the Stock reached a good price I offered £10,000,000 of it by tender. The price was not so high as might have been anticipated. Why was this? It was not on account of the value of the Stock itself, but partly because people would not believe that conversion was possible. That vitiates the test which the right hon. Gentleman applied, because the real market value could not be ascertained until it was certain that conversion would come. Consols were not at their proper position, and the value gave no indication, and the Local Loans Stock did not give sufficient indication, either 1481 because the bankers and the Market generally were against it, and it was a small Stock which could not compare with Consols. I trust that neither the right hon. Gentleman nor the House will make an ex post facto judgment of this matter, nor hold that either the Stock has been thrown away or that it has been improperly dealt with. The right hon. Gentleman asked what has become of the remainder. The remainder, some £18,000,000, is held by the National Debt Commissioners, and upon that they will be able to realize the full benefit of the high price at which the Stock now stands. Then I come to the side-light of the right hon. Gentleman upon the present operation. The right hon. Gentleman did not show us what that light was. He applied it; but he was so intent upon dwelling upon the way in which the Local Loans Stock was treated, that he did not draw his moral, and say that the price was too high or too low for conversion. I do not think that I have gone wrong in fixing the price at which the conversion now takes place. In an extremely difficult matter like this, it is very hard to say whether the terms are too high or too low; but I venture to think that no general attack has been made upon the terms. The right hon. Gentleman raised another point with regard to agency commission, and he put it—I hope I am not using too strong a phrase—somewhat offensively when he said that the agency commission was a bribe offered to bankers in order to induce them to advise their clients in favour of the conversion. One or two hon. Members have already exposed the unfairness of such a contention. But the right hon. Gentleman is entirely wrong when he says all the banks are with me. I can assure him that four of the most influential banks in London have been those most opposed to the conversion scheme which I have in hand. These banks deal very largely in Consols, and one of them is likely to lose £10,000 a-year, which will afterwards be £20,000 a-year by the scheme. I do not think that the commission will be such as will in the slightest degree or in any degree mitigate that loss. I am extremely anxious that this matter should be properly understood. I have heard of one bank in London where they have had to take on 20 additional clerks to deal 1482 with the work arising out of the conversion, and that the cost in labour and correspondence will absorb the commission. But we have not to deal with bankers; those whom we have mainly to do with are the stockholders; and the right hon. Gentleman asked whether the stockholder ought not to get the commission of 1s. 6d. himself. If he were, he would have to pay, not that sum, but possibly a higher amount to the broker or banker to convert it into Consols; and the object of this commission is to give the conversion clear of any cost to all the small fundholders and all the others as well. A question was asked as to the position of the solicitor whose client, a fundholder, writes to him, and asks him for advice. As he would be entitled to receive this commission, he will give this advice gratis; and, far from admitting the way in which the right hon. Gentleman has put it, this is practically limiting the expense that will be put upon the stockholders, for it is very possible the stockholders would have to pay a higher commission and brokerage if this limit were not inserted in the Bill. It is, perhaps, too much to expect that the brokers, or the solicitors, or the bankers would act gratis for their numerous clients; and I do not think that, out of goodwill to the Government, they would forego all commissions or agency expenses upon these transactions. The amount, no doubt, is large when it is added up; but then the transaction altogether, of course, is upon a very large scale. I should be quite prepared to meet the right hon. Gentleman in argument with regard to this matter; but I regret the tone he took and the manner in which he wished to put it before the House, as if the great banking establishments were to be bribed to give judicious advice to their clients by this small commission upon their Stocks. Well, then, I have replied to one or two points.
§ MR. HENRY H. FOWLER
Will the right hon. Gentleman refer to the precedent which he promised to mention?
§ MR. GOSCHEN
I thought the right hon. Gentleman would have remembered the precedent in which there was paid a commission, not of 1s. 6d., but of £2 10s.
§ MR. GOSCHEN
In the case of the Suez Canal. Well, the right hon. Gentleman did not ask me whether they were good or bad precedents, but he said it had never been done.
§ MR. HENRY H. FOWLER
I said there was no precedent of the English Government offering a financial agent a commission to advise his clients to accept terms offered by the Government. That was a question of the purchase of shares on which the Government paid a brokerage of enormous amount.
§ MR. GOSCHEN
The right hon. Gentleman has now placed two parts of his argument together. He was properly answered by another hon. Member, who showed the enormous difference between the secret commission of which he spoke and the open agency commission which is embodied in the Bill. But the right hon. Gentleman, though he spoke of this being a commission to advise, as he says, where does he find that it is a commission to advise?
§ MR. HENRY H. FOWLER
Because it is not paid unless the advice is successful. Unless the client accepts the conversion the advice will not be paid for.
§ MR. GOSCHEN
Well, I must say that is an unworthy argument of the right hon. Gentleman. Of course, he reminds me that a great deal of advice may be given without being successful at all; but the right hon. Gentleman says—and there he must be in error—the agents are paid in order to advise. Now, can the right hon. Gentleman stand by that? He must know that that is not the reason why they are paid; they are paid because of the large trouble involved, and unless this trouble is paid for as we suggest the cost in a large number of cases will fall on the stockholders themselves. I do not regret being met fairly in argument; but I do regret the aspersions conveyed in the speech and in the explanations of the right hon. Gentleman. Then the right hon. Gentleman said that it would be no relief to the taxpayer. Upon that point, too, he has been answered. Whatever happens, it is a relief to the taxpayer. Whether the whole of this money saved by this scheme is applied to the reduction of the National Debt, or whether a portion only of it is applied, whether the money is divided between relief to 1484 the immediate taxpayers and the payment of the National Debt, or whatever takes place, it is clearly a relief to those whose financial interests are concerned. It is a relief to the people of this country, and it really seems to me as if the right hon. Gentleman throw out that remark in order to remove any impression of the value of this operation. He said, in effect, to the taxpayers—"You will not be the gainers by it. The scheme is not worthy of consideration by the public at large, because it will not assist the taxpayers of the Kingdom." I am bound to say I did not find that encouragement to the general plan of the Government which was accorded to it so fully and generously by the right hon. Gentleman the Leader of the Opposition (Mr. W. E. Gladstone) at an earlier stage of these proceedings. The right hon. Gentleman further asked, What are you going to do with the Bank of England and the £13,000,000? Well, it was not necessary to speak of a threatening measure. It is perfectly clear that the Bank of England cannot continue to receive 3 per cent interest upon her debt when the credit of the country is put down from 3 to 2¾ per cent. It will clearly be necessary to make fresh arrangements, and the Bank is perfectly aware that it will be necessary so to do. And that reminds me to say that the value of this measure does not consist only in the amount actually saved. If the credit of the country once settles down at 2¾ instead of 3 per cent, whenever we may be called upon to borrow, whatever operations may be necessary, we shall have the full advantage of the fall, and it is that consideration which makes it to such a degree the duty of the Government to proceed with this matter. A question was raised as to whether the 5s. bonus should be treated as capital or as income. I think a very good argument may be made as to whether it ought to be treated as capital or income. I have well weighed this matter, and, on the whole, I am inclined to think, personally, that it is rather capital than income; but the inconvenience of investing 5s., or 10s., or 15s. is so great that Trustees would be in a very disagreeable position if they were directed to treat the bonus as capital; and so, in order to facilitate transactions of this character, Trustees may treat it as income if they think fit. I trust the right hon. Gentle- 1485 man the Member for East Wolverhampton will use his great authority to persuade those who would spend this money in an injudicious manner to add it to their capital, because they will be fully at liberty to take that course. In conclusion, I must apologize if I have not touched on various points, some of them of a legal character. I can assure the House every possible attention will be paid so as to make this measure work smoothly and remove those difficulties from which it is not free, and from which no conversion of the Public Debt can possibly be free.
§ MR. CHILDERS (Edinburgh, S.)
I shall not detain the House more than a few minutes, but I am anxious to follow my right hon. Friend the Chancellor of the Exchequer (Mr. Goschen) at once. I wish to say that the scheme which he has proposed should, in my opinion, be pronounced, on the whole, to be a good one, and that no consideration of what happened three or four years ago—when it fell to my lot to carry through a Bill for the conversion of the National Debt which was not as successful as I hope his will be—will have the smallest influence upon my mind in discussing this. I must, in the first instance, refer to some words which fell from hon. Gentlemen on both sides as to the treatment which the scheme of 1884 received from certain bankers, as compared with that which the present scheme has received. What I wish to remind the House of is that in 1884, when many of their customers applied to certain bankers for advice whether they should accept the plan of that year, they were told—"No; you will get better terms." I am receiving many letters from persons repeating to me how hard their case is; that when they applied to know whether they should accept the scheme of 1884 they were told they would get better terms; whereas now, when the terms offered by the Government are no less than 6½ or 7 per cent worse, the same persons are told by their bankers that they had better accept the terms. To this I have simply replied that bankers are not infallible. I hope in that way I have done no harm to them and no harm to my right hon. Friend. I do not agree with the view of the hon. Baronet the Member for North Antrim (Sir Charles Lewis), who opened this debate. We ought, I admit, to be as 1486 tender as possible to small holders, taking care that they have sufficiently good notice and not put to any disadvantage. But, as the right hon. Gentleman the Member for East Wolverhampton (Mr. Henry H. Fowler) said, our duty is primarily to the taxpayers. It is our business to see that the country does not pay more interest to its creditors than the state of the Money Market requires; and if, therefore, such a scheme can be carried through with the assistance of the Money Market, it is our business to give the right hon. Gentleman the Chancellor of the Exchequer all the assistance in our power. I hope he will be able to carry the scheme through. Beyond these general remarks I should like to say a few words. In the first place, I observe that my right hon. Friend has been asked to adopt some measures under which persons who now hold Consols and other Government Stocks under settlements should have these powers enlarged, so that they may invest in Railway Debentures, Corporation Stocks, or Colonial Loans. But I hope he will resist this, and, at the outside, only sanction investments in what are called Chancery Funds. [Mr. GOSCHEN assented.] I am glad to see that he agrees with me. Again, as to the recent issue of Local Loans Stock, my right hon. Friend has told us in the course of his speech that in January, although he did not know the details of the plan he would bring forward in March, still, as a matter of fact, he did then contemplate conversion, so that when he issued his Local Loans Stock he must have had conversion in view. What I wish to ask him is why, under these circumstances, he did not, as was suggested here, strengthen the Two-and-a-Half per Cents? At any rate, would he not have done better to postpone the issue of the Local Loans Stock until after the contemplated conversion? I think he ought to give us his reasons for having omitted to do what would have saved a considerable amount of money—namely, held his hands for six weeks, and then, after laying his conversion scheme before the country, manipulated—using the word in its correct sense—the Local Loans Stock. Again, as to the commission of 1s. 6d. per cent, my right hon. Friend said that there was a precedent in the Suez Canal commission paid to Messrs. Rothschild.
§ MR. GOSCHEN
It had been said that there was no examples of a commission. I merely dissented from that particular proposition. There is absolutely no parallel whatever.
§ MR. CHILDERS
Why, then, did he interject the remark? Surely, the Suez Canal transaction was, in Iris own opinion, pessimi exempli. But my right hon. Friend argued that it was an object to obtain the goodwill of the bankers.
§ MR. GOSCHEN
I never said anything about obtaining the goodwill of the bankers. I said they were put to actual expenses for their clients, and that unless they were paid in the way suggested in the Bill they would charge it to their clients.
§ MR. CHILDERS
Surely it is obvious that the bankers will not receive this commission unless they give advice in one direction. If they give advice not to accept the Government's offer, of course they will receive nothing. In each case they will have correspondence and trouble. Finally, I should like my right hon. Friend to say whether he proposes to alter the total sum applied to the interest and redemption of the National Debt? If not—and I hope he will leave the present arrangement untouched—something will be done to counteract the mischievous reduction of last year in the amount of the Sinking Fund, as the new Sinking Fund will gain by whatever is saved in interest. In conclusion, I have only to assure the right hon. Gentleman that I have no desire to criticize his proposals in any spirit of hostility. On the contrary, I think them, on the whole, very wise and judicious proposals, and if he will kindly explain the points to which I have referred I shall be satisfied.
§ MR. GOSCHEN
With regard to the Local Loans Stock, the right hon. Gentleman says that it would have been an advantageous arrangement to wait to the present moment, but then he forgets that since the time that the first arrangement was made a conversion scheme has become possible, and by no possible foresight could I be able to judge of the effects so long in advance. I was anxious to strengthen the position of the National Debt Commissioners, and, before the conversion came on, to withdraw a certain amount of Stock from the Market, so as to have in my possession saleable Stocks available for any emer- 1488 gency, instead of unsaleable Stocks, as was the case then. As regards the second point, he asks why I did not take Two and-a-Half and Two-and-Three-Quarter Stock. I consider that I have been better advised in following the course I have adopted rather than that suggested by the right hon. Gentleman. It was desirable to see the difference in the interval between the different Stocks, and some time was required to make that out; but at the present moment I consider that the power is established to a certain extent. But the argument involved in this question is a larger one than I can venture upon. The right hon. Gentleman asks me what is to become of savings. I prefer not to answer that question until I know what the saving is. It is well not to count your chickens before they are hatched. I would rather, therefore, with the indulgence of the right hon. Gentleman opposite, not make a premature statement. As to the third question, relating to the Bank of England, I am quite aware of the situation in which the matter is left. The relations between the State and the Bank of England will have to be re-adjusted. I thank the right hon. Gentleman very much for the courtesy and friendliness with which he has spoken. I hope we may get the second reading to-day, as in the Committee there will be ample opportunities for discussing the more technical points of the question.
§ MR. COURTNEY (Cornwall, Bodmin)
said, he should like to make a few remarks before the Bill was read a second time. He was not at all surprised that the Chancellor of the Exchequer had not given any explanation of what he was going to do with the advantage which resulted from this operation. Twelve months was a long time to look forward to; but he must express the hope that the right hon. Gentleman would not use the advantage so gained to diminish or take away from the amount in reduction of the National Debt. He thought that every year required more and more the maintenance of Sir Stafford Northcote's maximum, and that they should not alter the amount that went in reduction of the Debt. The right hon. Gentleman had followed the precedents that were applicable to this operation, and he congratulated him and the country on the pros- 1489 pect of complete success. The difficulty had always been in respect of Consols where 12 months' notice had prevented the action of previous Chancellors of the Exchequer. It was asked why the scheme of his right hon. Friend the Member for South Edinburgh (Mr. Childers) was not successful when it was brought forward four years ago, and why the Local Loan in the month of January did not secure better terms. The right hon. Gentleman the Member for Edinburgh had replied to inquiries made of him, that bankers were not infallible. The same view had been expressed in a coarser way in the expression—"There are no such fools as the Three per Cents." That proverb had been verified four years ago, and he might say also by the conduct of those who had declined to take the Local Loan Fund. The right hon. Gentleman offered 5s. as a bonus if holders would accept conversion. But what did that amount to? He presumed his right hon. Friend would not deal with the question of the Debt or Conversion till next year. He must wait 12 months before he could affect the holders of Consols; and if they did not accept conversion they received 3 per cent, so that there was no advantage in that 5s. bonus. Here came in, then, the part of the scheme which he confessed he did not much like—namely, the 1s. 6d. payable to bankers. He happened to be a Trustee, and when the scheme of 1884 was brought in the bankers left him alone; but now he had already been served by a friendly banker—one of the first in the City—with a notice which was awaiting his signature. It was a singular circumstance that the bank sent round these circulars, whereas they did nothing four years ago.
§ MR. GOSCHEN
The matter is so important that I must interrupt my hon. Friend. I cannot accept the proposition that I should have to wait another year. If the conversion is perfectly successful, there will be nothing to hinder Parliament from immediately giving notice to the other two classes.
§ MR. COURTNEY
said, his object in rising was not simply to show the position of the holders of Consols and Reduced, but to bring out the position of the Chancellor of the Exchequer. Chancellors of the Exchequer had usually held that they were blocked 1490 by the immense masses of the Consols. His right hon. Friend the Member for Mid Lothian, in his great Budget Speech of 1853, referred to this great mass of Consols, which was greater then than now. It had been held that the Chancellor of the Exchequer could not attack that great amount; he could not attack it in the total, but he could do so in detail. Notices need not attach to the whole, but could be applied to part in sums of not less than £500,000. Supposing that the right hon. Gentleman felt himself courageous enough to give notice that he would pay off £20,000,000 if the holders did not come in; when the books were closed, it would be easy to arrange the whole amount of Consols in groups of £20,000,000, and to draw lots for the amounts to be paid off. There would be no need of special notice if the bonds were to be paid off in that way, and the Chancellor of the Exchequer would be able to secure the redemption on as good terms as he now secured the reduction of the other Stock.
§ MR. ARTHUR O'CONNOR (Donegal, E.)
asked of the Chancellor of the Exchequer if he could inform hon. Members from Ireland what would be the effect of the scheme on the fund of a million and one-third appropriated for the pensions of national school teachers. He had used his best endeavours to ascertain how that fund would be affected, but had been unable to gather any information on the subject.
§ MR. GOSCHEN
Perhaps the hon. Member will be good enough to put the Question to me on another day, between which and the present time I will have the matter thoroughly examined.
§ Amendment, by leave, withdrawn.
§ Main Question put.
§ Bill read a second time, and committed for Tuesday next, at Two of the clock.
§ MR. T. M. HEALY (Longford, N.)
asked if any other Business than the Committee stage of the Bill would be taken on Tuesday?
§ THE FIRST LORD OF THE TREASURY (Mr. W. H. SMITH) (Strand, Westminster)
said, that no Business of a contentious character would be taken.