HC Deb 21 May 1889 vol 336 cc634-68

Order for Third Reading read.

SIR W. HARCOURT (Derby)

Before this Bill passes I wish to make one or two remarks upon it. The Chancellor of the Exchequer objected the other day to my describing his financial operations as a disparagement and impeachment of the Sinking Fund. I do not quite understand the ground on which he based his objection. The first clause of this Bill states that the amount of the permanent annual charge for the National Debt during the current and every subsequent financial year shall be the sum of £25,000,000, and that £25,000,000 shall be substituted for £26,000,000 in Section 1 of the Sinking Fund Act of 1875, as amended by Section 2 of the National Debt and Local Loans Act, 1887. Consequently, on the face of it, it is a modification of the Sinking Funds Acts of 1875 and 1887, and a reduction of the amount applicable under those Acts to the liquidation of the National Debt. Many members will remember the production of the plan for the reduction of the National Debt by Sir Stafford Northcote in 1875. It was considered one of the great achievements of the Conservative Party to have established for ever a fund of £28,000,000 for the purpose of the reduction of the National Debt. The way in which it was to operate was this. As everybody knows, the actual interest due upon the Debt is less than £28,000,000. The amount due upon the interest of the Debt, and of course I include that upon the terminal annuities, is considerably less than £28,000,000. Therefore the difference between £28,000,000 and the sum necessary to discharge the public liabilities under the Debt was to be the Sinking Fund for the future reduction of the Debt. Sir Stafford Northcote established the margin between this sum of £28,000,000 and the interest due on the debt as a perpetual Sinking Fund; and in the Act of 1875 it was provided that during every financial year £28,000,000 should be set aside for that purpose. Now of course the extent of the Sinking Fund, varied according to the amount of interest which had to be paid on the Debt. The plan of Sir S. Northcote was not that a particular sum should be annually set aside, but that the actual sum of £28,000,000 should be appropriated, so that as the interest on the Debt from time to time became less, so the margin constituting the Sinking Fund should become greater. The Chancellor of the Exchequer told us the other day that this was a question only of the interest to be paid. With great submission I maintain that that is not so at all. Sir S. Northcote did not mean that as the Debt was diminished the Sinking Fund. should also be lessened; he meant that if in his day the necessary interest on the Debt was £23,000,000, the Sinking Fund should be £5,000,000; that if, by the reduction of the Debt, the necessary interest on the Debt became £20,000,000, then the Sinking Fund should be £8,000,000; and that if it became £18,000,000 the Sinking Fund should be £10,000,000. That was the plan contemplated by Sir S. Northcote, and there were great rejoicings in the Conservative Party that this permanent and ever-increasing Sinking Fund was to go up proportionately with the reduction of the National Debt. I remember it was remarked at the time that it was produced at a period when it was incapable of being immediately applied, but in subsequent years it did come into operation. Later, in 1885 and 1886, no doubt it was necessary temporarily to suspend its operation in consequence of great financial pressure; but this will not be a temporary suspension. It has happened to the present Chancellor of the Exchequer twice permanently to break down the plan of Sir S. Northcote. In the Act of 1887 the right hon. Gentleman permanently altered the figure of £28,000,000 to £26,000,000. That was at a time when he had a surplus revenue, and when there was no financial pressure at all. Now he has again come forward and proposes to write £25,000,000 in the place of Sir S. Northcote's £28,000,000. The other day I had a letter from a very experienced financier, Sir Thomas Farrer, whose connection with Sir Stafford Northcote was well known, and he says:— I confess I do feel very bitterly that the present Chancellor of the Exchequer should have destroyed the two great works of Sir S. Northcote's financial life—first, his institution of cheap sugar; and, secondly, the Sinking Fund.

* THE CHANCELLOR OF THE EXCHEQUER (Mr. G. J. GOSCHEN, St. George's, Hanover Square)

Not the cheap sugar.

SIR W. HARCOURT

The right hon. Gentleman has not done it yet, and I hope he will not succeed, but he has done his best. The right hon. gentleman is an accomplice in the one case and a principal in the other. I will not, however, dispute that point with him; it is not now under consideration. He will not of course deny that he has cut down the 28 millions to 25 millions. I do not know whether he has in his pocket some of his favourite tu quoque arguments on this subject. I am not going to argue it on that basis. I am going to argue that the scheme propounded in 1875 was a scheme which was to be permanently applicable to the reduction of the National Debt, and that under it as the margin increased so the sum applicable to the reduction of the principal would increase. This great scheme which was so much extolled in the year 1875, has been pared down to the extent of three millions. But it is not only that; there is also a question of principle involved, and the Chancellor of the Exchequer has established a principle that as you go on diminishing the National Debt, so you may diminish the Sinking Fund. If you are to do that, the whole value of the principle on which the scheme is founded is destroyed. I do not know whether the Chancellor of the Exchequer thinks that warnings of this kind are dictated merely by partisan hostility to his financial measures; but if he does so I would advise him to look at the Economist—a paper by no means hostile to the Government or its Members—and he will see there what is said of his finance and the principles on which it is founded. There was some justification for suspending the operation of the scheme when it was first propounded, but that is a totally different thing from permanently reducing it. The Chancellor of the Exchequer does not intend to meet an exceptional demand at a particular period by a temporary suspension of the Sinking Fund, but he proposes by this Bill and by his previous Bill of 1887 permanently to reduce the figure of the Sinking Fund, and consequently to deprive the financial system of this country of what was considered a great resource. After all, we are not doing so very much to reduce the National Debt as compared with the efforts of America in that direction. We think it a great thing if we set aside six or seven millions a year for the reduction of the Debt, but after all the amount now devoted to the service of the Debt is lower than it has ever stood for the last 20 years. I am not saying that the amount applicable for the reduction of the Debt is lower, but the sum devoted to the payment of principal is less, and the total amount set apart for National Debt purposes is to be 25 mil- lions instead of 28. I look upon this as a retrograde financial operation, and I think we should not have been justified in allowing the Bill to pass its Third Reading without calling attention to the matter.

* MR. BARTLEY (Islington, N.)

I should like to say one word on this subject. I quite agree with the right hon. Gentleman opposite that the principle of the reduction of the National Debt is a matter of enormous importance, and I must say that I regret that we have departed from the rule laid down by Sir S. Northcote that £28,000,000 should be the amount set apart annually for the interest on and the extinction of the Debt. Doubtless it is attractive to reduce the Sinking Fund because the rate of interest is reduced, and we all know that pressure was put on the Chancellor of the Exchequer to do this. In my opinion, however, the right hon. Gentleman would have acted more wisely if he had remained firm on that subject, and many on this side of the House would have supported him. I think it is not satisfactory that this country should allow the enormous incubus of the National Debt to remain. Looking to what is going on around us, and especially to the possibility of America becoming a Free Trade Nation, it is quite probable that future generations of our countrymen may find themselves, perhaps earlier than is imagined, severely handicapped in the competition of the world, and the fact of our not having paid off more rapidly this enormous Debt during periods of prosperity may very much retard our future progress. Under Sir S. Northcote's plan it was calculated that the Debt would be paid off in 60 or 70 years, and I much regret that that plan has been departed from. I hope it will be distinctly laid down, somehow or other, that the Sinking Fund shall not again be disturbed.

SIR G. CAMPBELL (Kirkcaldy)

I have been a good deal surprised that this Bill has gone through so many stages without more being said about it by the great financial authorities on the Front Opposition Bench. Now that the great authority on that Bench has spoken, I will say that I did view with great dislike and distrust the decrease of our efforts to diminish the National Debt. It is sometimes said that the National Debt has been very much decreased, but I may point out that there has been a great increase of local debt.

MR. HANDEL COSSHAM (Bristol)

I should like to endorse the remarks of the hon. Member opposite. America will soon enter the field against us nearly free from debt, while we shall be handicapped in the commercial competition with a heavy debt and a heavy expenditure. So long as America retains her present Protective policy we are safe; but when she enters on a Free Trade policy then the danger to us will arise. It is not the Navies of the world we have to fear, but it is the competition of a Free Trade America.

* MR. GOSCHEN

The hon. Member for North Islington says the House would have supported me if I had maintained the Sinking Fund at its original level. I think it is possible, provided this would not have invited raising money elsewhere, but I do not think I should have been supported if the maintenance of the Sinking Fund had involved, as it would have done, the imposition of additional taxation. My hon. Friend seems to suppose that under the present arrangement the Debt will not be paid off in 60 or 70 years as Sir S. Northcote calculated it would be by maintaining the Sinking Fund at the level of 25 millions, but in that the hon. Member is mistaken. At the reduced rate of interest the whole Debt will be paid off in less than 60 years, and, therefore, so far as the spirit of Sir S. Northcote's proposal is concerned, we stand very much where we were in 1875. I would ask the right hon. Gentleman to draw a distinction between the several ways in which the burden of interest on the Debt may be reduced. The right hon. Gentleman has rather confused two different points. We may reduce interest by paying off Debt, or we may reduce interest by reducing the rate of interest. Now, Sir, S. Northcote's whole scheme is based on a reduction of the capital of the Debt, and thereby of the interest chargeable on that capital, but he did not contemplate, and no one contemplated at that time, that it would be possible to reduce the rate of interest, first, by one-twelfth, and then by one-sixth, and the reduction of the rate of interest to that extent has practically put the country in this position, that a much smaller permanent payment will have the same effect as the large payment contemplated by Sir S. Northcote. The right hon. Gentleman said the Sinking Fund was a growing fund. So it will continue to be a growing fund, and let it be distinctly understood that, by the operation of this Bill, I do not retard by one single day the result which was in the view of Sir S. Northcote. Therefore, the charge of the right hon. Gentleman, or that of Sir T. Farrer in the same direction, I look upon as utterly unfounded. Perhaps Sir T. Farrer was thinking of the operation of two years ago, but if he meant to touch by his remarks the operation of this year, he was as much in error in saying that the Government are upsetting the scheme of Sir S. Northcote, as he would be in saying they propose to destroy the cheapness of sugar as secured by Sir S. Northcote. Generally, however, I consider the remarks made in the discussion as perfectly fair and legitimate criticism, and that it is right to call the attention of the country to the very important subject of the diminution of the Debt. I am glad to find the right hon. Gentleman so orthodox upon that subject, for I think I remember certain passages in his history when he declared that he considered it was not detrimental to the interests of the country to have a large National Debt, and that a great deal too much fuss was made with regard to the reduction of the Debt. I should be extremely sorry if I have in any way disparaged by what I have done the great merits of what Sir S. Northcote was able to accomplish in this direction. I may also point out that when Sir Stafford Northcote propounded his scheme for the payment of 28 millions annually, the income tax stood at 2d. in the —, whereas at present it is 6d. Sir Stafford Northcote himself said that if the income tax stood at a much higher level, the Chancellor of the Exchequer might possibly see fit to make some change in the Sinking Fund. Sir Stafford Northcote therefore did not intend that his system should be such a cast-iron system that it would be perfectly out of the question for any future Chancellor of the Exchequer to touch it. I believe myself that standing at £25,000,000 this fund is safer than when it stood at £28,000,000. When the Sinking Fund is so large it offers a peculiarly strong temptation in case of emergencies. As it stands at present, the arrangement provides for a certain payment of more than £5,000,000 a year, increased by nearly half a million next year, and subject to a further steady, though small, increase in each successive year, and I think it cannot be held that this is a niggardly arrangement for the repayment of the National Debt. During the last two years we have been able to pay off more Debt than has been paid off during any two previous years except on one occasion. The right hon. Gentleman argues that I am reducing the Sinking Fund. As a matter of fact I am merely reducing the charge by the reduction of the interest of the National Debt. The amount of capital annually paid off will not be reduced. Besides that you will have an additional £500,000 next year, and if you look at my present financial arrangements as a whole you will find that so far from diminishing the payment of capital I shall have added to the means of paying off the Debt.

* MR. H. H. FOWLER (Wolverhampton)

I do not agree with the views expressed by the right hon. Gentleman as to the action of Sir Stafford Northcote. The principle of Sir S. Northcote's scheme, was that this country in time of peace could afford an annual charge of £28,000,000 out of which to pay the interest of the Debt and the surplus to go to the reduction of the Debt itself. It is not a question between the Sinking Fund and interest, but whether in 1889 £25,000,000 is an adequate sum for this country to bear in respect of the National Debt, having regard to its amount, and with reference to what the country has hitherto borne. Sir S. Northcote, in a time differing from the present, thought that £28,000,000 was a moderate sum for this country to bear. But several years after this Sir S. Northcote came upon evil times. The Government was involved in several wars, a very considerable deficit had accumulated year after year, and Sir S. Northcote had just before him a General Election, and must, therefore, have been tempted to deal with the Sinking Fund in order to produce a popular Budget. No one can doubt that finance played a very material part in the controvery of 1879. Sir S. Northcote, however, instead of reducing the charge, positively increased it to £28,800,000, the £800,000 being put on in order to pay off the deficit that had accumulated. I think Sir Thomas Farrer is a much more accurate exponent of Sir S. Northcote's intentions than the Chancellor of the Exchequer. I think that the House ought to ask whether, in a time of profound peace, of unparalleled prosperity, with national investments accumulating, this country ought not to bear an annual burden of £28,000,000. This is the lowest figure at which the National Debt charge has stood within the present century. When the Queen came to the throne in 1837, the annual charge for the National Debt was largely in excess of £28,000,000. To-day we are not prepared to pay £28,000,000, or even £26,000,000, but are asked to put our hands upon what the Chancellor of the Exchequer calls this unforeseen windfall. Our local debt is now increasing at very rapid strides. I am aware that a portion of that Debt represents a remunerative expenditure, but nevertheless, so far as the National Balance Sheet is concerned, we are increasing our National indebtedness year after year, if you put together the National Debt and the Local Debt. I think this was not a year to have selected for the reduction of the charge for the National Debt by another million. I quite admit that an exceptional period might arise, such as a war or an unusual depression of trade, when we should be justified in suspending payment of Debt for a year or two. The Chancellor of the Exchequer would have been supported on both sides of the House if he had firmly held to the principle of not tampering with the fund set apart for the liquidation of the National Debt.

MR. BIGGAR (Cavan, W.)

What I protest against is that a Government belonging to the same Party as Sir Stafford Northcote should, within less than 15 years, make two attacks upon the principle involved in the scheme he drew up. I do think that in a time of profound peace, progress, and prosperity, the Government, instead of making a further attack upon the payment off of the National Debt, should have, in accordance with Sir Stafford Northcote's scheme, tried to make a very large reduction in the Debt.

MR. LABOUCHERE (Northampton)

This is a financial and not a political question, and I rather go beyond the notions of the Chancellor of the Exchequer. I never could understand why we should pay off one shilling of the National Debt. My own impression is that if we were to pay off the Debt we should at once say, "We can afford to go to war; we can afford to meddle with matters which do not concern us, and run up a fresh debt" 'The right hon. Gentleman the Member for Wolverhampton (Mr. H. H. Fowler) has said the Debt is increasing because the Local Debt is increasing. But the Local Debt is represented in the main by property. The Debt is not increasing when you get remunerative property. We have to pay our way. Not only have we to pay interest on the debts incurred, but we have to pay them off. I shall support any Chancellor of the Exchequer who is prepared to take off a certain amount of the taxation that now presses on the community and reduce the amount that we annually pay off towards the National Debt. That I regard as sound finance. The real extent of debt is relative to the property that the person owing it has. Suppose that 50 years ago we had entered into these wild notions about paying off the National Debt. We should have paid really three times as much as now, because the income tax yields much more at present, and the burden of debt is not half as great as it was then. In 50 years' time, with the increase of wealth, the existing Debt will relatively be much less, and the burden of it will be much less than it is at present. My only regret is, that the Chancellor of the Exchequer has laid hold of the windfall which came into his hands, owing to a reduction of the interest on the Debt, in order to expend it in warlike preparations. I should like to have seen him take off more of the tax, but, at any rate, I am thankful for a small mercy.

MR. STOREY (Sunderland)

My hon. Friend (Mr. Labouchere) is no doubt sincere in his exposition of his views of sound finance, but I myself do not see the difference in this matter between the nation and individual. If a family find themselves heavily burdened, they feel it is just and fair to themselves, and to them own home, and to the future interest of posterity, to do their share towards reducing the Debt. And so it is in my view with nations, even if there were no more serious reasons to be urged in favour of it. I therefore always fell grateful to the Conservative party, led by Sir Stafford Northcote, for its efforts towards the reduction of the National Debt. I do not think the precise procedure was a particularly wise one. Sinking Funds are very apt to be seized upon by some impecunious Minister, or some popularity hunting Minister. A sound method of reducing the Debt, which I hope both Parties in the House will be willing to adopt, is to keep the Estimates low, to exercise due economy, to be sufficiently liberal with the Estimates, to have surpluses, and then to let the surpluses go to the reduction of the Debt year by year. That seems to have been the old and wise Liberal policy, and I wish it were adopted by our Conservative friends. I must say I view with considerable surprise the proceedings of the present Chancellor of the Exchequer, who has been recently introduced into the Conservative Party, and who seizes upon one of the wisest things that Party ever attempted to do to meet his financial exigencies. He has deliberately taken a considerable portion of the money set aside for the reduction of Debt by the Conservative Party, and insists all the time that he has done no such thing. I felt ashamed when I saw him do it two years ago. Instead of keeping the income tax at the figure it was and boldly sticking to the guns which had been left him to serve, he reduced the income tax by seizing upon £2,000,000 a year. And now, having a second opportunity of getting an annual sum towards reducing the Debt, he takes advantage of his position and secures another million sterling a year, so that we are in the position of applying only 25 millions instead of 28 millions sterling to the extinction of Debt. My hon. Friend the Member for Northampton (Mr. Labouchere) says we ought to be thankful for small mercies. I do not see what the special mercy he is referring to is, but the special mercy I should be thankful for would be that the Conservative Government who are now in power, and who, according to all appearances, are likely to be in power for some time to come, should, instead of increasing the charges of the country, exercise economy, and having obtained sums in that way should boldly apply the saving to the reduction of the Debt.

SIR J. McKENNA (Monaghan, S.)

My hon. Friend who has just spoken has pointed his argument by saying that the Government ought to act for the country as a private individual should act—that is, to pay off their debts as rapidly as possible, and that therefore we should not now reduce our annual payments of 28 millions to 26, but rather pay off the National Debt still more rapidly than we have been doing. I must point out the defect in this reasoning. The National Debt is a charge in the whole inheritance of the country, whilst the taxes to pay the interest, and to reduce the principal, as we have been and are doing, are levied on the life estate, and out of that still more precarious life estate, the earnings of the people, who have no other estate of any kind. The heavily taxed population of Great Britain, and the still more heavily taxed population of Ireland, are paying off the National Debt in a manner and at a rate most unjust to them. I feel bound to complain of the injustice involved in the fashion in which the Irish people are called upon to contribute to the payment of the National Debt. In 1853 there was a solemn engagement made to Ireland upon the question of the income tax. Ireland was to pay additional amounts in Customs and Excise, Duties, and the income tax was not to be renewed, however, and in the first 25 years after the new taxation came into force between 70 and 80 millions of the National Debt were paid off, of which Ireland paid more than 60 millions by means of the additional exactions. My complaint is not that the Chancellor of the Exchequer provides too little for the reduction of the principal, but too much. I am only sorry that the right hon. Gentleman did not see his way to give more relief to the taxpayer. The debt took several hundred years to pile up, and at the present rate it would be paid off in 50 years, or say in the lifetime of a man of twenty.

* MR. J. M. MACLEAN (Oldham)

I think the burden of the National Debt is a very light one in comparison with the advantages which we have obtained through having the Debt. It is really the very best investment the country ever made. It represents the cost of a great war in which we engaged, but the result of that war was to give us our naval supremacy and that unparalleled extension of commerce from which we now derive such overflowing wealth. Ought not this generation, which has reaped the fruits of the exertions of former generations, do something out of its wealth to clear off the Debt? It is a bad sign that the principal supporter of the Chancellor of the Exchequer in reducing the amount available every year towards paying off Debt is the hon. Member for Northampton (Mr. Labouchere), who avows that his object is that if we should be engaged in any war hereafter we should not have the means of carrying on that war successfully.

MR. LABOUCHERE

I did not say that. What I said was that we should not be as anxious for war if we knew we had a considerable amount to pay for interest on the National Debt.

MR. J. M. MACLEAN

That is only another way of putting the same thing. The hon. Member is anxious we should have this burden of Debt so heavy upon us, that if it is incumbent on the nation to go to war for the protection of its honour or interest, we should have to think, not once, but twice, before we go to war. I certainly do not think the Chancellor of the Exchequer in his ingenious speech disposed of the point raised on the other side and enforced by the hon. Member for North Islington (Mr. Bartley). The right hon. Gentleman's argument rather surprised me. He said, that when Sir Stafford Northcote applied 28 millions sterling a year towards the reduction of the burden of the Debt, the income tax was only 2d. in the pound, and therefore the burden on the taxpayers was not so severe as now when the tax amounts to 6d. in the pound. Surely, that argument cuts the other way. If we could afford to give 28 millions sterling out of the annual revenue towards the reduction of Debt when the income tax was 2d. in the pound, we certainly ought to be able to devote that amount, or even more, when the income tax is 6d. in the pound. Then the Chancellor of the Exchequer contents himself by saying that although he is not putting so much aside towards the reduction of the principal of the Debt, he has done a great deal by reducing the rate of interest, and that practically we are now in the same position as we were in when Sir Stafford Northcote set aside 28 millions sterling, and that the 25 or 26 millions sterling will have the same effect. But I do not think that is a satisfactory state of things, for it appears that after all this reduction of the rate of interest on the Debt by one-twelfth, and afterwards by one-sixth, the country will only be in the very position in which it was placed by Sir Stafford Northcote, when he established this plan of the Sinking Fund, because, in proportion to the amount gained by the reduction of the annual interest, we have a diminution of the sum set apart for reducing the Debt. I certainly do not think it is very heroic finance if we, after all this great conversion of interest, are only to be placed in the same position as that in which Sir S. Northcote left us. Surely with all the advantages flowing into the country, with reviving trade, with wealth increasing in an unprecedented way, we ought to be able to do a great deal more than Sir Stafford Northcote did, and if the time should come, as we are told it is likely to come, when we may be engaged in a serious struggle, in which all the resources of the nation will be required to maintain our interests and the greatness of the Empire, now is the time to diminish the burdens upon our population, and to take care that we shall be prepared to meet any enemies hereafter with whom we may have to contend. If we do not do that, when the time of trouble comes we shall have serious cause to regret our neglect and want of thrift in more prosperous times.

Bill read a third time, and passed.