EAST INDIA LOAN (£10,000,000) BILL. (No. 475.)

HC Deb 13 December 1893 vol 19 cc1269-336

SECOND READING.

Order for Second Reading read.

THE UNDER SECRETARY OF STATE FOR INDIA (Mr. GEORGE RUSSELL, North Beds.)

Mr. Deputy Speaker, it may be for the convenience of hon. Members who were not present when this Bill was last before the House, that I should recapitulate the circumstances under which it has been found necessary for the Government to apply for borrowing powers to the ex- tent of £10,000,000. As the House is aware, the Indian Government has to make certain fixed payments here for interest on debt, pensions, Army charges, purchase of stores, and the like; and this must be done in gold. In order to meet these charges we have to sell our bills, which are drafts payable in India in rupees. If, for any cause, that sale of bills falls off, of course our stock of gold dwindles. Until June of this year, the Bills were selling well. Then came the closing of the Mints. When speaking on this subject a few days ago, the right hon. Member for the University of Cambridge (Sir J. Gorst) laid some stress on the fact that I had made use of the word "momentous." That is a word to which I adhere, because no Government, I imagine, would undertake any step so grave as to interfere with the laws of currency without a deep sense of the momentousness of what they were doing. The course which the Government adopted was based on the recommendation of the famous committee of experts; and a serious responsibility would have been involved by the, rejection of that recommendation. The leading fact in the situation was the fall in the exchange value of the rupee, and the prospect of the repeal of the Sherman Act, which seemed likely to make it fall further. The Indian Government wished to stop the fall by preventing the unlimited increase of rupees. It was provided that, at 1s. 4d. the rupee, gold might be tendered for silver; but it was never said or contemplated that bills should never be sold below that rate—a fact as to which there has been much misconception in the public mind. The closing of the Mints was carried out in June last. Instantly there was an unusual demand for Indian bills; but the demand was short lived, and was followed by a marked and heavy falling-off. Now, the reasons for that falling-off were many, and it is not, perhaps, for me to trace the connection of cause and effect; but I may briefly indicate two or three circumstances which, if the Government had not taken the steps they did, would not have been unlikely to produce something of the same result. In the first place, the export season had just come to an end, so that for many months there would be little or no demand for bills on India. The Lancashire trade was just reviving after a long strike; the stocks of cotton goods in India had run out and needed replenishing; the steadiness in the exchange permitted merchants to make their bargains with security. Thus, the imports into India were enormously increased in July and September, 1893. This, of course, gave an abundance of mercantile bills in the market and diminished the demand for Council bills. Be the causes what they may, the facts and figures with regard to the sales stand thus—that, whereas between June and December, 1892, bills were sold to the amount of £6,202,000, in the corresponding period of this year the amount sold was only £897,000. Thus there was, in order to meet the home charges, £5,300,000 less than last year. This was what I referred to the other day as a "loss" to that amount. " Deficiency " would be a better word. Owing to this failure to sell bills, the Government had to use some of their unexhausted borrowing powers. We were bound to look ahead— at least as far as April; by that time we would have to pay £8,000,000 sterling, whereas we had not enough borrowing powers to carry us beyond the 5th of January. These are the circumstances under which the Government comes to Parliament for these increased borrowing powers. I have two very sufficient answers to the reproach— perfectly courteously levelled against us —of not having given warning of the present application at the time of the Indian Budget. The first is that there was no reason to anticipate so complete a failure to sell; and the second is that, even if there had been, at the time when I made my Indian Budget speech it was, of course, decided that there was to be an Autumn Session, and, therefore, we should have had the means at hand of meeting the necessity by the present application to Parliament. As to the amount which the Government ask, much of course depends on the sale of bills during what remains of the winter. They may possibly want only £1,000,000, or even less; they may want £6,000,000, and the rest of the borrowing powers is "margin." In asking for a margin over and above our actual and definite necessities, we are strictly following the precedents of former times. The right hon. Gentleman (Sir J. Gorst) said that the application is abnormal; but similar procedure has been adopted when like difficulties had to be contended with. I leave out special applications for specific purposes, and I find that since the Queen took over the Government of India my predecessors at the India Office have come 11 times to Parliament for general borrowing powers, and the various Ministers in charge of those successive Bills have almost always asked for a little more than they actually required in order to meet unforeseen, but possible, contingencies. There are two cases—in 1860 and 1861—when the late Lord Halifax, then Sir C. Wood, took action which closely resembled that which is now being taken, and, indeed, was not in principle distinguishable from it. When railways are being constructed by companies in India, the practice is that money is borrowed in London and paid in gold to the Secretary of State, who undertakes to pay in India in rupees the equivalent sum as far as the money has to be spent in India itself. The explanation Lord Halifax gave in 1860 for taking power to borrow money if necessary was that he might replenish the home treasury without stopping the progress ' of the Railway Companies in India. And similar was the course adopted by Lord Halifax in 1861. The explanation Lord Halifax then gave for taking power to borrow money, if necessary, was that he might replenish the Home Treasury without stopping the requirements of India. But, Sir, we have a very much closer precedent in recent times. In 1874 Parliament was asked to give borrowing powers to the extent of £10,000,000 sterling on account of famine in Bengal. There were at that time unexhausted borrowing-powers to the extent of £2,000,000, so that the Secretary of State for India had altogether £12,000,000 at command. To deal with the expenses of the famine only required a loan in this country of £5,000,000 in 1874–75. In 1876 the price of silver dropped heavily and the demand for bills had fallen off. There was a deficiency in the Home Treasury which was met by the sale of debentures to the extent of £1,300,000 and of Stock to the extent of £4,000,000. The explanation given to Parliament by the late First Lord of the Admiralty was that this step was taken in consequence of the low rates of exchange tendered for bills on India. It seems to me that that transaction was closely akin to, and, in fact, practically identical with, the one under notice, the only difference being that in that case the emergency was dealt with first and the remainder of the money was used for ordinary purposes, whilst we are using the money for ordinary purposes first and keeping the rest for possible emergencies. That, however, is merely a difference of order. I have, I think, said enough as to the circumstances under which we ask for these powers. I am well aware that in making reference to the closing of the Mints in India I have opened the floodgates of controversy, and that controversy, I have no doubt, will occupy a considerable portion of the Debate. I have said enough to make it clear to the House that in the circumstances under which we ask for borrowing powers, and in the fact that we are doing so, there is nothing unusual or abnormal. It remains only to say a word or two about the details of the Bill. Power is taken under this Bill to issue sterling bills, which are very much like Treasury bills. These bills have been found a convenient form of security, therefore power is taken in this Bill to issue them, and their use was sanctioned under the previous Acts of 1877 and 1879. Then there is a provision for composition of the Stamp Duty. The stamp on each bill entailed a certain amount of trouble and labour, and power is taken for composition of the Stamp Duty. By the Loan Acts of 1873, 1877, and 1879, it is provided that certain sums, amounting in all to £7,000,000, should not be raised by the issue of capital stock, and this restriction proved inconvenient, therefore Clause 20 provides for its removal. This Bill enables us to get the money in any way we can, and that is the only alteration of any consequence in it as compared with that of 1885 and previous Acts. I have nothing further to add. I can only ask the House to consider our proposition entirely on its merits, without passion or Party spirit, and to give us the credit of having done the best we could under rather difficult circumstances, to meet a deficiency which we had no reason to foresee, and no power to prevent. I beg to move that the Bill be read a second time.

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

SIR R. TEMPLE (Surrey, Kingston)

I rise to support the Second Reading of this Bill. I shall not attempt to enter into details of the Bill itself, because I am anxious to address myself to the very large and broad principle involved in this measure. I am glad that the Under Secretary of State for India has fully explained to the House that this sum of £10,000,000 included in the Bill is wanted partly for ordinary and unquestionably legitimate purposes—that is, in respect of public works like railways and canals, because, as an old finance Minister, I feel sure that is what it means. The Government of India is entitled, according to well-established practice, to borrow so much annually for public works in India of a remunerative character, and that is borrowing of a legitimate character. Portion of this £10,000,000 is wanted for that; but there is no doubt as to what the Under Secretary of State has called a margin, and a very large margin. That margin is really wanted to place the Secretary of State's treasury in funds, in the event of Council bills being unsaleable. This amounts really to a loan of a permanent character, or of the character of permanent borrowing for meeting the expenditure, and that is undeniably a very serious step, and an important precedent which undoubtedly demands the most rigid and strict scrutiny of Parliament, and of criticism. I can hardly imagine a financial case more requiring explanation. I do not at all minimise the gravity of the case. I admit it demands explanation. I am prepared now to offer that explanation, and I consider it is thoroughly satisfactory. Of course, I am a Member of the Opposition; but a case like this I endeavour to regard as I should have regarded it when I was myself Finance Minister, or had my Leader been sitting on the Treasury Bench and I behind him.

THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT, Derby)

I would point out that my hon. Friend the Under Secretary for India has not said that the Indian Government regard this as a loan of a permanent character. They hope and expect it will be temporary. I only wish to indicate that.

SIR R. TEMPLE

I am much obliged to the right hon. Gentleman for correcting me if I really deserve correction. The point is this: Temporary borrowing, as I understand the term, is the issuing of debentures or other bonds of the nature of Exchequer Bonds which are repayable within a short period. Now in so far as this Bill provides for the issue of Stock, that is an ordinary loan which will form part of the National Debt, and there is no particular condition in it for repayment within a particular specified time; therefore, I can call that permanent borrowing. I am sure the term "permanent borrowing" is applicable to it. It should not be understood that the Government are going to do this from year to year. I am sure they contemplate nothing of the kind; but so far as the case goes, it is of the nature of permanent borrowing. Perhaps it would have been better if, instead of bringing forward this loan, they had raised their margin in the shape of Exchequer Bonds and debentures of that character. That, however, is a financial detail of which the right hon. Gentleman is the best judge, and if he thinks it desirable to obtain the margin necessary to provide for the payment of Council bills by a permanent loan, I am prepared to accept his decision, and offer the due explanation and justification. I do not want to minimise the case. I am prepared to defend it, and I think the defence will be more effective if the gravity of the case is fully and frankly acknowledged. What is the margin wanted for? It is to give a fair field and a proper chance to the very important experiment which was made last June in closing the Mints. Now, Sir, if the Debate to-day should go into the merits or demerits of that experiment, I think we shall hardly be quit of it by half-past 5 this evening. But I myself deprecate that. I hope the general question of bimetallism will be kept out of this Debate, and I submit that the merits or demerits of the closing of the Mints last June is not essential to the question before the House. I do not, therefore, propose to discuss the main points in that experiment—namely, the grievous and distressful vicissitudes of finance which beset the Government of India; the dread alternative with which they were confronted; the urgency, owing to the possibility of the repeal of silver legislation in America, or as to whether trade would be hampered or the just interests of native holders of silver specie and bullion would be affected. Into all these questions I do not propose to enter. The experiment, rightly or wrongly, has been made. It was proposed by the Government of India; it was recommended by a committee of the highest authorities and experts in this country, one of whom is present among us to help our deliberations this afternoon. It was sanctioned by the Home Government and, I contend, by this House of Commons; therefore, let it rest there. The experiment, rightly or wrongly, has been made, and all that is before us this afternoon is the question how we shall give it a fair chance and proper trial, and a reasonable scope and means of running its course. Well, Sir, that is really the question. I contend that this loan is wanted for this purpose. Now, what has been the result of this experiment as yet? In the first place it undoubtedly has steadied the exchange. So far it has remedied some of the evils with which the Government of India were threatened, and undoubtedly given much reassurance to the trade between India and foreign countries. But it has not succeeded in one particular thing— namely, it has not facilitated the sale of Council bills. Although for a short time immediately after this experiment Council bills were sold, the sale has somehow suddenly ceased—I may say entirely ceased for the present. And it does not seem likely to be resumed for some weeks to come at all events. In the meantime the Secretary of State has arranged to cross over the gulf by a temporary bridge in the shape of Exchequer bonds which have been issued for short periods, and will, I presume, soon be redeemed. That was a proceeding which might have been continued. But, instead, this loan has been brought forward. Now, in reference to this, what are these Council bills for—what is their real origin? They are in reality issued for the sake of balancing the trade between India and foreign countries. The balance of trade in favour of India is very large—as much as from £30,000,000 to £40,000,000 sterling annually. That is to say, the value of the produce which India exports to foreign countries is Rx. 30,000,000 to Rx.40,000,000 greater than the value of the goods which she receives from foreign countries, and she has had to be paid accordingly, if not in kind then in cash. On the other hand, there is no doubt that she owes a heavy payment to England in the shape of 16,000,000 or 18,000,000 sterling, which she had to pay annually for the interest of debt raised in this country, for the purchase of plant for the various public works in India, for the charges connected with the Government of India, and so forth. Thus the debt due by her to England is a set-off to a considerable extent to what is due to India from foreign countries in the manner that I have described. But there remains the question of the balance which has to be paid in cash, and it is in connection with this that we have the real origin of the Council bills. If the balance is large there is a great demand for the Council bills. If the balance is small, there is less demand. If there happens to be no balance there is no demand for these bills; and that is the origin of the trouble now. It has happened that since June last the imports into India have been gradually increasing—more than usually increasing—and that the exports from India have been more than usually decreasing. This is an extraordinary coincidence. Those who are inclined to criticise the Government in India and in this country for their conduct during 1893 will say that this state of things is due to the closing of the Mints. I, for one, do not at all admit it. I acknowledge that the closing of the Mints has to some extent helped on or brought about the difficulty. But the difficulty itself arose from physical and material causes. The temporary reversal of the balance of trade is partly due to the large export of goods from England to India and also of silver. That is a very remarkable circumstance. It appears that people must get rupees in India. They cannot get them in the usual quantities through the Mint, and therefore they have to get them in the market. For that they want silver, and silver is going out from England to India for that purpose. No doubt the crisis is aggravated to that extent by the action of the Government of India. Further, I admit that the slight raising of the value of the rupee by the closing of the Mints does help the importation of Manchester goods into India. I am very glad, of course, that Manchester men should have this benefit. When a Manchester man sends his goods to India he is paid there in rupees. The rupees he gets are slightly more valuable than before June last, before the closing of the Mints, and therefore he has pro tanto an inducement to send out his goods. To that extent the reversal of the balance of trade is due to the action of the Government of India. I have thus shown the House two respects—two limited respects—in which the reversal of the balance of trade has been brought about by the action of the Government of India. But these are not sufficient to account for the phenomenon. So large a phenomenon in trade must arise from some great physical and material causes, and I submit that these are not far to seek. The trade consists in two things— merchandise and treasure. The great difference as regards the balance of trade is in merchandise, and this is not to be accounted for by any slight variation in the currency or operations in silver. What is the true condition of the export trade of India at this moment? The harvest has been good. Everything promises well in that respect so far. But the great export season has not yet commenced. When it does commence we shall see what the result will be. I believe that it will be an increased demand for Council bills. The harvest, I repeat, has been good. It may be asked why had not the Indian people seized the opportunity to send their wheat to this country? Cannot the House imagine the reason? Look at the state of prices in this country! That is one reason. We here give them so little for their produce. Does not every country gentleman in this House know that the prices of wheat and cereals of all kinds are lower than ever? Well, those prices do not arise from any operations in silver in India, but from im- portations from America and other countries, and from various causes existent within England itself. There you have at once the great cause. As regards imports into India—or exports from England—the Manchester goods have recently been favoured. We may thank Providence for that! But does anyone suppose that the fact of the rupee being 1s. 3d. instead of 1s. 2¼d. is the only cause of the augmented exportation? Of course, there are other causes of the present state of things which can be better explained by Lancashire Members than by myself. There have been some remarkable strikes, and there have been accumulations of stocks of goods, and so on, operating in Lancashire itself, and for various reasons it has suited Lancashire to export material into India. I submit, therefore, that there are great physical material causes, which are far removed from silver and the operations therein, which in the main account for the reversal of the balance of trade; and when we have the material causes before us, why should we search so minutely into causes connected with the currency? I suppose that this kind of inquisition arises from a good deal of politico-economic misapprehension. After all, what is treasure—what is specie? Shortly, they constitute the mechanism of exchange—of the exchange of goods; but they are not exchange itself. They do not represent the real value, which consists in the commodities themselves. It is the exchange of the commodities which is essential, and the precious metals are the medium. I admit that if the metals are rendered cheaper or dearer, or rendered more easy or difficult to get, that does affect values somewhat; but the broad general causes which affect values so largely are connected with harvests and the state of the labour market, and a hundred things of that kind which are quite separate from all questions of currency or the like. Well, then, such are the reasons why the balance of trade has been reversed for the time with this effect: that as there is no money to be remitted to India in payment for her exports—there is no demand for Council bills. What I have stated is the broad, and, I consider, strong and sufficient explanation of the coincidence to which I referred. It is due to the action of the Government only in a slight degree. But this coincidence is really the justification of the action the Government are now taking. They were bound to do as they have done. They were bound not to allow the rate of the Council bills to go down and down to the serious discouragement of all Indian interests, and to the embarrassment of the Government of India—probably undermining the future position, and preventing the currency from recovering its position hereafter. Therefore, I say that nothing could be done but to take such steps as have been taken in asking for this loan. This is the broad and main justification. I thought it better to put it in the fullest and frankest terms, and I now leave it to the judgment of the House. There is yet one other matter. The right hon. Gentleman below me (Sir J. Gorst) I understood to ask a very difficult question. He asked, how long is this to go on? If the Secretary of State cannot sell his bills this year how is he going to do so next year? Is this request for sanction to a loan to be repeated annually? That, surely, is inadmissible; and therefore he asks—What is the prospect? Well, Sir, that is a question that I desire to confront. I wish to look it fairly in the face. I admit the prospect is a little awkward unless the difficulty can be cleared away. Supposing that the Government succeed, as I hope they will, in tiding over the crisis with the present loan, what then will follow? There will be, in the meantime, a great relief to the Government of India. Instead of having to send home several millions at a ruinous rate, millions of tens of rupees will be kept in the treasury at Calcutta and elsewhere and there will be no loss by exchange. But I believe, Sir, the sale of Council bills will revive. The export season, the most active period, is not in full swing. It will be in January and February, and we may then have such trade as will make tenders forthcoming at acceptable rates, and, once resumed, they may continue at such rates. I may have my own opinion as to what the rates should be; but it is sufficient for me to use the words "acceptable rates." Well, Sir, I hope we shall have tenders at such rates. But the question of tendering or non-tendering does not depend on the question of silver, because the exportation rises or falls according to commercial circumstances. Two years ago there was a drop in the statistics of exportation from India far greater than any drop which has occurred this year, and there was no question of closing the Mints then. There was another drop early this year in the rice exportation, and that was before the closing of the Mints. There is, therefore, nothing to be surprised at in these drops. They show that the question has nothing to do with that of silver. Therefore, I hope that, notwithstanding all that has happened, the natives of India will begin again to export, and then we shall see a demand for the bills. If the Secretary of State cannot get his Council bills taken up, the Government of India will have to send the money home. They can buy in the Indian markets gold for their silver taken from the Treasury chest, and they can send that gold home in a coined or uncoined state. Adsum qui feci. India owes the money, and must pay it, and if she cannot arrange that through mercantile bills, she must send cash. That is perfectly practical. The Government of India has got the money—all the money that is wanted—in the Treasury chest and in the Presidential Bank. They can buy gold in the Indian market for their silver, and they can send that gold home here. I say it is perfectly practical. In 1872, the then Secretary of State telegraphed to me that he could not sell any Council bills. I telegraphed back to the Secretary of State that I would remit the money. I had the impression at the time that the merchants were holding back for more favourable terms with the Indian Government—

MR. MACFARLANE (Argyll)

What was the exchange then?

SIR E. TEMPLE

Allow me to put the case. I at once, at some considerable trouble, purchased a large quantity of gold, and sent it home by steamers through the Suez Canal. I do not think I made a very good bargain in buying; but it was not concluded at a ruinous loss. At all events, I did the best I could for my Government, and secured much the same terms as they had demanded in vain. Apparently the merchants did not wish this object-lesson to be afforded to me, so tenders were at once offered for the Council bills. And if I were asked what the Secretary of State should do if unable to sell his Council bills, I would reply that there was nothing for him to do but to take the course which I myself adopted in 1872. If Manchester should succeed in opening her markets for the sale of vast quantities of goods and manufactures, and if Yorkshire should succeed in getting a footing in the woollen market with the import of goods from England, we should have a commercial millennium, which is too good to hope for. Then, indeed, there might be no longer any further demand in respect of Council bills. I have shown what would be the consequence to English trade, and a very happy one it would be. But the Government would have to find some other means of remittance, as Council bills would cease. In conclusion, I have looked the question in the face, and I hope I have succeeded in giving a satisfactory answer. There is nothing alarming in the prospect. I thank the House for listening to my exposition of politico-economics. What I submit, apart from details, is this: that this measure is sound, judicious, and necessary, in order to give a fair trial to the experiment which has been made by the highest authority in this country and in India to prevent silver from being compromised, and to relieve the Government of India from undue embarrassment for a short time.

MR. MONTAGU (Tower Hamlets, Whitechapel)

Mr. Deputy Speaker, I wish to say a few words with regard to the recent financial policy of the Indian Government, but I do not propose to discuss bimetallism; I consider this Bill should have been introduced when the Indian Mints were closed to the free coinage of silver. It appears to me that the Government of India are acting in a manner likely to defeat or greatly to impede their own policy. What were the objects expected from the closing of the Indian Mints? The first was to maintain a reasonable stability in the exchange between this country and our great dependency; the second was to prevent India from being deluged with the refuse silver of the world; and the third was to prepare for and. eventually, to introduce into India a gold circulation.

SIR W. HARCOURT

A gold standard.

MR. MONTAGU

A gold standard now exists. It was understood, I think, that a gold circulation was to be introduced. And what was the action of the Indian Government in the matter? They made the initial mistake of commencing their operations at a time when the exports from India were usually very small, and they showed no confidence in their own policy of offering 15 rupees for every sovereign in India, while at the same time they announced that they desired a maximum and not a minimum value of the rupee. What the Indian traders wanted was a reasonable stability in the exchange, and that a minimum should be approximately fixed to the value of the rupee. The result of that confession of weakness was that European investors took fright and sold their Rupee Stocks, which were sent out to India in competition with, and even to the exclusion of, the Council bills. In spite of that weak action, the export trade began to revive a little while ago, and a demand for these bills sprang up; but just at that critical moment the market was flooded with 60 or 70 lakhs of bills drawn by the railway Companies at a fraction under the estimated minimum of 1s. 3¼d., and so the market was spoilt for the Indian Government. I certainly think the Government might have arranged with the Railway Companies to maintain the stability of the rupee. Another, and much more important, cause of non-success was that whereas it was believed that the exports of silver to India would cease or greatly diminish when the Mints were closed, nothing of the kind occurred. Silver is still exported in as large a quantity as in previous years, the amount being £2,189,000 this year, £2,482,000 in 1892, and £1,545,000 in 1891. Those are the Returns for five months since the closing of the Mints. In July the quantity was £816,000.

SIR W. HARCOURT

What was it last month?

MR. MONTAGU

£277,000. It is estimated that something like £3,000,000 or £4,000,000 sterling of silver per annum is sent to India at the present time, and that millions of the natives are still ignorant that the Mints are closed, and are tempted to buy uncoined silver against the hoarded rupee. The exports of gold from India to this country are increasing, just reversing the avowed policy of the Indian Government, which contemplates, the ultimate introduction of a gold currency into India. If we added to this state of things the somewhat unjust treatment of the Indian banks by the Indian Government with respect to silver in transit, we cannot be surprised that the Government of India are at present in some financial difficulty. If they had shown courage and confidence in their own policy they would, last June, have asked for power not only to borrow this money, but also to impose an Import Duty on uncoined silver. Those powers would not have been, used; for there would have been no loss of confidence, and the rupee would have been maintained at about 1s. 4d. The-late Chancellor of the Exchequer (Mr. Goschen) the other night, protested against an analogy being drawn between the action of the Indian Government now and that of France 20 years ago. India possesses more gold than France, but it is not so accessible as in the latter. In India, however, silver coins can be circulated; but you cannot do that in France. In Paris you have in the Bank of France £51,000,000 in five-franc pieces lying idle because the people will not have the silver. I think the Indian Government were forced into this action and they are quite right to presevere in it. At the same time, I think they will have to adopt the recommendation which I put forward once before on this subject. They will have to impose an Import Duty on silver. This step will have to be taken some time, and I hope the Indian Government will show a little more the courage of their convictions in the future than they have shown in the past. I am glad to think that Lancashire industries have benefited by what has been already done.

SIR J. GORST (Cambridge University)

Sir, the Under Secretary (Mr. George Russell) and the hon. Baronet (Sir R. Temple) have recommended this-Bill to Parliament as if the policy of the Government in stopping the sale of current Council bills was the necessary or logical consequence of the stoppage of the free coinage of silver in India last June. The two policies are entirely distinct. The Mints might be closed without suspending the sale of Council bills, and the sale of those bills might be suspended without closing the Mints.

SIR R. TEMPLE

I am sure, Sir, I did not say anything of the kind. The whole of my argument was the other way.

SIR J. GORST

I understood him to say that one action was the necessary consequence of the other.

SIR R. TEMPLE

No.

SIR J. GORST

Well, I do not want to press the matter forward. I assume that we now agree that the present proposition is an entirely separate one, which has not had the sanction of the Financial Committee presided over by Lord Herschell. It is a proposal for which the Indian Government and the Government at home are solely responsible, and which must stand or fall on its own merits. In this discussion, however, the policy of closing the Indian Mints cannot be left out of consideration, because it is quite clear that the first step taken by the Government led to the second.

SIR W. HARCOURT

No connection.

SIR J. GORST

One step might be justified without the other, but the Government have justified both steps. I do not propose to discuss the momentous step taken in June last—the closing of the Mints. No one has attempted to defend it as being in itself desirable—I do not know that the hon. Baronet did— but it has been excused as a step which could not be avoided owing to the extreme position in which the Government of India found itself in that month. Those who were responsible could recommend no other course at the moment. The Committee recommended this experiment —an experiment that can only be justified by its success. At the present moment it is rather early positively to say whether such a step has succeeded or has failed. But, at any rate, the Government were entirely taken by surprise at the first consequence of the step that was taken, because the expectation of the Government in India and of the Government in Downing Street, and of the Financial Committee itself, was that the closing of the Mints would be followed by a rapid rise in the value of the rupee. The Committee recommended that the Government should adopt an expedient to prevent a rapid rise in the value of the rupee. It was explained to the House that the provision made to receive gold at the rate of 1s. 4d. a rupee was an expedient devised for the prevention of the too rapid rise of the rupee, and to prevent the disturbing action that so speedy a rise would have on the export trade of India. The expedient taken for that purpose was entirely in accordance with the traditional policy of the Government of India in this country, because that traditional policy has always been to prevent, as far as possible, any interference with the operations of trade by reason of the large remittances which have to be made from India to this country for the purpose of carrying on the Government. Well, the Government availed themselves of that sudden and temporary rise which took place in the value of the rupee in June last to sell an abnormal amount of Council bills. They sold more in the month of June than they sold in any other month during the present, or that their predecessors sold during the past year. But the relief of the Government was very short-lived, because the value of the rupee almost immediately fell; and since that date, with the exception of a very slight improvement in November, the Government have practically sold no Council bills at all, or they have sold an amount so small that it is hardly worth taking into consideration. Now, the Under Secretary of State for India used the expression that they could not sell bills, and the hon. Baronet spoke about the sale of bills as impossible. He said they were unsaleable, but, of course, that is only a manner of speaking. He means that they are unsaleable at the price the Government thought fit to take for them. Bills in India have not been unsaleable during the whole of this year. They have been continually sold, but the Government did not choose to sell the bills at the price at which they could have been sold in the market, although that price is not by any means the lowest price which the rupee has touched. That was in pursuance of quite a new policy— a policy which, in spite of the illustration given by the Under Secretary of State, I venture to say was never pursued before. It may be right or wrong, but it is a policy which ought to be considered on its merits.

SIR W. HARCOURT

I observe that Lord George Hamilton in 1876 said that the loan of £4,000,000 of that year was raised because it was not right to force the Government bills on the silver market.

SIR J. GORST

I am afraid I cannot undertake to discuss the finance of India in 1876. I withdraw the expression that this course was not pursued before. At any rate, it has not been done in recent times. The precedent which has been brought forward is an old one. I am justified in saying that in recent times the settled policy of the Government of India and this country has been to sell their bills regularly and systematically month after month, whatever may be the state of the exchange, and not to attempt to speculate for a rise or make provision for a fall. A confirmation of that statement I have before me —the list which the Under Secretary of State was good enough to supply me with the sales of Council bills in 1892 and 1893. Without troubling the House with the figures, I may say that there was a perfectly steady sale, generally a little above Rx.2,000,000 each month down to June of the present year, when the sales was Rx.3,800,000. Then, after that, the sale practically ceased altogether. That shows that the practice, at all events, and the policy of recent times, has been that the Government should abstain from all speculations in the value of the rupee. The hon. Baronet made a point in approbation of the policy of the Government, that the exchange had been steadied since June. Well, but if the exchange has been steadied since June, it looks very much more as if the exchange had been steadied by the Government abstaining altogether from selling bills than by the expedient of stopping the coinage of silver in the Indian Mints. Without stopping the coinage of silver, I have a strong suspicion that the Government could have suspended altogether the sale of their Council bills, and that that would have secured the same result— that the exchange would have been steadied and the fall in the value of the exchange in the rupee would have been checked. What good is that to the Government here or to the Government in India? It is no use keeping the exchange value of the rupee at about 1s. 3d. if you cannot sell your Council bills—if the effect of going in the market to sell your bills should be that the bills would immediately go down; and that does seem to have been the result, because in November the Government did go into the market, and they sold nothing like the ordinary amount of bills. They sold Rx.980,000, or less than half the usual monthly sales. What is the result of that? Why to check immediately the slight tendency to improvement in the exchange. We are told by the Under Secretary of State that there has been this month practically no sales, and that at the present time there is no immediate prospect of such an improvement in the exchange as would justify the Government in again going on to the market. Then the Chancellor of the Exchequer, in a speech he made a day or two ago, told us that the cause of the inability of the Council to sell their bills was the particular state of the export trade of India; because the export trade of India had fallen off, therefore the Government were unable to sell their bills. Well, I do not know which is the cause and which is the effect. The Government withholding these bills from the market no doubt has a tendency to raise the value of the exchange. The rise in the value of the exchange has a tendency to stop the export trade, and whether it is the stoppage of the export trade that has prevented the Government from selling their bills, or whether it is the refusal of the Government to put their bills on the market that stops the export trade I leave those financiers in the House more conversant with these matters than I am to determine. But it is worth the while of the House to observe that this is not the first time there has been a contraction in the export trade of India. The hon. Baronet referred to what took place in the early months of this year through the fall in the exportation of rice.

SIR R. TEMPLE

That was two years and a-half ago.

SIR J. GORST

The fall in the export of rice was in the early part of the present year. If you look at the statistics of the Indian export trade you will not find the contracting of that trade work upon the sale of Indian Council bills at any other period. If anyone will look at the bills sold in the early part of this year, he will not see a marked contraction in trade in the amount of bills sold, nor will he see in former years that a sudden contraction of trade in India ever prevented the Council from putting on the market at the proper time, and selling at the price which could be realised in the market of the day, the Council bills that were necessary for carrying on the Government. So far as you have gone you have not met with marked success in these new arrangements. But there is an extraordinary phenomenon—namely, the continued exportation of silver to India. The hon. Member for the Tower Hamlets made a proposal which I was surprised to hear from a member of the Free Trade Party. He suggested that you should put an Export Duty on silver, so that a person who wanted a silver ornament or utensil should pay an increased price in order to stop this phenomenal export of silver to India. I cannot tell how it is to be explained, but I should like to ask whether this continued importation of silver into India, notwithstanding the closure of the Mints, may not be an indication that the population of India are devising some other medium of exchange, instead of having an enhanced rupee? It is always easy, particularly in the case of people like the Orientals, to make them adopt a new form of exchange. If there is a dearth or scarcity of rupees, causing the value of the coin to rise in the European or Western community, it will have on the Eastern community the result not of making them pay more for their rupees, but of making them adopt some other medium of exchange. The native Mints are not closed; they are still coining. The coins of the native treasuries may take the place of the rupees the Imperial Government are withdrawing from circulation. I want to remind the Government and the House that India is in quite a unique position as regards this matter. There cannot be any proper analogy drawn between the Government of India and the Government of any Western Country. And for this reason: that whereas the Government of India receives the whole of its revenue from silver, it has to pay a large proportion—more than one-third: getting on for half—of the whole net expenditure in gold. That is a position which I do not think any other Government occupies, and it is this fact which makes the relation between the value of silver and the value of gold so vital to the safety of Indian finance. Anything which tends to affect the value between the rupee and silver and gold is of the most intense interest and importance and vitality to the finance of India. Let us look at the course which the Government are now adopting. I hope I may only be understood as pointing out the gravity of these matters. I am not presuming to say that the Government is wrong or that the course they are taking may not be the only possible course. But just look at the gravity of it! The hon. Baronet the Member for Surrey (Sir R. Temple) spoke of this as a permanent loan, and he was immediately corrected by the Chancellor of the Exchequer, who said that the intention of the Indian Government was not to borrow this money permanently to pay their liabilities, but that it is a temporary loan. But let us look at the possible consequences of a temporary loan. The Government are borrowing on a temporary loan. That is their policy. Then I say, as I said the other day, that the Government are staking everything on a revival of the export trade of India and a rise in the value of the rupee —on the revival of the export trade resulting in a rise of exchange and the increased value of the rupee. The hon. Baronet the Member for Surrey was very confident—and I always observe that people who discuss currency questions are confident in predicting the result of any measure they advocate—the hon. Baronet was very confident both that the export trade of India would undergo great inflation in a short time, and that that would give rise to an increase in the value of the rupee. If that is so, it will be all right; the Government will be able to sell its Council bills and obtain the money from India; the Treasury would be full of silver, which the Government would be able to convert into gold, and then it would be able to repay this temporary loan. But suppose it should not be so. Just suppose for a moment that it is not so. The hon. Baronet himself faced the other alternative. Let the House face it for a moment. Suppose the sanguine expectations of the Government are not realised. How are the Government going to pay this temporary loan? It will have in its hands not only the ordinary Council bills, but it will have this year's Council bills to get rid of. You will have two years' bills in hand; there is a very low exchange, not a very active demand for bills, and yet you are going on in this from year to year. The consequence will be that you will have an accumulation of bills in the market, greatly cramping it. If that is so that will have the effect of having your bills now at the price of a dreadful financial disaster in the near futute. The hon. Baronet's expedient was that if he could not sell Council bills at a fair rate he was to convert the silver with which the Hindu treasuries are to be filled into gold and send the gold by the Suez Canal to this country. He once did that with very great success he says. But what was the rate of exchange at the time when the hon. Baronet effected that operation? What was the value of silver? Silver then could be converted into gold, and no doubt the gold could be shipped and sent here. How much could you get for your silver now? What the Treasury of India has got is silver. In order to pay the liabilities of the Government of India in London that silver has to be converted into gold, and at what rate could silver specie be converted into gold specie? I do not know whether the Government are thankful to the hon. Baronet for his suggestion or whether that is a course which, in the event of a bad exchange next year, they at all contemplate. But it seems to me—I have no hesitation in saying it—that the Government are staking everything upon the next year, and if that improvement upon which they are counting should not come to pass they will be in a much more evil case then than they are now. The noble Baronet has spoken about the great interest the people of India have in the solvency of their country. No doubt the people of India are interested in the financial prosperity of their country. It would be premature if I were to attempt to enter into the question of possible retrenchment, of possible saving in the administration of India, or if I were to discuss what I regard as an im- possibility—namely, the increasing of the Revenue of India without fresh taxation. But I cannot but allow that any expedient by which the value of the rupee is increased is really increasing the taxation of the people of India. Other causes than these currency questions have contributed to the prosperity of the ryots of India. I have no doubt that there are districts in which the ryots are not so prosperous, but the increase in the land revenue will show that the people of India are very prosperous as a whole. If they have to pay their revenue in an enhanced rupee—a rupee artificially enhanced by the action of the Government —no doubt that is a slight increase of their taxation. Every person who has to pay taxes to the Government has a slight increase thrown upon him by reason of the enhanced value of the coin in which he is made to pay the taxes. I do not think there is any royal road in this matter. Such deficiency as there is must come sooner or later out of the pockets of the taxpayers of India. All expedients for making an apparent gain to the Government of India by increasing the value of the rupee, so far as the people of India are concerned, is merely spreading the burden—making good the loss on the rupee in the transmission of gold to this country. Spreading it may or may not be the best way, but the burden will fall on the people who pay taxes. I think that there is no doubt that this system of paying large sums of money every year in gold is a great disadvantage and a great misfortune to the finances of India, but it has to be done, and the Government ought to have, and I am sure will have, the support of the House in taking such measures as they think would successfully meet the necessity with the least possible disadvantage and the least possible oppression of the people of India.

SIR J. LUBBOCK

The hon. Member for the Tower Hamlets (Mr. Montagu) blamed Her Majesty's Government for several things, and, amongst others, for not having taken steps to carry out their intention of introducing a gold currency into India. Well, I never understood that that was a part of the policy of Her Majesty's Government, and the Chancellor of the Exchequer intimated his dissent from the intention attributed to him. They proposed a gold standard, as to which their intentions were far from clear, but they have never proposed a gold currency. But my hon. Friend the Member for the Tower Hamlets was speaking of the introduction not of a gold standard, but of a gold currency, and I may just remind him that an authority whom I am sure he will bow to with great respect (the late Mr. Bagshot), after discussing that policy at length, stated that however flourishing the condition of Indian finance, that was a step which, in his judgment, would make it infinitely worse. I was astonished to hear the suggestion come from my hon. Friend as a bimetallist, because I should think that would be the last thing he would suggest. It would still further diminish the demand for silver, still further increase the difficulties of the Government as regards their silver coinage, and, of course, to a very large extent, would increase the demand for gold throughout the world, which is one of the matters bimetallists most complain of. I do not rise for the purpose of opposing this Bill, but I must confess my serious apprehensions as to the policy of the Indian Government which led up to it, both as regards the cessation of drafts, and as to the recent currency changes. My right hon. Friend who has just sat down has gone at some length— not too long—into the difficulties which the Indian Government may find themselves in if the course of trade is not that which they anticipate. The Government are really having a gigantic speculation—a "corner" in silver. ["Hear, hear!" and "No, no!"] My Friend says "No, no," but that is what I understand to be the case, and when the right hon. Gentleman the Member for Surrey stated that this was a permanent loan, the Chancellor of the Exchequer at Once rose and corrected him, and said it was only a temporary expedient, because the Government were confident that they would be able to sell enough Council bills in the next few months, not only to make up the usual amount, but also to make good the deficiency which has taken place. ["Hear, hear!"] My right hon. Friend admits that is the case. In my humble judgment, that seems to be a speculation in silver.

SIR W. HARCOURT

No.

SIR J. LUBBOCK

In rupees if you like—put it that way.

SIR W. HARCOURT

Our view is that there will be an increase in the exports, and that the sale of bills in the next few months will be enhanced as a consequence of that increase of the exports. That is the foundation of the expectation of the bills being sold.

SIR J. LUBBOCK

All I can say is that anyone who can foresee the course of trade is a person of great ability. I hope the sanguine expectations of the Government will be realised, and then, no. doubt, this course would be a financial success, but that would not prevent it from being a speculation. The Under Secretary told us at the beginning of our Sitting to-day that they have now a balance of Rx.15,000,000 which is Rx.6,000,000 more than last year—they have an overflowing Treasury in India, and yet they were borrowing here. The Indian Government were borrowing here, while they had immense sums of money lying idle in India. There was also a further consideration. What would be the price of silver some months hence? That was a matter of very great doubt, and he would be a very sanguine man who would venture to predict. Of course, so long as the Indian Government with a full treasury in India are borrowing money here, all this time the interest is annually telling up against them. I cannot, myself, help thinking that the Under Secretary of State for India has been too apprehensive as to what will be the effect of the exchange if he resumes the sale of bills. In support of this view, I may refer again to the high authority of the late Mr. Bagshot, and especially to the chapter on "The Effect of an Increase of Council Bills" in his work on The Depreciation of Silver. He points out very justly the effect it has both on the exchange and on the question of prices. An increase of Council bills will affect—gradually affect—both exchange and prices, and the adjustment will take place by a combination of the two. The effect on the exchange is much less than might be expected, because you have also to consider the question of prices. This alteration in both exchange and prices covers such an immense field that, practically, the effect is less than might be expected. On these grounds I regret that the Indian Government have ceased drawing, and think they would act wisely in beginning to do so again. When we come to consider this Bill in Committee it may be desirable to reduce the amount of the loan from £10,000,000 to £5,000,000 as an indication of the opinion of the House that the Government should recommence the drawing of Council bills. But that will be, of course, for the House to consider when we get to the Committee stage. I am not prepared, therefore, to oppose the Second Reading. It is remarkable that, notwithstanding the closure of the Mints, there should have been so large an import of silver into India. Although the mints have been closed the import of silver into India has been practically as great as before. While coinage has practically ceased, the imports of silver into India continue on a very large scale. The amount for the first 11 months of 1891 was £5,200,000; for 1892 it was £8,200,000, and for 1893 it was £7,900,000. There was some falling-off in November, but I believe the amount has now risen again. Surely that indicates what was hinted at by my right hon. Friend who has just sat down (Sir J. Gorst) that bullion is now being used for some purposes for which coin was used previously, and that is a consideration which I think commands the most serious attention on the part of the Government. The Indian Government must by now have grave misgivings as to the wisdom of the course they have adopted in closing the Mints. The use of coin was a comparatively new thing in the history of the world. The builders of the Pyramids, the Pharaohs who designed the great irrigation works of Lake Mæris, the builders of Babylon and Nineveh, the founders of the Assyrian and Persian Empires, had no coins, and used bullion only. Coins were an invention of yesterday. They went back scarcely more than 2,000 years, which was a little period in the history of the human race, even in the history of civilisation. No doubt we in Europe consider coins now almost a necessity, because they save much time and obviate much bargaining. We value time, and, as a rule, hate bargaining. But amongst Orientals time is of little value, and they love bargaining. If you erect a substantial difference between the value of coin and bullion you will run some danger that for certain purposes the latter may replace the former. Just look at what happens in China! There you have a great Empire, and, in one sense, a highly civilised people—so educated according to their own ideas that promotion and the highest offices in the State are regulated by competitive examination, yet their only national coinage is copper. They have no coinage at all in the precious metals. In the Treaty ports Mexican dollars are used. In fact, in the interior of China there is no coinage except copper " cash," and if silver dollars get into the interior they have a tendency to return to the Treaty ports. But in the interior of China there is no coinage—either of gold or silver. Silver is used by weight. If a lady goes out shopping she cannot take enough copper coins to pay for her purchases; and when she has settled the price she pulls a little piece of paper out of her pocket, unwraps it, and produces a number of little bits of silver of all shapes and sizes—some as small as a pea, and some as large as a bean—and she pays for her purchase by weight, just in the same way as did Abraham and the Patriarchs. Is there no danger that something of the same kind may go on in India? I was very glad to hear the hon. Member for the Tower Hamlets (Mr. Montagu), who speaks with so much authority, supporting a suggestion I ventured to make some time ago—that there should be an Import Duty imposed on silver. My right hon. Friend the Member for the University of Cambridge (Sir J. Gorst) could not understand how that suggestion came from this side of the House, where we are mostly Free Traders. But I do not understand the words "Free Trade" as he does. What I have always understood them to mean was that we should not attempt to alter the course of trade by any artificial means; and that if you put a duty on articles you are going to import from abroad, you ought to put a corresponding duty on a similar production at home. The hon. Gentleman the Member for Surrey (Sir R. Temple) and the right hon. Gentleman the Member for Bodmin (Mr. Courtney), when on the Coinage Committee, dismissed the suggestion of a duty on silver, because from their point of view it would not bring in enough to the Indian Government. The imports of silver being something between £8,000,000 and £9,000,000 a year, an Import Duty at 10 per cent. would bring in something not very far from £ 1,000,000 sterling, while a duty of 5 per cent. would, of course, produce half that amount. But that would not be the whole effect it would have, because the exchange would be seriously affected. Perhaps I may be told that if there had been an Import Duty on silver there would not have been so large an import of silver into India. ["Hear, hear!"] My hon. Friend behind me says "Hear, hear." But he must remember that if the importation of silver is diminished that must increase the price of the Council bills. After all, it must be remembered that silver is a commodity like everything else. The inhabitants of India import silver because they like silver ornaments, and they like silver in other ways. Therefore, the imposition of a duty on silver would benefit the Government of India not only by the duty, but by the effect it would have upon the Indian Exchanges. I may be told it would be a very anomalous thing to impose a duty upon an article which is the standard of value, and I quite agree with that. I have never advocated it per se, for I agree then it would be an evil; but of all the courses which have been suggested, it would have the maximum of advantage with the minimum of inconvenience. My right hon. Friend the Member for Bodmin (Mr. Courtney) asks "How about the question of uncoined silver in India?" I did not intend to go into that point; but I think you have this danger to face: that up to the present time the natives of India have always regarded their silver ornaments as being a sort of reserve. They have always considered that if they had bad seasons it is in their power to take their silver and to get almost weight for weight in rupees for it. I am afraid that when they come to realise, as of course they will before very long, that the amount of silver which they regarded as being equivalent to 100 rupees is now owing to the action of the Government, worth only 90 rupees, it will create a considerable amount of dissatisfaction. If the Government impose a duty on silver somewhat equivalent to the increase you are attempting to make in the value of the rupee, the value of silver would rise with the rupee, and in that way you would obviate what I cannot help regarding as the serious danger of political dissatisfaction in India. You would also have this advantage: that you would not have the difference in value between the coined and uncoined silver, which I cannot but regard as producing a very dangerous state of things. Surely, those who have advocated the closing of the Mints—although I quite agree that we have not yet had a long enough time to judge what the effect will be, and although I believe it will produce more effect in course of time than it does at present—must be disappointed with the results that have taken place. So far it has given them no increase of revenue. On the other hand, though the imposition of an Import Duty on silver would not have given the Indian Government everything they wanted, at any rate it would have given them, last year, something approaching £1,000,000 if they had fixed the duty at 10 per cent., and half that amount had they fixed it at 5 per cent. What have they gained by the closing of the Mints? As far as I can see, they have as yet gained nothing whatever by it, and they have rendered it more difficult to sell their Council bills. I doubt whether they will not by their own action be forced to impose a duty on the import of silver sooner or later, and it is quite clear that it is better to do so sooner than later. I hope, therefore, that Her Majesty's Government will consider the suggestion, which now has the additional force of being recommended by the hon. Member for Whitechapel (Mr. Montagu). No doubt in these matters it is undesirable to make any great or extreme changes. The Government have for some time past ceased to draw bills, and I shall not advocate a sudden reversal of that policy; but I would urge them to commence redrawing, because any speculation, whether in silver or in exchange, is an operation which it is very undesirable for any Government to engage in.

SIR G. CHESNEY (Oxford)

Having been a Member of the Government of India at the time when this proposal first assumed a material form, and having also been among the first to bring into notice the proposal for closing the Indian Mints, and fixing the rate of Council bills I would venture, Sir, to offer a few remarks upon the general question. The action of the Government in closing the Mints, and in fixing a definite rate below which they would not sell the Council bills, was adopted in face of an impending catastrophe, because the fall of the rupee, if continued at the rate at which it was going on, would have resulted in nothing short of a financial disaster to the Government of India, the consequences of which it would be almost impossible to exaggerate. The impending abolition of the Sherman Act, which would have still further depreciated the value of silver as compared with gold, was looming in the future; and if the Secretary of State for India had not taken the step he did before the United States repealed the Silver Law, and if the Government of India had continued to go on selling their Council bills in the market to the highest bidder, and keeping the Indian Mints open to the free coinage of silver, it is difficult to say to what point the rupee might not have fallen, or to what extent the financial disaster might not have reached which would have overtaken the Indian Government. Regarded from that point of view, I submit to the House that the action of the Government has been very well justified by the results. The intention of the Government was not to raise the exchange value of the rupee by a great and sudden amount. The main object which the Government put before themselves, and which was recommended so strongly by the Committee who reported upon that subject, was to give stability. That stability, Sir, has been established. For the last year or two, before the Indian Mints were closed, the history of the exchange is one of continual fall of the rupee from point to point, and there is no reason to suppose it would have stopped. On the contrary, there is every reason to believe that if no action had been taken, the fall would have continued with ever increasing velocity. Since the Mints have been closed in July last the exchange has remained very nearly at 1s. 3d. and a fraction. I have heard it said in Debate to-day that the two actions — closing the Indian Mints and placing a limitation upon the rate at which the Council bills were to be sold—had no necessary connection with each other, and that one or the other might have been carried out independently of the second step. The Chancellor of the Exchequer, I think, acceded to that view; but with all due respect to him, I venture to say that I consider the two measures were absolutely linked together, and that it was essential to the success of the whole scheme that both should be adopted simultaneously. It is true that in one respect it may be said that the measure has not been successful, in so far as it was undoubtedly anticipated that the Secretary of State would be able to place the Council bills in the market at the price dictated by himself. As a matter of fact, we know that the market has not responded to the terms offered by the Secretary of State, and that for several months the usual demand for bills—in consequence of the bills having been put at fixed prices—has not been at all adequate to the supply. That being so, the anticipations formed of the measure have to that extent not been verified. But if we assume that the Government were justified in closing the Mints, then I think, as a necessary consequence, the Government are more than justified — they are absolutely pledged as a necessary result of that measure—to come here to borrow a large sum in sterling in order to enable them to tide over this period of difficulty. This measure, my right hon. Friend the Member for St. George's (Mr. Goschen) oberved in his criticism last week upon the First Reading of the Bill, is a very serious measure to propose. Well, Sir, a very serious proposal undoubtedly it is. It is a very serious measure to propose to cut a man's leg off, but it is a still more serious matter to allow the whole of his body to be destroyed because you abstain from this necessary operation. I observe that in the powerful speech of my right hon. Friend, while crittcising the action of the Government, he was unable to propose any alternative proposal. I think the same remark applies to the speech of my right hon. Friend the Member for the University of Cambridge. He has analysed the measure and criticised the proceedings of the Government, but he has not suggested any other course. It has been assumed that the change in the course of the balance of trade which has just occurred is due to the action of the Secretary of State in refusing to sell his bills below a certain price. Now, I would ask the House to bear in mind that the rate which the Secretary of State has fixed for his bills is not a very great advance upon the rate which obtained before the Mints were closed. He has not gone back to the high rate of 1s. 8d. or 1s. l0d. proposed by various writers on the subject. He has merely raised the price of his bills by a little over 1d. on the rupee, and surely it is not to be supposed that that small change in the price can have turned the balance of trade from England to India. The balance of trade between England and India has been in favour of India to the extent of some £25,000,000 or £30,000,000 for a period of more than 20 years. It has been found during that time that the exports of India exceed the imports by £25,000,000 to £30,000,000. During that time the exchange has fluctuated from 2s. to Is. 2½d. Nevertheless, during all this period, the balance of trade has remained, within a small margin, fixed. Then can it be imagined that a further small fluctuation of 1d. in the rate of exchange can possibly have had this effect of turning this great balance of trade, and that the exports of India and the imports into it should have varied in a few months to the extent of £30,000,000? It so happens that the action taken by the Secretary of State occurred at an unfortunate period. It was no doubt necessary to take a quick action, because the repeal of the Sherman Act in America was impending, but it happened at a time when various circumstances combined to diminish the exports from India and to increase the imports. In the first place, it happened to be the dull season of the year. During the months from June to October there is very little export business going on, and, therefore, to argue from a table of figures taken in the month of September as to what will be the normal export trade of India for the next few months is as if one were to come down to the City of London and measure the traffic on a Sunday or a Christmas Day as an index of the normal traffic in the streets on any day of the year. There had been, previously, a very large and excessive amount of exports from India of cotton goods to other Eastern countries; the China market had been glutted, and there was a temporary lull in the exports of those goods from Bombay. Then there had been an insufficient harvest, and, lastly, there was a great, sudden stimulus given to imports, into India of Manchester goods—partly due to the fact that there had been a temporary spurt in the Exchange, but further, as I am informed on the best authority, because the Indian markets for English goods had run down to a very low figure. These circumstances combined have led to what is a perfectly abnormal and, I believe, purely temporary condition of trade. The Indian crops are now coming down to the ports for shipment to Europe, and it would be a really miraculous circumstance if we do not find this temporary reversal of the balance of trade disappear in the course of a few weeks. It has been said that the action of the Indian Government has been counteracted by the operation of the silver markets, and allusion has been made in the Debates to the large shipments of silver to India recently. Those large shipments have, no doubt, taken place, and it has been assumed by some speakers that the people of India are contemplating taking some ingenious proposed measure of their own. I do not think it is necessary to seek far for the explanation of these continued remittances of silver to India, notwithstanding that the Mints are closed. The people of India, Sir, are a very conservative race, and it takes a long time for views, financial or otherwise, to permeate them, and I think' it is quite reasonable to suppose that the shipment of silver to India has been going on simply and solely because the people of India have not yet discovered that the Mints are closed. Further, there has been, no doubt, a belief in some quarters that an Import Duty on silver will shortly be imposed, and there is every reason to believe that considerable speculation in silver has taken place in anticipation of this Import Duty being levied. Then, again, there happened to be a large quantity of Indian securities lying available in this country at a very slack season, and these securities have been sent over. All these circumstances combined formed sufficient grounds for the reversal of the balance of trade. As to the possibility of the Indian Mints of Native States establishing a fresh currency of their own, and with reference to the remark made by the right hon. Gentleman the Member for London University (Sir J. Lubbock) on what he considers the analagous case of the Chinese currency, it is to be observed that in India, in every district of the country, you have a Government Treasury. In that way the Indian rupee has a specific value of its own. The native-coined rupee never passes hand-to-hand in India. Only the Government rupee is to do that. The Government rupee passes at par all through the Native States. My right hon. Friend the Member for St. George's (Mr. Goschen) observed what a serious thing it would be if the Secretary of State found himself in this difficulty: that he borrows £8,000,000 for a temporary purpose now, and he has to add to his ordinary drawings an obligation to eventually dispose of the loan, so that the amount of bills to be sold next year will come up to the enormous sum of £24,000,000. There is, therefore, it is assumed, this further complication: that not only is the obligation for next year to be met, but the accumulative obligation which it is now sought to stave off by loans. Notwithstanding, however, what is said about this being only a temporary loan, I would venture to draw the attention of the House to this: that if this loan were not quickly redeemed, the consequences which would follow would be by no means so serious as regards the people of India as the consequences of a falling Indian currency. Let us suppose this loan is not paid off. Let us suppose £8,000,000 sterling is borrowed for a long term. The interest on that loan would be a charge upon the Indian Revenue of, I suppose, about £250,000 stering per annum. On the other hand, supposing that this loan was not raised — supposing the Secretary of State abandons his policy of holding fast to the fixed rate of exchange, the result is that the rupee falls 1d. further; this fall would involve a tax on the Indian taxpayer of considerably over £1,000,000 per annum. In order to save £250,000 of interest sterling you would have to impose on the Indian taxpayer a charge four or six times as much. That in itself is a sufficient justification for the action of the Secretary of State. After all, it is the interest of the Indian taxpayer which has first of all to be considered. Hon. Members in this Debate have spoken of the injury done to the people of India by giving an artificial value to the rupee. May I venture to point out that this "artificial value" is really a value which it had only a very few months ago? When the rupee has fallen to 1s. 3d. surely there can be no injury in supporting it at that value. When you have to consider the people of India you have to consider not only the holders of the rupees but those who have to pay taxation. The fall of the rupee is an extra charge on taxation. Therefore, unless some measure of this kind is undertaken, the burden which would have been placed on the Indian taxpayer would have been almost insupportable, and even then would not have saved the Indian Government from a financial difficulty. My right hon. Friend the Member for the University of Cambridge spoke of the policy of the India Office during the late Government. That policy was to do nothing, but simply to drift according to the rise and fall of the market. One might as well say when one sees a sailor riding astride a spar, drifting here and there on the top of the ocean, that what he was doing was navigation. Sir, when it is said that it is a very extraordinary and abnormal circumstance for a Government to deal with questions of currency, it has to be remembered that the Indian Government by force of circumstances has already—whether it likes it or not — constantly to deal with, and interfere with, the ordinary course of trade. The Indian Government, of all Governments in the world, is an enormous dealer in bills. Surely if this Bill dealing with the Indian Government is permissible it is only right the Government should try to restore the exchange. One circumstance I have not mentioned, but which is worthy of mentioning, as having a very great effect in retarding the object anticipated—namely, of enabling the Secretary of State to sell his bills at his own figure. There has been a very large amount of speculation during the last three years—a large speculation in the importation of silver into India, which has been sent to the Mints to be coined, and for which paper currency has been issued in exchange, and which has largely inflated the currency of India. The currency in 1890 suddenly rose from £17,000,000 to nearly double that amount—it rose 70 per cent. I ask the House to consider what the effect would be in this country if the currency of the Bank of England were inflated suddenly to a similar extent. Naturally, until that inflated currency is reduced by the ordinary process of an extended circulation all over India, the Secretary of State will find a difficulty in getting rid of his bills at his own price. Now, that is a point which must be reached within the next year or two, and if the Secretary of State holds to the policy he has established, and will refuse to sell his bills below the fixed price, he will confer the inestimable advantage of stability on Indian trade which has been wanted for many years. There will be stability and certainty, and in time his action will be fully justified.

SIR W. WEDDERBURN (Banffshire)

I very much regret that my hon. Friend the Member for Central Finsbury (Mr. Naoroji) is not present on this occasion. The hon. and gallant Member who has just spoken once disputed his claim to be the representative of the Indian people. But I think the reception now given to Mr. Naoroji throughout the length and breadth of India will relieve any doubt he has on that point. In his absence I will venture to say a word on behalf of the unfortunate and unrepresented Indian taxpayer who, after all, is the person chiefly interested in this matter. I will appeal to Her Majesty's Government that if they are going to make this great leap, they should make it as little as possible in the dark, and they should grant an impartial inquiry into the financial conditions of India before embarking .upon a fresh loan in gold. Unfortunately, it is only on the occasion of proposing a new loan that there is any opportunity of attempting to refuse supplies, because, as we all know, the Indian Budget is a mere farce. It is merely registering the decision already come to by the Indian Government. Therefore, an opportunity like this is the only one on which I can appeal to the House, that there should be a thoroughly impartial inquiry. There are very special reasons for this inquiry. In creating a fresh liability in gold, we are increasing the weight of that millstone which already hangs about the neck of the Indian taxpayer. We know that in order to pay the interest on their gold debt the Government recently have taken the very exceptional measure of closing the Indian Mints. Without passing any opinion on the wisdom of that measure, I will only say it has convulsed the whole financial world. Therefore, to increase the liability in gold is a very serious action, indeed. In order to justify an action, of this sort, we should have very great confidence in the wisdom of the Indian Administration. For one, I will say that I have not that confidence. Now let us look at what has been done up to the present time to meet the existing grave crisis. What is the Indian Administration doing in matters, of economy? They have just added six lakhs of rupees to the grant of Afghanistan—throwing money into a quicksand. Another financial measure has been to-give a very large amount as compensation to the services. That means that the richest class in India is to be compensated at the cost of the poorest class who are their fellow-sufferers. Now, besides all this, the great millstone is to be increased in weight. It seems to me the Indian Administration is very much in the position of the Directors of a company which is in a most embarrassed condition. They come to the shareholders, and the only acts they have to show is that they propose to increase the Directors' fees, and go to the Jews in order to get capital to meet current expenditure. Under these circumstances, it is very necessary that an impartial inquiry should be made. The Chancellor of the Exchequer says that this is a temporary measure. Sir, I think that is what all spendthrifts say; they always say their borrowing is a temporary measure, but it always becomes a permanent debt, and is added to the previous debts. I do not believe at all in these financial expedients. When a man has exceeded his income, the only real financial expedient is to reduce his expenditure. That is what we wish to have done. But in order to do it, it is necessary that there should be a proper inquiry, and then it will be seen in what direction that expenditure can be reduced. I therefore appeal very strongly, both to the Government and the House at this critical juncture for the Indian taxpayer, to grant an impartial inquiry. No authority managing the affairs of the people is entitled to take up the position of assuming that an inquiry is any reflection on their integrity or honesty. The shareholders are entitled to know what the Directors are doing. The shareholders in this great Indian Empire are the British people and the Indian people, and they are entitled to know the exact state of their finances before any such step is taken as proposed.

THE CHANCELLOR OF THE EXCHEQUER (Sir W. HARCOURT, Derby)

I am very sorry to hear, Sir, from my hon. Friend the Member for Banffshire that he has no confidence in the present Indian Administration. But, Sir, I do not think that that is the general view of the House, because, if it were, it would be disposed to refuse to the Indian Administration the means of carrying out the proposals which it makes. So far as the hon. Baronet is concerned, he says that the most important consideration for the Indian Government is whether or not a stop can be put to the vast and increasing expenditure of that country. In that I am in entire agreement with him, and I wish the Government of India would keep the point more in view than it has hitherto done. Since the days of Burke the maxim, Magnum est vectigal parsimonia, has always been accepted, but hardly ever put in practice. That, however, is not the question now before us. What the Government of India had to do—the most important consideration for us—was to decide whether or not it would take some steps to provide an immediate remedy for the loss on exchange in order that they may meet their public obligations. That is the question we have got to consider here to-day. I am glad to observe that every hon. Gentleman who has taken part in the Debate has refrained from in- troducing the topic of bimetallism, and I hope that the remainder of the Debate will be conducted in the same practical and sensible tone. Well, Sir, the Royal Commission of 1888 condemned bimetallism as applied to India, but it accompanied that opinion by a recommendation that the Indian Government should be allowed a free hand to suggest any other plan that might appear advantageous to them in dealing with the difficulties of exchange. They declared —and I would call attention to this— that we could not run any risk in altering the currency at home, and that the Government of India should be allowed to deal with the question as might seem best to them. I do not want to go into this question at any length. That was the situation as the Royal Commission left it. Then came the Monetary Conference at Brussels. It was adjourned. There was a proposal that some arrangement should be come to for the purpose of renewing that Conference, but it was understood that the American Government had withdrawn from it, and I may say that within the last few weeks Her Majesty's Government have received an intimation from the Government of the United States that they do not desire that there should be any renewal of that Conference. The document is dated 23rd November, and in it the President of the United States informs us that, so far as his Government is concerned, he does not think the Conference need be again convened. That being so, the Government of India had to find the best plan by which to meet the difficulties that had arisen. They proposed—not exactly the plan that has been adoted, but substantially —that the Mints should be closed to the coinage of value. The initiative lay with the Government of India, that Government being best acquainted with the internal circumstances of India, and having to consider the interests not less of the native population than of the Anglo-Indian community. And, Sir, we are bound to assume that when the Government of India makes a proposal of this character it is made for the benefit of all classes under their administration. I make that assumption, and I believe it to be well-founded. What, then, is the duty of the English Government? Do not let it be supposed for a moment that the English Government desire to disclaim any responsibility in the matter, because it lies with them in such a case to sanction or to refuse to sanction the proposal. We sanctioned the proposal after a careful and searching examination of the matter in all its bearing. That is the situation that has arisen. We selected the most competent men that were, in our judgment, to be found in this country to examine the proposal of the Indian Government, and to consider whether there was any ground that would justify us in refusing it. The whole question was carefully considered by this Commission and the Commission came to the conclusion that it would not be justifiable to refuse the demand of the Indian Government, and acting upon that demand and with the sanction of the Commission, we decided to not refuse it. That being so, we do not conceal from ourselves—and I am sure the Indian Government would not be prepared to deny the fact—that this is an experiment of a serious character which has been entered upon, because it is necessary, in order to meet a very serious situation. I desire to recognise the extremely moderate and patriotic tone with which this question has been dealt with by the right hon. Gentleman the Member for the University of Cambridge. He showed no spirit of carping criticism, and no desire to interfere with the progress of the Bill, or with the experiment that is being made. He went into the matter in a spirit of fair criticism, as he was perfectly entitled to do, and he raised a very proper question with which I will endeavour to deal. I hope, Sir, that the Debate may be confined—may start from the point at which the decision was taken—the point at which this experiment was commenced; and that it will continue on the basis that the decision to close the Indian Mints have been taken, and examine the consequences of that decision. I do not see why we should diverge from the point, which is the point in question. You cannot reverse the fact that the Indian Mints have been closed. Therefore, the only question is, what are you going to do under the existing circumstances? You cannot reverse the fact that the Government have declared they would not adopt the bi-metallic remedy. That is entirely beyond the discussion. The Government are not prepared, and will not be prepared under any circumstances, to do that. The alternative which the Indian Government adopted was the closing of the Mints, and the question is, what has been the consequence of that adoption; whether any further remedy is required and what evils are admitted to exist at this moment? I think these are the points in the discussion, and it is on these, and these only, that I will make any remarks. There has been a temporary disturbance of trade. Nobody denies that. That must be a necessary consequence in any change in the system of currency. When there is a change you will always find great disturbances, as was the case in 1819, in the change from inconvertible currency to cash payment. Therefore, there is nothing astonishing in the fact there should have been a disturbance in this instance in consequence of the closing of the Mints. We had to expect that there would be a change in the import trade. I do not desire to go into this at length, but I would like to refer to a very able speech of Sir David Barbour before the Indian Council in June last. He distinctly contemplated that changes of this kind would take place. He says— If our trade with silver-using countries will be injuriously affected our trade with gold-using countries would receive a beneficial effect in a corresponding degree, and the latter branch of our trade is much larger and much more important than the other. I believe it is 75 per cent. as compared with 25. Now let us see what the disturbance has amounted to. The right hon. Gentleman the Member for St. George's (Mr. Goschen) challenges me to say something on the question of what had been the actual effect on the exports of India. I will give him some figures upon that directly. But there has been a change not only in the export and import of goods, but also, what is most material, a temporary change in the import and export of specie owing to the fall of silver. These effects were almost certain to occur. Now, as hon. Gentlemen know, the currency question is extremely complicated. The question of Council bills raised by the hon. Baronet, who is a great authority in finance, depends upon the balance of trade; that is excess of exports over imports, and upon that depends the demand for the bills. Let us see how the balance of trade in this respect stood at the end of the quarter, from July to September this year, as compared with the corresponding quarter of the previous year. We will take merchandise first. Exports to the East diminished by Rx.2,000,000: that was principally upon opium and cotton. Exports to the West increased by 1,000,000. The difference between those two will, of course, be the figure you have to reckon when you consider how the diminution of exports has injuriously affected the exchange. Then there also comes the important increase in the imports from England to India amount-ting to 2,000,000. That is Rx.2,000,000 more than in the corresponding period of the previous year; that was in great part due to the increased trade from Manchester. This brings the figure up to 3,000,000 operating against the exchange. Now I come to specie, which is extremely important. In the same quarter of 1892 the export of specie— gold and silver—was 1,400,000; in 1893 it was 4,000,000, making an increase in imports of specie of 2,600,000. If you add these figures you will find a disadvantage in respect to exchange of 5,600,000. That is almost exactly the figure with which we have to deal upon this Bill. How are we to meet this? Of course, in such a condition of trade there would be no effective demand for bills—at all events, not except at a ruinous price. One right hon. Gentleman said that the question of the price at which the Council bills should be sold was a totally distinct question from the question of the closing of the Mints. That is perfectly true. It has been said the object is to raise the price of the rupee. That is not accurate. The object of the Indian Government has been to prevent a fall. That is a great distinction. The Indian Government want to steady the exchange by preventing the continued depreciation of the rupee. It is quite plain the closing of the Mints has a tendency to prevent the fall of the rupee because it limited the supply of commodities. If the Indian Government had acted on the suggestion of several right hon. Gentleman and followed the market they would have allowed the value of the rupee to run down. They would have done exactly the very thing which their whole policy was to prevent—that is, the fall in the price of the rupee. Had the rupee fallen to 1s., as was not unlikely if the exchange had been allowed to run down, it would have meant a loss of £5,000,000 sterling to the Indian Government. Something has been said about interest on the loan. The interest is something under £200,000 a year. Shall we take a course which will cost us £200,000, or take a course which will cost us £5,000,000? That is the question practically before the Indian Government in dealing with this matter. The only other course was that they should hold on, and not sell their bills below a certain price. That is called a speculation in silver. You may call anything by any name you like, but, in my opinion, this transaction is of a totally different character. I will give an illustration. A man has a large quantity of wheat in India. There are exceptional circumstances which make freights very high. He thinks that in a few mouths freights will be much lower. He borrows money when the freights are high, and brings over his wheat when they are low. That is exactly the situation in which the Government of India find themselves. If the exports increase largely in the coming months as is expected, then the Government will sell their bills at a better price. Now, the right hon. Gentleman the Member for St. George's the other day said— Can you reasonably expect that in the next few months exportation will so increase that it will not merely prevent such a thing as has now happened happening next year, but also clear off the arrears of the present year? I think I am describing accurately what the right hon. Gentleman said. [Mr. GOSCHEN: Substantially.] I am able to give an answer which I think he will consider satisfactory. The very same thing, only to a greater extent, occurred in the year 1890. In the Autumn of 1890 there was found a balance against India of upwards of £3,000,000, the balance now being about £1,000,000; therefore, the situation was at that time worse than it is now. Curiously enough, the cause of that was, or, at all events, it was contemporaneous with, the passing of the Sherman Act. It is remarkable . that the results were exactly the same in a time when there took place a rise in silver, as has undoubtedly now taken place when there has been a fall. The moment the Sherman Act passed it was expected there would be a great rise in silver, and so there was for a moment; but that passed away. These are the figures given to me from the India Office with reference to the deficiency in the balance of trade with India in the end of 1890. There was a recovery for some months, the net balance in favour of India in November, December, and January being only Rx.1,176. But in the next six months, from February to July, 1891, the balance in favour of India was: In February, 2,560,000; in March, 3,161,000; in April, 1,588,000, or, together, 7,300,000 for the quarter. In the second quarter the figures are—For May, 4,246,000; for June, 3,890,000; for July, 3,500,000;' making, together 11,643.,000 for the second quarter. Thai is very nearly Rx.19,000,000 recovered between February and July. These figures, I venture to say, afford some indication that it is a reasonable probability that the exportations of India in the ensuing months may recover. What the Indian Government say is that that does not seem an unreasonable expectation. There may be a large sale of bills on India in the coming winter with the prospect of a good export season. That is what is called a "speculation in silver!" It seems to me not an unreasonable expectation on the part of the Indian Government. If this is realised then the would be justified in tiding over the present difficulty by borrowing rather than by taking a course which would have resulted in great loss. The Indian Government, at all events, entertained an expectation on that point which was entertained by other people. I read in The Statist of last week, this— The closing of the Indian Mints has not only acted adversely upon exports from India, but it has stimulated to a considerable degree the importation of Manchester goods and other merchandise. The consequence has been a very large increase in the number of merchants' bills offered in competition with India Council bills. Some Manchester merchants have, at the same time, taken a favourable view of the future exchange, and they have shown an increasing disposition to obtain sterling advances from the banks instead of selling their rupee bills, thus taking upon themselves the risk of loss in the exchange. The merchants in Lancashire are doing exactly the same thing as the Indian Government are doing, and upon exactly the same grounds. They expect that in the ensuing months the exportations will increase; and instead of selling their bills, it is much better for them to borrow for the present. That is some confirmation of the reasonableness of the expectation of the Indian Government. It is said—"Oh, this is a new thing; nothing of the kind was ever done before." It is not a new thing. It is precisely what the Government of India has done in precisely similar circumstances before. In the year 1876, what happened was this: There had been a very sudden fall in the price of silver. The price of silver in January, 1876, was 56d.;it was 53d. in February, and 46d. in July. There had thus been a fall in silver in the six mouths of l0d. This year the fall has been 5d. and 6d. What happened then? Exactly the same thing that has happened now. The Indian Government were not able to sell their bills—at any rate, at a price they thought at all sufficient, and a question was asked in the year 1876 of the late First Lord of the Admiralty, who was then Under Secretary for India. The noble Lord was asked if he would explain under what circumstances the Secretary of State for India had thought proper to borrow in London an amount much greater than the Budget Statement published in India showed to be necessary? The Under Secretary answered the question in this way: He said— The Secretary of State had not only to consider that expenditure, but also what was necessary to provide for the deficiency in the amount obtained here on bills on India in the last months of 1875–6, and any further deficiency that, with reference to the uncertain state of the exchanges and of the demand for bills, might arise in the current financial year 1876–7. That is exactly the same case. They had borrowed for their deficiency on their bills, and not only for that, but for any prospective deficiency which in the coming year might arise. Do not let there be any doubt about it; there is nothing new about it, but this has been the practice of the Indian Government under the circumstances of a sudden fall in silver and difficulty in selling bills. On the' 10th August, 1876, the same noble Lord told Parliament that a loan had been made of £4,000,000 for the express purpose of preventing the Govern- ment having to force the Council bills upon the Indian market, and then in the next year he said it was to be remembered that the Indian Government were not in the position of our own Government: that it had two spending treasuries and only one of supply. The noble Lord said— The bills were sold to get money from India. These bills competed with the London silver market, and the demand for silver depended on the eastern trade; and while the bills in India might be overflowing, they might be unable to sell our bills to her. Last year, owing to the extraordinary fluctuations in the silver market, they could not sell their bills; great pressure was put upon them to raise a loan …. and they had to do so. Could any situation have more exactly resembled ours? And it was dealt with in the same manner. So much for the statement that it is an unexampled condition of things. I have pointed out that even if it had been unexampled you must always begin with some example; and they began—and in my opinion very properly began—then to borrow money, because they thought that was the best method of dealing with the situation. But, Sir, the question has been greatly complicated, no doubt by the large importation of silver into India. That is a very obscure subject. I do not know that the opinion of anybody is of very great value upon that subject. I have heard many suggestions. In the year 1890, when there was this great deficiency on the balance of trade in the Autumn, curiously enough, though silver then was rising—or, perhaps, for that very reason—there was no difficulty in selling bills. Of course, merchants here, thinking that silver would rise, desired to possess themselves of large quantities of silver in India, and therefore they bought Government bills in order to provide themselves with rupees, which they thought would rise. That, of course, does not operate in the same way when the expectation in the silver will fall. But, Sir, without question, these importations of silver have greatly affected the balance of trade. I have pointed out that it amounts to something over £3,000,000 upon this year. In the month of November, 1891, the importation to British East India of silver was £897,000; in the same month of 1892 it was £824,000, and in the present year it was £436,000; therefore, the importation of silver into India in the month of November of this year is not half what it was in the previous years of 1891–2, though I am told since that time it has been again on the increase.

SIR J. LUBBOCK

Will the right hon. Gentleman give the month of October?

SIR W. HARCOURT

There is no doubt the importation into India was very large in the years I have mentioned. The exportation of silver from England to the East in October was Rx. 1,000,000; in September it was Rx.1,258,000, and in November it was not half that. This excess of exportation of silver from England to India is one of those sudden effects which always do take place when you have a great change in the currency. These large exportations of silver commenced a month before the Committee had arrived at any conclusion on the subject, and were nearly double in May what they were before and after. And I would point out that when you speak of the great exportation of bullion to India in September and October being about £4,000,000, it was not more than the average exportation of previous years. What is remarkable is that the exportation decreased for a time, and in November it was only one-half the average that has taken place in former times. It is impossible to say what is going to happen, and I beg the House to believe I am not giving them any opinion founded on my own judgment; I speak here the opinion of the Indian Government, who do understand these matters. They think it possible that the disturbance that has taken place is a temporary disturbance, and that they should deal with it by temporary means. This Bill is necessary to enable them to issue not only debentures, but Treasury bills, which they get a very low price. I see this morning they are £2 12s. They get this accommodation for a few months, and if they want it they get it again, but they are not desiring to saddle India with a permanent loan. If their expectations are fulfilled the Treasury bills would soon be paid off, and it seems to me to be a reasonable and sensible transaction. Something has been said, and truly said, upon the question of the operation of this policy upon the population of India. The Committee of 1888 pointed out, I think with great force and with great good sense, the infinite danger that would have accrued to India from adopting the bimetallic system. They show how it would operate to injure the natives, and how mischievous it would have been to raise in the native mind the conception that the policy of England was directed to her own selfish interests. One of the main reasons why they rejected the application of the bimetallic system to India was the injustice to the natives and the social and political injury which would result from it. I know it is said that the natives of India would suffer immensely by the fall in the price of silver. If he is a holder of rupees, he will not lose, but will gain if the rupee is prevented from further falling. Everyone who has any knowledge of India assures me it is a complete fallacy to suppose that the natives hold great stocks of uncoined silver except in the form of ornaments, and the ladies do not part with their ornaments except under extreme necessity, as they would do in this country; and, therefore, in ordinary times, they would keep their ornaments; but the supposition that they have great stocks of uncoined silver is now exploded. Everyone who knows anything of India knows that is not the case, and that what they hold is the rupee, and those rupees they will not lose upon by the policy, but will gain; they will be protected from a further fall, and even derive an advantage. Then the right hon. Gentleman opposite spoke of its effect upon taxation. He said it was in some form —and I do not complain of his statement —"a covert and concealed tax." All Chancellors of the Exchequer love covert and concealed taxes; they find them the most profitable of all taxes. It is convenient if you can collect a tax without the individual who pays knowing too much about it. Therefore, if you have to impose taxation, I am not sure that is not the best form. But I am not certain that this tax, if it be a tax, really does fall on the native. You may talk about it as long as we do about the incidence of rates, and whether they fall upon the owner or the occupier. I should like to read, in the words of a friend of mine, a great authority on these subjects, a view of this subject. He says, treating of these exports— No doubt the fall in exchange arises from the fall in silver rather than a rise in gold. The Indian exporting merchant gets the same gold price for his goods and gets more silver for his gold; the exporting merchant for a time pays no more silver than before, and does more business; that the Indian ryot receives the same amount of coined silver which immediately for some purposes, and ultimately for all purposes, is worth less than before, and the exporter makes his profit out of the ryot. But that is not all. The ryot has fixed charges to pay, especially his Land Tax to the Indian Government. That remains the same, but as a real value is established for the exporter and for the Indian Government, the consequence is the ryot shifts unconsciously much of the loss from depreciated silver on to the Indian Government, who thus really bear the loss and must make up the Revenue in some other way. I do not pledge myself to that, but it is an ingenious view of the subject and one worthy of consideration. I have occupied, I am afraid, too much of the attention of the House, but I thought it necessary to endeavour to meet some of the objections raised on this subject. But what I would desire to say, in conclusion, is this: This is unquestionably an experiment, and has been so regarded; it is an experiment which becomes necessary in the situation in which the Indian Government finds itself. The Indian Government have an experience far greater than any of us—and we have heard to-night with great advantage the voice of gentlemen of this House who are, perhaps, more entitled to speak on Indian affairs than those with less experience in these matters and not versed in Indian finance, and their voice is unanimous that this experiment was one that was necessary, was one that it was wise, and one that it was prudent to try That has been confirmed on examination by the most competent and most careful persons that could be selected. That experiment is on its trial, and it must be obvious to everyone that five months is not a sufficient time to form a judgment. And these five months are notoriously the five months most disadvantageous for the experiment. The reason the Indian Government struck the blow at the time they did was because they had before them the expectation of the change that was likely to take place in America, otherwise they would have postponed it to a period when it could have been effected with more advantage. They have taken that which in their opinion was the best course to take; therefore, the experiment has not been carried to anything like a point that would enable a fair judgment on its final success or its non-success. I am quite sure this House will not make itself a party to an attack upon, or condemnation of, the Indian Government when they are doing their best for the great Empire under their charge. Of this I am confident: that gentlemen on this side of the House and gentlemen on that, so far from endeavouring to embarrass the Indian Government in their difficulty and in the experiment which I venture to say they were called upon to try, will do all they can to assist them, and will give them in this experiment a fair trial, and will not by carping criticism endeavour to weaken their position or damage their influence. To endeavour to hold up to the natives of India that this policy is injurious and unjust to them I think would be a most unwise and impolitic and unjust line to take. Neither will they endeavour to injure the Indian Government in the markets of England while they are endeavouring to redress the disadvantages under which they suffer. I am quite sure, after the language we have heard from the Representatives in this House who have had great Indian experience, who have given their authority and countenance to the course the Indian Government has taken, we are quite certain the House of Commons on the Second Reading will do nothing by act or language to increase the difficulties of the Government of India.

MR. GOSCHEN (St. George's, Hanover Square)

The right hon. Gentleman who has just sat down has done justice to the tone of the Debate. He acknowledged to the full that hon. Members from all parts of the House have treated this issue in a moderate and statesmanlike manner. The right hon. Gentleman will have seen, I think, the very great importance which is attached to this Bill from all quarters of the House, and he will feel we were perfectly justified in suggesting that this measure should be discussed at a time when full attention might be given to it. Nothing that I can say will I hope, Sir, go against the conditions which the right hon. Gentleman has laid down. Nothing could be further from my thought than to wish to embarrass the Government of India over which my Friend, Lord Lansdowne, presides. Nothing should induce me to act in any manner to weaken the success of the experiment they propose trying. At the same time, the right hon. Gentleman opposite, and gentlemen in all parts of the House, will feel that it is a positive duty of an Assembly of this kind to examine such a great measure as this is. Silence is, I think, equally to be condemned with the criticism which the right hon. Gentleman deprecates. The right hon. Gentleman is strong on the subject that bimetallism should not be introduced into this Debate; but the right hon. Gentleman positively trailed his coat in the sight of my right hon. Friend the Member for Sleaford (Mr. Chaplain)—for he lost an opportunity in the course of his observations of stating his objections to bimetallism, and I think it is a great act of self-denial on the part of the right hon. Member for Sleaford to have allowed me to reply to the right hon. Gentleman rather than answer him on the spot on this matter, in regard to which the Chancellor of the Exchequer feels as passionate an hostility against as my right hon. Friend feels as passionate a favour for.

SIR W. HARCOURT

I did not intend to do that. I only alluded to the fact that we, in the circumstances, had adopted another alternative.

MR. GOSCHEN

But I will not follow the right hon. Gentleman's example. He will remember that even at the end of his speech, he lost no opportunity of contrasting what might have happened under bimetallism with that better arrangement he supposes to have been made by the law which had been passed by the Indian Government. But I do not intend to argue this matter, except so far as in the course of the observations I may have to make. I may find it my duty to ask whether some of the features of the present situation do not more closely approach some of the principles of bimetallism than the right hon. Gentleman would himself be disposed to admit. He objected the other day to the idea that there was a paper ratio, but there is something uncommonly like paper ratio. Sir David Barbour spoke of the fixing of a ratio between gold and silver, and said that it was done. He did not recommend it, but he said it was done in a measure for which Her Majesty's Government were partly responsible. I will not go into the details of this particular Bill, except to say this: that I am sure both the Chancellor of the Exchequer and the Prime Minister and ex- Chancellors of the Exchequer must envy the manner in which the Indian Government is allowed to conduct its loan operations. Here in this Bill there is no provision whatever for repayment. There is not only no provision for repayment, but there is provision for borrowing on. There is a clause which allows them, so soon as any amount has been paid off, to borrow it again. There is no provision with regard to the rate of interest or with regard to the Sinking Fund, and we give them total discretion in the matter of how to spend, what to spend, what rate to borrow at, and what rate to repay. Never was there such a licence given as is conferred by this Bill. That appears to me to make it all the more incumbent upon the House to examine rather closely into the nature of this transaction. The Chancellor of the Exchequer alluded, as he was perfectly entitled to do, to the events of 1876, when my right hon. Friend the late First Lord of the Admiralty borrowed—I will not say for a similar cause—but borrowed with a view of tiding over a difficult time. Well, as the right hon. Gentleman insisted, and fairly insisted, upon this as a precedent, I ask myself will the right hon. Gentleman tell us what was the result of that experiment? Were the Government of that day able to sell their bills afterwards at a better price than they could have got for them at the time; and what has become of the money? Was, further, the loan made for temporary purposes; was it repaid; or is it still a liability of the Indian Government? As the operation was explained to us, it would have been interesting to know whether the experiment was a successful one. Everything seems to turn, with regard to this particular step, upon the likelihood of its success. It has formed the staple of the arguments we have heard today. Will this be justified as a temporary measure; what are the hopes, and what are the fears with regard to it? I do not think any criticism of this kind will embarrass the Indian Government, for the Indian Government, if it chooses—if it should be convinced that the holding out is a dangerous experiment—have a perfect right any day to abandon it. They can any day put down the rate at which they propose to sell; they may diminish the 1s. 4d. or 1s. 3¼d. to such a rate as buyers would be willing to pay. Therefore, what I mean is this: If we condemned— I do not say that we do—but if we all condemned the action of the Indian Government in holding out so long, that condemnation will not prejudice them, because they may change their course without any material breach of agreement or policy. Well, the right hon. Gentleman very ingeniously quoted the case of the exporters to India, and said they had borrowed in sterling from the banks in order to avoid selling their bills. That may be so, but these gentlemen will be the very first to be the competitors of the Indian Government as soon as their bills are sold, and the more this is carried out the more it is likely to interfere with the operations of the Indian Government who have bills to sell. But the right hon. Gentleman based his main hopes, I think I may say, upon the fact that in 1890 or 1891, when there had been a similar diminution of exports, there was a very large increase in the balance of trade in favour of the Indian exporters.

SIR W. HARCOURT

And a diminution of imports.

MR. GOSCHEN

And these two circumstances acting together on a very large scale put the Indian Government in this position: that they were able to sell their bills at a better price. There is a very interesting fact which has been ascertained in regard to that. Everybody knows that that was during a period at which the silver was rapidly falling, and, that being so, silver was favouring the exports and was hindering imports. That has been the general course, but now the operation would be the very reverse. Now, the hon. Member behind me thought that too much was made of the fall or rise in silver with regard to these mercantile transactions. The hon. Baronet said, what is a penny? A penny is upwards of 3 per cent. Every penny is 6 per cent., and, therefore, here is a fall of 2d., which means 12 per cent. It is a considerable amount, and sufficient to make a difference in profit or loss in the export of Manchester goods and to the exporters of Indian produce. Therefore, the question of the rise and fall in the value of the rupee is quite enough to influence the exports and to influence the imports. The Chancellor of the Ex- chequer himself has, of course, been obliged to acknowledge that it has facilitated imports into India, and that has been obtained. Of course, if the operation of raising the rate stimulates imports, as is generally acknowledged, it must adversely affect the exports. Is it to cease because it is upon the cessation of that operation that the right hon. Gentleman counts to a certain extent for a better state of things in the coming year?

SIR W. HARCOURT

We count upon the diminution of the imports of specie, not upon the cessation of imports. That was the disturbing element.

MR. GOSCHEN

Of course, if the operation of raising the rupee stimulates imports—and that has been generally acknowledged—it must be acknowledged equally that it must affect adversely the exports; and, therefore, we are in this position: that the very object of raising the rupee acts in the direction of weakening the balance of trade in favour of India.

SIR W. HARCOURT

The object is not to raise the rupee, but to prevent its falling. Therefore, it is not the object to disturb the existing state of things, but to prevent its being disturbed by a further fall.

MR. GOSCHEN

The correction is literally accurate, but in substance it is inaccurate. It is a dealing in such a manner with the rupee that it ceases to rise and fall according to its natural course. That is the position which the Indian Government have taken up. But I will abandon this technical and very intricate point. My contention, however, is that the effort of the Indian Government to put the rupee at a higher point than it would naturally be is partly intended, and, if not intended, it has certainly had the effect of adversely affecting the balance of trade in favour in favour of India. If that is so, you are building on a balance of trade in favour of India to help you out of the difficulty in which you are at present. I am doubtful, therefore, whether, in contemplating the present position and the sanguine views taken by the Indian Government, you are not taking too hopeful a view of the situation. I shall be very glad if the difficulties should be less than I at present anticipate. Now, with regard to the fixing of the rupee at a particular rate: There has been great misunderstanding with regard to the fixing of the rate of exchange. The Committee did not contemplate in any degree that the Government would say—"This is the point at which we will sell our bills, and we will not sell them at any other price." As my right hon. Friend the Member for Cambridge University said, the Committee, therefore, is in no way responsible for the present action of the Indian Government. You have taken this course of fixing arbitrarily upon 1s. 3¼d.; and why have you said "At that rate we will sell and not below"? Neither the Under Secretary nor the Chancellor of the Exchequer has given us any explanation whatever.

SIR W. HARCOURT

I tried. The object of the Indian Government is this: If they sold bills at whatever price they could get in the market they would so run down the exchange that the loss to the Indian Government would be £5,000,000 in the course of the year.

MR. GOSCHEN

I must say that the right hon. Gentleman's speech was not very clear; but that portion of it was extremely clear. I do not know how he gets at a loss of £5,000,000. The Under Secretary says there is a deficit of £5,000,000; but that is represented by the coin in the Indian Treasuries in silver, and, therefore, it has nothing whatever to do with the loss which the right hon. Gentleman suggests. The loss which the Indian Government would incur by taking whatever rate may be offered would be measured by the price of the bullion which they held in the treasuries on the other side, and which, if converted, would be available for payment. That would be the maximum loss.

SIR W. HARCOURT

This is a very important point, and, as the right hon. Gentleman says my statement was not clear, I will give him the views of the Indian Government. The interest on the temporary loans raised in consequence of the failure to sell bills, including the forthcoming issue of India bills, is calculated at £170,000, which, at 1s. 3¼d., equals Rx 267,000 in the year. If India had not suspended the free coinage of silver, and America repealed the Sherman Law, it is not improbable that silver would have fallen as low as 31¼d. per ounce, which, at that rate, would have made the rupee only worth 1s. This would have compelled the Secretary of State to sell during the year bills on India to the amount of Rx.31,000,000, and would have imposed on the people of India a charge for the exchange of Rx.15,000,000 in the year, which would be about £5,800,000 above the provision in the Budget.

MR. GOSCHEN

That argument, standing alone, does not hold water. It is hypothetical. It assumes a particular price for silver, and it assumes that silver is still above that price. In the next place it assumes that the Government would not be able to sell above 1s. 3½d. and 1s. How do the Government know that they would not be able to sell at an intermediate price? £5,000,000 represents the difference in the value raised from the taxpayers of India between 1s. 4d. and 1s.—in other words, it shows that the currency which is paid for taxes would be depreciated to the extent of 33 per cent., or £5,000,000, if those eventualities occur. That is the root of the whole matter. The Indian taxpayer pays all in silver what is paid out of silver, but, besides that, he pays what must be equivalent to about £18,000,000 in gold, and, so far as the bullion which he pays into the Indian Treasury is less in value than the arbitrary exchange at present held out for by the Government, so far the Indian exchange must lose. Is it possible to fix the rupee at an arbitrary rate? I may point out the difference between the bimetallic theory and the right hon. Gentleman's. It is not so great as he imagines. Under the bimetallic theory, £30,000,000 of silver, in order to pay for £15,000,000 of gold would be paid in silver, and the desire was to raise the value of that silver. The counter plan of the Indian Government is to pay that amount, not in coin, not in anything that has an intrinsic value, but in a bit of silver, to which the stamp of the Indian Government has given a particular value. It was called, in Sir David Barbour's statement, a depreciated currency.

SIR W. HARCOURT

Just like the French 5f. piece.

MR. GOSCHEN

The right hon. Gentleman is one of the most inveterate Interrupters in the House.

SIR W. HARCOURT

I am only giving information.

MR. GOSCHEN

I do not want to turn aside from my argument, but I may point out that France has got what is called a limping standard. India has not. India has no gold coins of legal tender, as in Franco. It is said that there is more gold in India than in France. But in what position? Not in coined gold, in which transactions take place. If French men wished to pay their debts in gold there is the Bank of France with £50,000,000 or £60,000,000 of gold to which they can go in order to get their debts paid. The Indian Government is in the position of having to find £l7,000,000 or £18,000,000 of gold every year; and again in that respect it is in a different position from the French Government. The character of a currency is of infinitely more importance to a country which has external liabilities to meet than it is to a country which is more self-contained. While a depreciated currency in 5f. pieces may circulate freely in France, or depreciated rupees in India, it is when you have to meet liabilities abroad with a depreciated currency that the difficulty arises. If the Chancellor of the Exchequer does not see that, he does not understand the first elements of the difficulty in which the India Government finds itself. If India were in the same position as France, the rupee would continue to circulate without very much difference in prices. The real difficulty has arisen from the necessity of converting the rupees paid to the Government Treasury into gold. France is not engaged in any of those extraordinary measures, because they are not necessary; the India Government is, because they are indispensable. France closed her Mint, but she was not in the position of having to maintain an arbitrary exchange. There is no other example of a Government determining to maintain exchange in an arbitrary manner as the Indian Government has been forced by circumstances to do. It has been asserted that there is no necessary connection, and it is true, between the action of the Indian Government with reference to the sale of its bills and the closing of the Indian Mints. I do not know how far my right hon. Friend the Member for Bodmin (Mr. Courtney) would agree with me; but as I read the proceedings of the Committee, what was feared by them and contemplated by the Indian Government was that the exchange would rise so rapidly that precautions ought to be taken against the rise. What has happened must make us careful in our prognostications in future. There is no coin that has exhibited the same perversity as the rupee. The effects of the exportation of silver to the East upon the circulation of the rupee have run counter to the views of economists. So it appears to me that the present position was not foreseen in the least by the Indian Government; and measures have to be adopted now, because events did not take the course which had been contemplated. My hon. Friends have congratulated the House and the India Government on the stability secured in the Indian exchange. There is no exchange. They cannot sell our bills. The exchange is in a state of suspense at 1s. 3¼d. It has stood at that point because the Government will not sell. Therefore, the stability rests upon the action and the intention of Her Majesty's Government. I am glad that the exchange has been controlled in a manner that is satisfactory. It is, at all events, satisfactory to one most important portion of the community —namely, the Manchester export houses. But they have not to thank the closing of the Mints for it, nor the balance of trade between India and this country. They have to thank the Government for having held the exchange at a point which enable them to conduct their operations in a comparatively profitable way. Let the Government be careful that bankers and others do not claim to be put on the back of the Indian Government. There is always this danger when you undertake any of these arbitrary arrangements. The action of the Government must necessarily be more or less public; but there are traders who will conduct their own operations in private. The Government are embarking upon the experiment of holding the exchange, notwithstanding any fluctuations which may be caused by the balance of trade. With regard to the balance of trade, we have had some interesting speeches, which I frankly admit have given reasonable grounds for the hope that the Indian Government in the coming months will be able to sell their bills at a greater advantage than now. But I feel that these operations with regard to exporters and importers do not constitute the whole balance of trade. It has been mentioned that payments are made to India in rupee paper, and operations of that kind affect the situation as distinctly as the export or import of merchandise. The question embraces not only the import and export of merchandise, but also the flow of capital between India and this country. This is a circumstance that must be taken into account. Is confidence likely to increase or to decrease? Are we more likely to remit capital to India or to withdraw capital from India? There may be a temptation to those who have capital in India to say—"We will withdraw it while the Government is good enough to hold down the exchange, lest the experiment should fail and we should suffer." This is a contingency that must be taken into consideration. I do not feel any confidence as to the direction that the flow of capital may take; but no calculation based on the balance of trade as indicated by exports and imports can be complete unless the movement of Stocks, of rupee paper, and of loans is also taken into consideration. There is no point of greater interest than the movement of silver. It raises one of the complicated and difficult questions we have to solve. When remittances may be made in rupee paper, why is silver going out, whether in large or in smaller quantities? I believe the amount for December will be larger than that for November. What is going to be done with that silver on the other side? While the Government are anxious to restrict the coining of rupees, and are creating a dearth of them which would enable the Indian Treasury to be the chief sellers, millions of rupees may be pouring into circulation from private hordes to be replaced by silver bullion. If so the one hope on which the Government build—the scarcity of rupees—will be severely shaken. The Chancellor of the Exchequer has told us that the hordes are in coined rupees. Why in uncoined rupees? Because they prefer it in that way. Now the holders are being tempted to put bullion in its place.

SIR W. HARCOURT

I do not know it.

MR. GOSCHEN

Yes; it is one of those complex operations which it is so exceedingly difficult to follow; never- theless, it may have great influence in India upon the state of exchange.

SIR W. HARCOURT

If it is a fact.

MR. GOSCHEN

You have the fact that the silver is going. The Government have got the monopoly value of the rupee, and have exclusive power over it. In my own commercial experience I have always seen monopolies break down in the end, and through causes which no one could foresee. Sometimes substitutes take the place, or a new production is found. It is rare that any speculation based upon monopoly will succeed. The Chancellor of the Exchequer objects to the word "speculation" for this operation; and when he was describing what it was he said it was analogous, it appeared to him, to the case of the man who would not sell his wheat, but borrowed the money in order to hold it. I thought that was strictly analogous to speculation. It is, however, a question of terms. The right hon. Gentleman calls it a reasonable expectation, but I should have thought it was a speculation based on a reasonable expectation of profit. But we will not quarrel about words. The point I am anxious to make is this that the circulation of rupees may be increased in two ways. It may be increased through the Native States coining rupees. I do not know whether my hon. Friends from India will say that these rupees are not circulated naturally in other parts of India. But suppose it is proved that they have no circulation there at present, that does not prove that it will not succeed in being circulated afterwards. Suppose that silver is sent into India, and is taken to the Indian Courts where rupees are given in exchange. That would be one operation. And the second is that the rupees which are worn as ornaments or are hoarded in India may be poured into circulation. Therefore it is clear that silver assumes in this matter a very great importance indeed; and that in the movement of silver in India the bullion which ought to be at the foundation of currency, but which is no longer to have any relation to that currency, has to be most carefully watched. I have not spoken at all of the possibility of the coinage being tampered with, because that is a danger which is so obvious as to need no remark. I have been led to this discussion of the ob- jects with which silver would be imported into India by the fact that it is flowing into India at present. That, again, is one of the operations which must materially affect the question of the balance of trade; because that balance which may be favourable merely on the basis of imports and exports of merchandise, may be adversely affected by the Indian Government's experiment if silver continues to flow into India for the purpose of drawing on the coinage. What other matters are there to allude to? There is one part of the subject which has not been touched at all to-day, or only most briefly—namely, the question of the effect of holding the rupee at this particular price while its natural price would be different. What will be the effect of that action on the trade of India in the East, on the interests of such a country as Ceylon, and on the trade with China and elsewhere? These questions, which have not been touched upon but shortly, are entitled to some consideration. The right hon. Gentleman the Chancellor of the Exchequer pointed out to us that the trade from India to the East would be more largely affected than any other part of her exports. He told us there would be £2,000,000 of deficiency in this respect as against only £1,000,000 of deficiency in the transactions in all other parts of the world. That is a very serious problem. How far will it affect the Revenues of India, and in these Revenues make a gap which it may be difficult to fill up? I do not know how far the sales of opium may be affected; but I have read statements made by competent judges who think it will have a great effect that way. What will be the effect on Ceylon, as regards Ceylon teas, and on China and its teas? I am told, and it seems obvious, that as this measure cannot be extended to China there will be so much of bounty given to China as compared with Ceylon as is represented by the difference between the value of silver and the value of the coined rupee. If so, this again is a matter which is full of serious import to many parts of Her Majesty's dominions, and which is very important to the trading classes of the country. It will not do to look upon this matter too exclusively from the point of view of India and of Great Britain alone. We have to look at the whole of our com- merce, and how through the currency the mercantile transactions with all the other parts of the world may be effected. And here—though not to introduce more than indirectly the question of bimetallism—I would say that, at all events, bimetallists may argue that what they desired was a treasure which would extend to all mercantile transactions all over the world, while this particular measure complicates the situation between totally different circumstances with regard to our trade elsewhere. This measure which is justified from the point of view of the Indian Government, cannot be confined in its effects to that sphere over which the Indian Government has sway. I do not blame Her Majesty's Government at all. Having refused the original plan of the Indian Government, I do not blame the Government for having allowed the Indian Government to introduce this experiment. But the experiment it is clear has a range of effects far beyond India itself; and it may affect the trade of Lancashire in a different manner, checking exports to China, and stimulating exports to India. In fact, no one will deny this: that the experiment is a dislocation of commerce, as it is a dislocation of the currency of India. It may be necessary, it may be the only experiment that could be attempted; but let us gauge its full effects, Remember, it is not an experiment which is entirely irretrievable. The Indian Government have it in their power to stop this danger ahead. They can sell their bills at a lower price than 1s. 4d., or they can take the violent step of selling their bills and facing the loss; or they may take the step of reversing this policy, if they find it is not successful. I am glad that it is not the fact that the Government of India have embarked on an experiment which must lead to ruin if it does not succeed. It is an experiment, the effects of which can be checked at any moment; and though they may be serious at the time, they will not lead to the ruin of Indian finance or any branch of our trade. Now, with regard to holding the rupee. I know that what I am about to say will not give pleasure to a great many of my hon. friends from Lancashire. But it is not the business of the Indian Government to hold artificially a rate of exchange and establish a monopoly value. What a monstrous outcry there would be in this country if we were to give an artificial value to the sovereign and say that gold should not be coined!

SIR W. HARCOURT

We do that with the half-crown.

MR. GOSCHEN

Yes, and the half-crown is legal tender up to £2. I thought that the Chancellor of the Exchequer would make an observation of that kind, and on my notes I put down "legal tender up to £2." But I did not think it necessary to use the note, because the fact is so obvious.

SIR W. HARCOURT

What about France?

MR. GOSCHEN

The right hon. Gentleman again says France; he has got France on the brain. The right hon. Gentleman appeals to bimetallist France. The right hon. Gentleman forgets that France is in its present position through years and years of bimetallist existence. It is through the possibility of keeping the two metals as closely together as she had done from the beginning of the century down to 1872 that France is in her present position. I have said ad nauseam that that is not the position we are in in England. I think I ought not to be turned away from my argument, because we have to face the question. What would our position be if, having debts to pay, we depended upon the action of Her Majesty's Government as to the number of gold sovereigns that they would coin for us if we could no longer take bullion to the Bank of England and ask them to coin it for us in such a shape as to enable us to pay our debts? There always has been a great charge made against bimetallists—and, to my mind, a charge in which there is some substance —that their object would have been rather to favour the debtor by an increase in prices. What is the counter proposition of the Indian Government with regard to this? So far as the measure is concerned, it cannot be denied that it operates, on the whole, against the debtor. One of the reasons why I have never been able to rally myself to bimetallism is because I could not see any equitable solution as between debtors and creditors. That is the great difficulty— the great difficulty in the way of embarking in an operation of that kind. But we are in exactly the same position in regard to this measure of the Indian Government. You establish in the debtor a value in the coin with which his debts might be paid, though he cannot get the same price for the coin with which he is prepared to pay his debt. I shall be glad to hear that I am wrong, but I think if you give a monopoly value to coinage it is against the debtor and in favour of the creditor; that is to say, you make the coin ex hypothesi of more value than that in which the debtor calculated he would have to pay his debts. The debtor thought he would have the silver of the whole world at his disposal, and could pay his debts with that, but now the Government say— "No, you will only be allowed to pay your debts with that quantity of coined rupees which the Government maintains at a certain value." That, I think, is against the debtor, I shall be glad if the right hon. Gentleman opposite can convict me of error as to that point. Now, as regards the taxpayer, I think the right hon. Gentleman the Chancellor of the Exchequer practically admitted in so many words that the difference in the value of the coined rupee and the uncoined silver must be paid either by the taxpayer or the Indian Government. He read out a statement with which I confess I did not entirely concur, to the effect that the difference will be thrown upon the Government; but if the difference is thrown upon the Government it is equally thrown on the taxpayer, because it makes a gap in the Revenue of the Government which the taxpayer must fill. I cannot draw a distinction between the taxpayer and the Government, for the amount has to be made good, and that lies at the foundation of the whole matter. The Indian Government is in the unfortunate position of having to pay £18,000,000 a year in gold, on the one hand, and getting its revenue in silver on the other, and whatever difference there in between the value of the gold and the silver must be paid in India in some way or other. It comes to this: What is the way in which India would least feel it? If the right hon. Gentleman could say that by enhancing the value of the rupee the deficit would be made up, I should admit that that method would have enormous advantages. That is one way of meeting the deficit. But let it be understood that that deficit is a natural one. There are no means of hiding it, and the only way of reducing it would be if the price of silver stood at a higher price than it is at now. I must apologise to the House for having detained it so long. The matter is a very intricate and complicated one, and it is extremely difficult to be clear in dealing with it. I have felt it my duty to enter into the matter as far as it is in my power, and to do what I could to unravel the matter, and place its various aspects before the House. The Indian Government is perfectly competent to deal with these matters, and with more serious difficulties should they arise. Let me say, in conclusion, that I must deprecate the use of exaggerated language. All this talk about the Government of India drifting into bankruptcy if this action does not succeed seems to me to be immense exaggeration. The Indian Government might possibly suffer, as anyone might in the commercial world, by speculating for a rise in silver, and in the end meeting a fall; but it is absurd to talk of their being thrown into bankruptcy. The Government of India desire to sell their bills at 1s. 4d., but may ultimately be obliged to take 1s. 2d. or 1s. 1d., and, although I think it desirable to point out the difficulties of the matter, at the same time I have no wish to paint any exaggerated picture of the situation.

MR. S. SMITH (Flintshire)

was understood to say that he regarded the present financial position of India with very great anxiety. Probably, that country was in a worse financial condition now than it had ever been in since the Indian Mutiny. A great experiment had been tried, but, so far, it had not met with success. In the future, owing to the rates of exchange which had been proposed to them, the experiment might be more successful; but the present was a mere speculative suggestion, and, looking at it from a practical point of view, as a commercial man, it seemed to him that the future of Indian finance was beset with difficulties, and that it was by no means impossible that next year the House might be confronted with something like collapse in Indian credit. He regarded this loan as only a temporary stop-gap—an attempt to stave off the evil day. It was not a solution of the difficulty at all. He did not, however, blame the Indian Government, as he did not see what other course was open to them. They had a Report from an able Committee who made recommendations, and no doubt the closing of the Mints of India and the artificial holding up of exchange had been of very great benefit to Lancashire. But all this advantage would not be of much benefit to Lancashire if it was followed next year by a fall in the exchange down to 1s. and collapse. He had only noticed two suggestions of any value in the course of the Debate. One of these was by the right hon. Baronet the Member for the University of London, that a tax should be levied on silver. He thought that a reasonable proposal. A tax of 10 per cent. on silver might very properly be made,. The other proposal was made by the hon. Baronet the Member for the Kingston Division of Surrey, and was a very original suggestion—namely, that the Indian Government should purchase gold in India in exchange for silver and remit gold to this country. He believed that the present state of affairs arose from a breach of the old bimetallic system in Europe. With great inconsistency the Chancellor of the Exchequer had supported a proposal to attempt to make a fixed ratio between gold and silver, which was the very object of the bimetallic party. He hoped the suggestion of the Member for Banffshire (Sir W. Wedderburn) would be acted upon— namely, that the Government would hold an inquiry in India into the whole financial condition of the country before any further changes in the currency were proposed.

Mr. COURTNEY

and several other hon. Members rose to continue the discussion when—

Mr. Chancellor of the Exchequer rose in his place, and claimed to move, "That the Question be now put."

Question put, "That the Question be now put."

The House divided:—Ayes 145; Noes 69.—(Division List, No. 381.)

Question put accordingly, and agreed to.

Bill read a second time, and committed for To-morrow.