HC Deb 01 May 1899 vol 70 cc993-1062

order for Second Reading read.

Motion made, and Question proposed— That the Bill be now read a second time.


desired to ask a question on a point of order. The Member for Wolverhampton had placed an Amendment on the Paper which would limit the discussion to the Sinking Fund, and he wanted to know whether in the event of that Amendment being negatived a general discussion on the Finance Bill would afterwards be permitted?


After the question raised by the Amendment in question is put from the Chair, any Debate which may follow would have to be relevant to the subject-matter of the Amendment; though this is not the practice where an Amendment on Second Reading is an alternative or argued negative to the whole Bill. If the Amendment is negatived and the Question is put from the Chair that the Bill be read a second time, the Debate will then be on the contents of the Finance Bill, except that part upon which the House will have already expressed its opinion—namely, the Sinking Fund. Therefore the Debate will divide itself into two parts.

MR. J. MORLEY (Montrose Burghs)

Is not the effect of your ruling this—that when my right honourable Friend moves his Amendment it will then be impossible, whatever may happen to the Amendment, to have a discussion, upon the whole scope and contents of the Finance Bill; in other words, after the Amendment is moved, the possibility of raising such a large and general discussion will be extinguished


That is so; the discussion afterwards would be limited in the way I have stated. There might be a discussion of a general kind before the Amendment of the right honourable Gentleman was moved, but then it would be possible for any honourable Member to take advantage of being called upon to move an Amendment in anticipation of the right honourable Gentleman. I am following the usual course in calling upon the right honourable Gentleman, who, I understand, represents the Opposition on this occasion.

MR. CLANCY (Dublin County, N.)

said that he had Amendment on the Paper which had been put down on behalf of the Irish Members, and he wished to know whether the Amendment of the honourable Gentleman the Member for Wolverhampton could be put in such a form so as to allow his Amendment to be moved afterwards.


said that if one Amendment was moved and negatived no other division could take place except on the question that the Bill be read a second time. The Amendment of the right honourable Gentleman could not be put in such a way from the Chair as to allow the honourable Member's. Amendment to be moved afterwards.

Amendment proposed, to leave out the word "now," and at the end of the Question to add the words "upon this day six months."—(Sir Henry Fowler.)

SIR H. FOWLER (Wolverhampton)

I feel somewhat embarrassed by the difficulty in which the House has been placed, and I desire, as far as possible, to obviate that difficulty. I do not intend to discuss at any great length various points that present themselves for observation with reference to the Finance Bill, the Second Reading of which has been moved by the right honourable Gentleman the Chancellor of the Exchequer. An impression appears to prevail that my moving the Amendment on the Paper in my name will confine the discussion to a specific subject, and thus restrict Debate. I should be quite willing not to move that Amendment, but to move a general Amendment that the Bill be read a second time this day six months. I would be the last man to limit a Debate of this sort, and if it be the general wish of the House I will adopt the plan I have suggested. Now, Mr. Speaker, I want to make one preliminary remark on this Finance Bill with reference specially to the statement of the Chancellor of the Exchequer. The right honourable Gentleman the other night stated, and the statement has been printed in the papers, and generally commented upon in the country, that the revenue for the year ending 31st March 1898 was £108,336,000. It is quite true that he also at the same time explained that to that should be added the local taxation account; but the general impression in the mind of the public is that the revenue of the year just closed was£108,336,000. As a matter of fact it was £117,000,000. That was the amount paid in taxation to the Imperial revenue during the last year. Not only is that confusing so far as the general amount is concerned, but also as far as the items are concerned. The Chancellor of the Exchequer told us that the customs and excise produced together £50,000,000. As a matter of fact they produced £55,000,000. He told us that the death duties produced £11,400,000. As a matter of fact they produced £15,633,000. I am quite willing to admit that the Chancellor of the Exchequer in his published weekly returns has set the matter right, but at the end of the year, when the House and the public are dealing with the revenue and the expenditure of the year, it is only fair and right that we should get rid of this transparent device, and that the real amount of revenue and expenditure should be put in figures as they really stand. The Finance Bill with which we are dealing to-day does not deal, as the Chancellor of the Exchequer said, with an estimated revenue of £111,000,000, but with an estimated revenue of £120,000,000. I think the time has arrived when the distinction between local taxation of this character, which is subsequently paid back in the shape of grants, should be put an end to, and the reform which Mr. Gladstone carried many years ago of not allowing any interception of revenue on its way to the Exchequer should be reverted to. We should go back to the good, sound financial maxim and show in our accounts exactly the sum we are raising, namely, £120,000,000. Now, Sir, the Budget which the Chancellor of the Exchequer has presented has two features. It imposes additional taxation of a very different character. I am not going to discuss this question, as I know there are many honourable Members of much greater competence than myself who understand the difficulties which the Chancellor of the Exchequer has raised by his proposals. So far as the modification of the stamp duties is concerned I would express my opinion that the time has arrived for a complete revision of the stamp duties, and for a Consolidation Act. I think that the right honourable Gentleman would find that a field of much profit. It would add to the public convenience, and he would secure a large and just addition to his revenue. I am sorry for the alteration in the duty on light wines, not only because of the complications it creates in the trade, but also on account of the effect it may have so far as foreign affairs and Colonial affairs are concerned. It is a very small sum from which to raise the questions which may be raised in these two directions. And when we look at it, that the wine duties are not increasing, but for years have been a decreasing quality—that the consumption of wine is under 16,000,000 gallons, while the consumption of spirits is 40,500,000 gallons, and of beer 1,251,000,000 gallons—I think there was another sphere in the drink duties which the Chancellor of the Exchequer, if he desired to enter into the happy enclosure, might have attacked. The Chancellor of the Exchequer said the other night that he saw no reason—and the House cheered, and the honourable Member for the Central Division of Sheffield cheered—why he should not impose these duties, bearing in mind that the Colonies imposed very heavy import duties on manufactures from this country. But who pays those duties here and there? If the Colonies choose to enhance the price of manufactures by imposing duties upon them, we think that is their misfortune and their mistake. If, on the other hand, in this country we impose these duties—they are not of a protect- tive character, for there is no one in this country who makes wine—the consumer will pay the tax. The tax will not be paid by the people of France or by the people of Australia, who export the wine, but by the British consumer. The effect will be, and that is what I deplore in connection with this matter, that you will reduce the trade with France, by diminution of the consumption of these cheap clarets—a consumption most desirable in the interests of temperance—and also diminish the trade with your Colonies. Now, the proposals with which I wish to deal with to-night are those relating to the Sinking Fund. I frankly admit that this is a very difficult subject, and that the Chancellor of the Exchequer in dealing with it is entitled not only to the fullest credit with reference to his opinion on this question last year, and the policy which he then adopted, but he is also entitled to the fullest credit for the great difficulties with which this question is surrounded. Circumstances have varied very considerably since 1883, when the last dealings with these annuities took place, and it is impossible fairly to consider this question in 1899 without recognising that there is a different state of circumstances with reference to the prices of funds, to the rate of interest, and to the position of the Savings Banks, which I will not say were not fully considered, but which it was not anticipated in 1883 would prove a difficulty of this magnitude. I venture to submit to the House, with the greatest deference, that it is impossible to fairly discuss this question without a full consideration of its details. I do not wish to look at this thing as a general question. I rather want to ask the House to go through it item by item, and to see exactly where we are, where the difficulties really arise, and what are the reasons why we object to the course which the Chancellor of the Exchequer proposes to take. It seems to me that in such a full consideration of this question we have to look at the Sinking Fund in three different branches—the old Sinking Fund, which is wrapped up and concealed in terminable annuities: and the new Sinking Fund. Whatever consideration we give to that question we cannot separate from it the peculiar and, I would almost say, anomalous—certainly the most difficult and complicated—posi- tion of the National Exchequer with reference to the Savings Bank Fund. I think it is worthy of note, when speaking of the Sinking Fund, that the creditors of this State have no right to claim any repayment of their capital. Now that is a totally different position from that occupied by most foreign countries, and certainly from the great bulk of foreign loans. Our State is under no obligation to provide any Sinking Fund for any of its liabilities. In consideration for the money advanced to the State, we undertake to issue perpetual annuities, once at 3½ per cent., then at 3 per cent., now at 2¾ per cent., soon going down to 2½. In 1923 we have a right to redeem those annuities at par—namely, at £100. Now the old Sinking Fund, to which Mr. Gladstone attached the greatest importance, and which was certainly his favourite instrument in dealing with the reduction of Debt, was the realised surplus of each financial year, the amount of income raised in excess of the expenditure incurred. The House will see that that is a very variable figure, and also a very variable system, that it led frequently in times past to tempt Chancellors of the Exchequer to put their estimates of revenue too low, and to put the estimates of expenditure too high, and in that way to create a surplus which was available at the end of the financial year. Nevertheless, a great deal of good has been done down to recent times by that old Sinking Fund. In three years—from 1864 to 1866—Mr. Gladstone paid off £10,500,000. Lord Sherbrook (then Mr. Lowe) paid off in five years £15,750.000, and the present Chancellor of the Exchequer—I cannot say he has paid off, but, he has had in three years—from 1896 to 1899—nearly £12,000,000, including the sum which was appropriated by a special legislation at the end of the first year for extra unanticipated expenditure. The actual realised surplus, beyond all question, was, in 1895–6, £4,200,000; in 1896–7, £2,473,000; in 1897–8, £3,678,000. It was from that surplus from which he appropriated, I think wisely, £2,500,000 for the purpose of shipbuilding. Last year the realised surplus was £186,000. These figures show the House that this is a variable quantity, and I think that it is a sound principle, to which the House will not dissent, that a fixed pay- ment of a fixed amount, not varying according to the exigencies of the year, is the safest and surest way of making provision for the National Debt. Now, the second and greatest Sinking Fund, which is to some extent touched by this Bill, is the terminable annuities. I have heard a very many financial authorities, both in and out of the House, regard that scheme as a perfect mystery. They do not understand it, and I do not believe that the public generally understand it, and perhaps in times gone by it was never intended that the public should understand what they were doing by paying these terminable annuities. There is no doubt that by means of terminable annuities we have affected enormous reductions of Debt, and I think it is only by that means that we shall be able to continue those reductions in the future. A terminable annuity is an annuity which ends at a fixed term. I will give the House one illustration showing how it works out, not with the Savings Bank Fund, and not with the funds under the control of the Chancellor of the Exchequer, but with the general public. Suppose I want an annuity for 15 years, and that I have £10,000 in Consols. The National Debt Commissioners will give me for that an annuity—I quote round figures—of £800 per annum. The Consols will be transferred into the National Debt Commissioners' names, and they will be cancelled, and the Commissioners undertake the liability of paying me for the next 15 years £800 a year. The payment to me of that amount—£800 a year for 15 years—will ensure to me my income at 2½ per cent. on the Consols, and will provide a fund which, accumulated at compound interest, will replace my £10,000 at the end of the time. That is a very simple operation, but it is an operation which has a very limited extant. But in 1863 Mr. Gladstone extended this sound principle of terminable annuities, to a very large extent, by dealing through their instrumentality with the funds under the control of the National Debt Commissioners. In that year he exchanged £24,000,000 held on account of the Saving Banks for certain temporary annuities, which expired in 1885. Let me give the House one figure to show how that was done. I take one sum of £5,000,000 in any sort of description of stock. The interest on that £5,000,000 at 3 per cent. was £150,000. Mr. Gladstone exchanged that for an annuity of £315,000 a year, expiring in 1885. The £5,000,000 Consols were cancelled at once in the books of the National Debt Commissioners and in the Bank of England, and the effect of that would appear to be an apparent reduction of £5,000,000 in the National Debt. So there was in the Funded Debt, but there was a corresponding sum put into the Debt due on terminable annuities representing the capital which had to be provided during the course of the years that that annuity would run in order to replace it. And here we will have the first difficulty with the Savings Bank Fund. That £5,000,000 Consols was not taken from the open market; it was absolutely extinguished, but it had to be replaced during the time the annuity ran. There had to be replaced from the open market, year by year, such an amount of Consols as would at the end of the time produce the £5,000 000 back again. There the difficulty is created, arising from the fact that the Savings Bank have to receive the full interest upon their sum of £150,000, and as fast as the money is repaid they have to replace a certain sum per annum in Consols, so that at the end of the period they have to replace the whole £5,000,000. The House will see, therefore, that there is no merit due to the Chancellor of the Exchequer who is Chancellor of the Exchequer at the end of these annuities compared with what is due to the Chancellor of the Exchequer who was in office at the beginning of the annuities. At the end of the period there is a much larger sum wiped out, and a less amount of interest to pay. What you have received in exchange for the £5,000,000 is an equal sum of £315,000, payable every year. How that is applied in the payment of interest and in replacing the capital is a matter for the creditor, and not for the debtor. The annuity is safeguarded—that is, the repayment of the debt—but the debt is not absolutely repaid until the last year has expired. Now this mode of conversion which Mr. Gladstone established was very popular, and he applied it in many succeeding years. But in 1881 Mr. Gladstone foresaw what would happen in 1885, and in his Budget speech of that year he re- ferred to it, and he made proposals for dealing with the annuities which would expire in the rapidly approaching 1885. I remember his making a proposal to deal with these annuities which would expire in 1885 by longer annuities than he had created in 1881. I will not trouble the House by stating what he did on that occasion, because, owing to the state of foreign and home affairs, he had not time to develop his proposals in legislation. It was not until 1883 that Mr. Childers dealt with the annuities which we are now asked by the Chancellor of the Exchequer to deal with in this Hill. In 1883 the Debt stood at £756,000,000. The reduction of the Debt in the previous year—I am quoting these figures to show the light that it throws on our present situation, for one of the arguments we have had to deal with is the undesirability of reducing the Debt by such large sums—but, so far back as 1883, the reduction of Debt in the previous year by Mr. Childers was upwards of £7,000,000, and the average for the three years which had elapsed since Mr. Gladstone came into office was £6,839,000. The proposals which Mr. Childers made involved a reduction of Debt in the year 1883 of £8,000,000. I only mention this to emphasise the fact that in 1883 a reduction of £8,000,000 was not considered an extravagant or intolerable sum, and at that time I think the revenue was only something like £77,000,000. Now, Mr. Childers not only dealt with the annuities which were expiring, but he said he did not propose to appropriate one shilling of the money that was going to be saved at the expiration of those annuities. Every shilling was to be employed in the creation of fresh annuities. He not only took £30,000,000 from the Savings Bank, but he did a still bolder thing, which Mr. Gladstone had indicated in 1881—he took £40,000,000 from the funds under the control of the Court of Chancery. The House will remember that the State is as much responsible for the funds paid into the Court of Chancery as it is for the funds paid into the Savings Bank. Mr. Childers calculated that there was then £60,000,000 in the Court of Chancery, and he took £40,000,000 of that, and turned his Consols into an annuity of between £2,000,000 and £3,000,000 a year. These were subsequently converted in the year 1888 into the annuities which will expire in 1902. The effect of that operation of Mr. Childers was that the £70,000,000 was cancelled, and the same process is now going on, and has been going on, and the difficulty of replacing that £70,000,000 of Consols is now coming to an end in the next few years. One great portion of those annuities which we are now dealing with will expire in 1902, another portion in 1904, and I am not quite sure that there is not one portion goes into 1906. At any rate the bulk of them expire within the next few years. It may be asked, What is the advantage of paying off terminable annuities in this way? The advantage is this—that the taxpayer pays a sum, without knowing it, towards the redemption of the National Debt. The terminable annuities he knows is a national obligation, the payment of which he regards as a nauseous powder which is disguised in a quantity of jam, and he swallows it without any objection. I do not think that beyond the desirability of securing a fixed payment for a certain number of years and converting it into a permanent payment there is any advantage. There is none theoretically, but the proof of the pudding has been in the eating of it, and the large sums I have mentioned and other large sums have been extinguished in the course of the last series of years by this method, and I do not think they would have been reduced to such a large extent in any other way. The other point I was going to allude to at the commencement of my speech was the new Sinking Fund, established by Sir Stafford Northcote, and that is the Sinking Fund which the right honourable Gentleman the Chancellor of the Exchequer is proposing to attack. Now, Sir Stafford Northcote in 1875, when he brought in his scheme, after having alluded to the success of what he called the continuous and steady efforts for the reduction of the National Debt, which had been made by means of these annuities, said:— I do not think Parliament has any great reason to be proud of the amount we have expended in the past year for the reduction of the Debt. We are paying this year £27,200,000 of Debt. But let us remember that up to the year 1860 our ancestors, from the time of the Peace, and ourselves in early days, never paid less than £28,000,000. Sir Stafford Northcote proposed to the House that there should be a fixed amount of £28,000,000 devoted to the Debt charge, and that was to be appropriated first in payment of the interest on the Debt, the management of the Debt, the terminable annuities, and the balance which remained was to form the new Sinking Fund. One of the features and one of the advantages of that new Sinking Fund was that it was to be an automatically increasing sum, as year by year the debt was paid off. It was not to be a fixed sum, but as the Debt and the interest was reduced the amount was to increase. Sir Stafford Northcote then thought, and I think so too, that the state of public affairs was so prosperous then that he thought £28,000,000 was a sufficient sum to be appropriated for that purpose. I have given the House, I am afraid, too much detail, but I have brought it down to the present time. That Sinking Fund has been dealt with twice, and that £28,000,000 has been dealt with twice since Sir Stafford Northcote's time. The Chancellor of the Exchequer now proposes to deal with the three annuities about to expire. There is the Savings Bank annuities of £2,199,444, or in round numbers £2,200,000, and he proposes to deal with that sum and commute them into longer annuities running over 20 years. His first argument is—and I will take it rather more fully from his Minute than from his speech—that, in effect, his scheme will be to diminish the annual charges in the next four years by £7,000,000. The effect of the present state of things and of the expiring annuities will be a reduction of the Debt, which will add £7,000,000 to the Sinking Fund in the course of the next four years. I think the Chancellor of the Exchequer will admit that that is a fair and a plain statement. But in order to arrive at that he has to make two or three large assumptions. He takes into consideration and places to his credit the reduction of the Debt in 1903. That, I think, is a question with which we shall have to deal when the time comes, and whether it would be desirable to apply that to the reduction of taxation, or whether it would be advisable to apply it to the reduction of the Debt is quite an open question. There is no legislation providing for that sum, and it would go into the new Sinking Fund. But the right honourable Gentleman makes another assumption, for he assumes that the annuities which are to expire in 1904 are going to be abandoned. To arrive at that £7,000,000 you have to assume that there has been the concession of utilising these for the purpose of creating fresh annuities.


In the Treasury Minute and in my Budget Statement, I referred to what would be the effect unless Parliament made an alteration in the law.


My argument is this: That according to precedent the alteration should be the creation of fresh annuities for the purpose of paying off the National Debt, and not for the purpose of relieving the Sinking Fund. Then he adds to the £1,388,000, which is now the new Sinking Fund, a possible condition, which may or may not arise year by year, and he puts the state of the new Sinking Fund for the time he mentions at £8,500,000. The wording of the Treasury Minute—which to my mind is a surprising document—is a very strong argument in favour of creating fresh terminable annuities to absorb that figure, and he bears in mind that in 1885 such measures were proposed by Mr. Gladstone, and were actually taken by Mr. Childers. Now we come to the actual proposal of the Chancellor of the Exchequer, which is to convert this £2,200,000 annuities into three new annuities. In one he proposes to extend the time of the unexpired portion of these annuities—and this is perfectly legitimate—which will expire in 1902 until 1923, and he then proposes to take what is called "The Book Debt" in the Bank of England, which was created by the present First Lord of the Admiralty at the time of the conversion, and which stands to the debit of the country at the Bank of England, and he proposes to convert that into an annuity. I think that is an arrangement which is open to some discussion as to whether they could not have dealt with it in a more effective manner to relieve the pressure upon the Consol market. He then proposes to increase the annual amount to£870,000 in regard to the new annuities which he takes from the Savings Banks. Now, the ultimate effect of what the Chancellor of the Exchequer proposes is that, so to speak, in consideration of his renewing these annuities so as to absorb upwards of £2,000,000 of money he shall reduce the fixed amount of the Sinking Fund from the £25,000,000, at which it now stands, to £23,000,000. That, Sir, is the operation of his proposals, which I propose to challenge on this occasion. The first point he mentioned in his speech was that he was justified by precedent, and that was his first argument. He said he was doing only what Mr. Gladstone did when the long annuities fell in, and also what Mr. Childers did. I think we must say something about Mr. Gladstone's finance in connection with this proposal. Mr. Gladstone, in 1860, himself said that they were approaching a most important epoch in British finance, and that was the falling in of what was called the long annuities, amounting to upwards of £2,000,000. They have nothing to do with the terminable annuities or the payment of the National Debt. But amongst the various ways in which money was raised during the time of the great war, and before the great war, in addition to the ordinary annuities and Consols, about which I have been talking, the Government of the day used to give bonuses in the shape of small annuities, amounting to a large sum in the aggregate—and some of them were created long away back in the last century—and they were all made to expire in 1860. It was a distinct relief, said Mr. Gladstone, that there was such a windfall as had never come into the Treasury before. Now, what did Mr. Gladstone do with that large sum? He was face to face with a gigantic expenditure, an expenditure which had been materially increased towards the close of the previous year by an extraordinary military and naval outlay. He had a large taxation on tea and sugar, the relics of the Russian War, and he had an income tax of 9d. in the pound. But if he contented himself simply with proposing that the sum should be absorbed into the revenue, and nothing more, it would have been a financial operation which no one would have questioned. That was not Mr. Gladstone's mode of finance. He discerned in that a great opportunity of carrying on and developing the commercial legislation of the country, which had already produced such happy results, and he faced the situation. Not only that, but he had to face the great loss of revenue arising from the French Treaty, which had been finished that year. He also proposed large remissions of taxation—and we have none in this Budget—to the amount, I think, of upwards of £4,000,000 upon consumable articles of the food of the country. Ho also proposed dealing with the paper duty, and would have dealt with it if the House of Lords had let him; and he also proposed a very ample scale of expenditure. That, no doubt, absorbed the £2,000,000, but he did not flinch from asking, and the House of Commons did not flinch from granting, an income tax of 1d. in the pound to carry out those arrangements. He raised the income tax 1d. in the pound when £2,000,000 were falling in, and that was the precedent of 1860, which I commend to the right honourable Gentleman. In 1881 Mr. Gladstone was again face to face with this question, and from the Budget Statement, to which I have already alluded, I should just like to quote to the House what Mr. Gladstone said. He was dealing with the annuities which would expire in 1885, and he said— The effect of this conversion is to liberate a considerable annual sum. I should regard it as a wholly illegitimate proceeding to apply any portion of the sum so liberated in favour of the Ways and Means of the year. I propose to use it to the last farthing in the re-conversion of stock into those longer annuities which will expire in 1906. I do not think that Mr. Gladstone's precedent is an encouraging one for the right honourable Gentleman the Chancellor of the Exchequer. Now, in 1883 Mr. Childers not only disclaimed any intention of appropriating any part of the money to meet the demands of the revenue for the year, but he created a larger demand upon the revenue in order to provide money for the reduction of the Debt. Therefore I say that the right honourable Gentleman has no precedent in the action of past financiers to justify his present proposals. He lays stress upon the enormous burden of seven or eight millions to be applied in the next few years, and he proposes to reduce the Debt charge from £25,000,000 to £23,000,000. In the first Budget after the accession of Her Majesty in the financial year which expired on the 5th of January, 1838, the Debt charged for that year was 29½ millions. The country could then afford to pay that large sum, and we are now told that we cannot afford to pay £25,000,000, although 29½ millions was paid in 1838, and of that amount £2,000,000 were applied to the repayment of the Debt. That sum has varied for a long series of years from £31,000,000 downwards, till in 1860 it was below 28½ millions; and with the solitary exception of 1886, when the Sinking Fund was suspended, it has never been below £25,000,000, and this will be the lowest figure that this item has ever appeared at in our national balance sheet. Is there anything in the condition of the country to justify this? I am not a believer—and I never held that view—in the doctrine that the Sinking Fund is never to be suspended. There are circumstances which will arise—circumstances of foreign complications, circumstances of commercial depression, and circumstances of oppressive taxation—which will justify, as they justified Mr. Childers when he was suddenly called upon to provide for an extra expenditure of £20,000,000, or when my right honourable Friend the Member for West Monmouth during his term of office had to deal with an unexpected deficit, although he only suspended a very small portion of the fund. I do not lay down the doctrine that the Sinking Fund is an Ark of the Covenant which ought never to be touched; but what I do object to is a permanent reduction of the amount. I want to ask the Chancellor of the Exchequer is there any reason for this? I go back to the Chancellor of the Exchequer himself, for he is the very best witness I can call upon that point. The Chancellor of the Exchequer, when he made his Budget speech last year, and two years ago when he went into office, had to explain the difference between the estimated receipts and the actual yield of the revenue, and he accounted for that to his own satisfaction, by dwelling upon what appeared to be the entirely exceptional circumstances of the year. I was wrong, and we were all wrong. Ever since that time there has been a sudden and steady advance in the activity of our trade, in the high-spending power of the masses, in the profits of the nation, and in the accumulation of wealth. He said there was no sign that the apex of our prosperity had been reached, or that there was any indication of a downward tendency; that so far as he could make out there was no falling off in our foreign trade; that in certain great industries profits and wages had increased, and that the standard of comfort in the country had also increased. That is what he said last year; but what did he say a fortnight ago? He said there was no alteration in the condition of the people between 1898 and 1899. He said that the returns of the bank clearing houses and the railway traffic showed the activity of our trade, that there had been a distinct increase in the rate of wages, and that our own trade was good; the agriculturists had had a good season, and foreign, trade had reached an enormous sum. I venture to submit to the Chancellor of the Exchequer that there is no case for his argument in the condition of the country. The revenue is the largest that has ever been known, for it is £121,000,000, and now we are to be told, in this year of unexampled prosperity, that it is too much to pay £7,000,000 towards the reduction of the Debt, when in 1883, at which time the revenue was only £77,000,000, we paid the same amount without grumbling. That is my objection to the Chancellor of the Exchequer's proposal. There is no foreign complication at this moment, and every fact refutes the argument in the Treasury Minute that the devotion of such a sum as £8,000,000 to the reduction of the State's liability does not transgress reasonable limits. That is the point where we are at issue. We say it does not, and that it is inside reasonable limits. The Chancellor of the Exchequer has said that this question should be decided without recourse to the Sinking Fund, for he held it to be legitimate to suspend the whole or part of the Sinking Fund to meet a temporary national emergency. That is exactly where we agree with him, and it is only when he applies his argument, that we differ at the conclusions at which he arrives. The Chancellor of the Exchequer himself laid stress upon an argument of a more practical character, arising out of the position of the Sinking Fund in connection with the Post Office Savings Bank. I pointed out to the House how the Savings Bank funds are dealt with, and not only have the Savings Bank funds increased—augmented by the appropriation of large sums of Consols to replace the £20,000,000 or £30,000,000 which the Chancellor of the Exchequer has taken from them, but there is a growing increase in the deposits of the Savings Bank, and the average in the last four years is upwards of £10,000,000, all of which, unfortunately, has to be invested in Consols. Now, this Savings Bank fund creates an increasing demand in the market where the supply is constantly decreasing. I did not catch the Chancellor of the Exchequer's figures, but I think he said that the Savings Bank holds £173,000,000 of Consols. Now, why should not these funds be invested? I know the answer will be that you must give the national guarantee. These people have deposited their money, and they can have nothing short of the national guarantee. But why is the national guarantee sounder or more obligatory when it is invested in Consols? I should like to put to the House a concrete illustration to clear up what I think is this Jekyll-and-Hyde confusion and complication in this doctrine, and in the position of the Chancellor of the Exchequer as borrower and lender, head of the Exchequer, head of the National Debt Commissioners, and as head of the Savings Bank Department. Suppose I am a depositor in the Savings Bank for £100. It is called the Post Office Savings Bank, but that has no meaning—it means a deposit with the Chancellor of the Exchequer ultimately. I lend that £100 and deposit it with him, and upon that sum he agrees to pay me £2 10s. interest, and to repay me my capital whenever I want it. The Savings Bank is a national bank, under the control of the Chancellor of the Exchequer, he being liable, as representing the State, for every shilling that is invested there, Now, what does the Chancellor of the Exchequer do. He takes my £100, and invests it in Consols, for which he is going to pay me £2 10s., and he is going to get £3. When Consols were below par it was a profitable operation. But now he is investing in Consols at 110, and for that he only receives £2 10s. a year, which is what he has to pay me. Say he invests the money for what it will fetch. He can only get £90 of Consols for his £100, and the time is coming when they must be paid off at par. It is an operation which is bound to result in a great national loss if it is allowed to go on. The real debtor in all these transactions is the State. The Chancellor of the Exchequer does not make £100 into £110 by transferring it from his name in one capacity to his name in another capacity. The time has arrived when some more complete, safe, and practical mode should be constructed for dealing with this new aspect of the funds of the Savings Bank. This very heavy premium, which I do not believe to be justified by the state of the market, practically arises from the Government buying against themselves. May I ask the Chancellor of the Exchequer whether there may not be a larger development of the Public Works Loans Commissioners' operations? May I not ask him whether there is not upwards of twenty millions of stock at 2¾ and 2½ now in the hands of the public which is redeemable at par in 1905, and which might be converted and redeemed? The Chancellor of the Exchequer being himself the debtor on the faith of the United Kingdom, the individual Savings Bank man has nothing to do with what is called the investment. He looks to the State—why should he not, instead of buying Consols at this premium of—10, lend the Secretary of State for India the money on the security, not only of the revenues of India, but upon the enormous reproductive works, so that he would get an interest which would not involve him in this heavy loss? I ask the Chancellor of the Exchequer whether he will not appoint a Select Committee of this House—totally irrespective from all Party considerations, and dealing with this question as a national question—to look at the whole question of these Savings Bank funds, and to see whether we cannot protect the Consol market and the terminable annuities, and relieve him of many difficulties by a thorough reconsideration of the whole of the State's liability in respect of these investments. Several honourable Members have contended that it was an advantage to have a National Debt. A nation is but the aggregate of individuals. Does the honourable Member who cheers consider it an advantage for himself to be in debt? Does he think that his position is stronger and better because he has overdrawn his banking account? Does any landed proprietor think the burden of a mortgage to be an advantage? There is no advantage to anyone in being in debt. It is a tax on the industry of the country, because it is industry which pays the interest of the Debt. I am sure that the Chancellor of the Exchequer will repudiate the idea that it is his business to find investments for people. His duty is to get rid, as far as he can, of debt. But the Chancellor of the Exchequer himself gave one reason, which is, I think, stronger to-day than it was 12 months ago. After alluding to our efforts to pay off debt, he pointed out that the increased debt of local authorities far exceeded the amount by which the National Debt had been reduced, and he said— I do not wish to enter into comparisons between the reproductive character of the National Debt and that of the local debt, but both are heavy burdens, and ultimately they are borne by very much the same shoulders. In view of this continual increase of the local debt, there is surely an additional reason, if any were required, for perseverance as far as we reasonably persevere in the payment of the National Debt. The right honourable Gentleman's virtue has succumbed to the temptation of the present time. There have been two reductions of this Sinking Fund, and both were effected by the present First Lord of the Admiralty. He effected his first reduction in 1887, when he reduced the 28 millions to 26 millions, in order to take a penny in the pound off the income tax. The situation then was so happily described by the right honourable Gentleman's predecessor in office that I must quote to the House some of Lord Randolph Churchill's words— We are told that economy is very unpopular, that the people of this country like to know that they have a strong Army and a large Navy. All I say is, place the cost of these things on the taxation of the country. Has the Chancellor of the Exchequer placed it upon the taxes? No; what he has done is this, he has manufactured a surplus by reducing the repayment of the capital of the National Debt. I, for one, do not believe that his proposals will do much good. I do not believe in his Budget. The sentence which follows is the most singular, for Lord Randolph Churchill had sat in Conservative Cabinets, he had been a Conservative Chancellor of the Exchequer, and he had prepared a very striking Budget of reductions for that year— It is a Budget that has been made for him partly by general political circumstances and partly by the persuasions—I will not call them the prejudices—of the colleagues with whom he has to deal. I think history has repeated itself.

THE FIRST LORD OF THE ADMIRALTY (Mr. G. J. GOSCHEN, St. George's, Hanover Square)

; It was absolutely untrue


The right honourable Gentleman is the living authority, and I will bow to him. But what did Mr. Gladstone say of this procedure in 1887?— We are now going to reduce the total annual provision for the reduction of the National Debt to appoint lower than the lowest point at which it has stood in the recollection of any of those that hear me…Is that a proposal worthy of support?…Is it congenial to Conservative tradition? Who are the Conservative financiers whose proposals are favoured and cherished in connection with Conservative recollections? Is this a proposal that Mr. Pitt would have approved? Is this a proposal that Sir Robert Peel would have approved?…I myself am convinced that serious, reflective, and sober-minded men, on this determination to stint the means applicable to the payment of the Debt with the view of not only what is called relieving posterity, but with the view of making provision for a rainy day, and enlarging your means and resources for great expenditure when the necessity for great expenditure arises—I cannot think that serious and deliberate reflection will warrant a proceeding so inadequately corresponding to the courageous tradition of Englishmen, to the far-sighted tradition of English statesmen, or to the general interests of the British nation. Those who had the honour of being associated with Mr. Gladstone in financial affairs will attach the weight to those opinions which they deserve. We are asked to tamper with these funds at a time of unexampled prosperity. Our Debt mainly represents a great war expenditure; there is very little of a truly reproductive character. Our only war-chest is this provision for the repayment of the National Debt. It is our true national resource; it is the most powerful instrument which the Government has if war breaks out. It is powerful not only by enhancing our financial reputation, but by enabling us at once to raise 200 millions without adding to the taxation of the country. In no other country in the world can they perform a financial operation like that. If a, war should arise it will not be done cheaply. The expenditure now on modern armaments is something far out-stripping anything that history records, and we shall not only have to raise a very large sum of money, but no doubt that expenditure would have a tendency to increase. I think that nothing has occurred that justifies this tampering with this Fund, and I ask the House to adhere to this moderate provision for the reduction of our liabilities and the strengthening of our resources. I ask them to do it as a measure of supreme importance, as a matter of national defence, and our national defence means the preservation of peace. Under these circumstances I hope the House will in some shape or other record its disapproval of the proposal as being not only a weakening, but tending also to destroy our strongest and most impregnable bulwark of defence financially. I move that the Bill be read a second time this day six months.

MR. HALDANE (Haddingtonshire)

, who seconded the Amendment, thought that his right honourable Friend (Sir H. fowler) had clearly shown that the matter was to be dealt with on general grounds alone, and it would be unreasonable to debate it upon any other. The reduction of the Sinking Fund could only be justified by special circumstances in a time of enormous difficulty, which he did not see existed at present. With the price of Consols standing at 111, either the terms of the conversion of the National Debt in 1889 had been too favourable, or the operations of the Chancellor of the Exchequer had been of an unsatisfactory character, and he thought the burden lay upon the right honourable Gentleman to prove to the House that there was no way out of the difficulty in which he was placed than by suspending the Sinking Fund. Looking at the matter, and taking it in a concrete form, what did they find? The Savings Bank deposits showed a surplus of something like £12,000,000, and everybody supposed that the Savings Bank was a concern which conducted its business on profitable lines, but on a closer examination it bore a different aspect. It was a Government concern, and took this money, upon which it agreed to pay 2½ per cent. to the depositors, and with it it bought Consols, but when those Consols were bought at £111 it did not look very profitable, seeing that on each purchase of £100. the Government were losing £10. He thought it was extremely bad business to pay Savings Bank depositors 2½ per cent., and then buy with those funds Consols at 111, paying 2¾ per cent. interest. The practice of investing, whether by means of the Sinking Fund or in any other way, in Consols at a premium to meet the liabilities of the Savings Banks was a practice that was involving the country in a great loss, and was a great deception of the public. At somebody else's expense they were paying a large sum of money to the depositors in these Savings Banks, and they were not getting their money back from anybody. The bearing of that upon the question which they were considering to-day was that they must find some other mode of dealing with the Savings Bank investments. What he wished to lay stress upon was this, that in 1923 it would be possible to redeem these Consols at par, and the difficulty of the Chancellor of the Exchequer would not exist then, or would not exist in the same form, and therefore it seemed most expedient that they should be making provision against that great day when they would be able to pay off their liabilities to the creditors of the nation at par. The question was how they were to invest in the meantime. The Government invested a large amount in loans to local authorities, but on such terms of repayment in regard to permanent improvements that many of these bodies found they could do better by going into the open market. There was abundant business of this kind to be done by the Government if they could only make their terms a little more workable. He was repeating what he had been told by business men outside when he said that if the Government were a little more elastic in the terms on which they went into the market, they could at any rate do better than they did at present. It was not only in the matter of local loans and of those Indian securities to which his right honourable Friend the Member for Wolverhampton had referred, but it was the same in regard to Colonial securities, He was quite aware of the difficulties of Colonial securities, but it was nonsense for the Government to shut trustees out from doing as part of the general law what they did privately and freely in this respect. He should support the Amendment because he felt that an opportunity had now occurred in which to revise the whole field of finance, to adapt the machinery to the conditions of modern times, and to manage the finance of the country in a fashion which would be more tolerable judged by the ordinary standards of bankers and financial authorities in the great departments of trade.


The little comedy which preceded the speech of the right honourable Gentleman the Member for Wolverhampton is the curious result of the divergence of opinion with regard to the financial proposals of Her Majesty's Government on the Opposition side of the House which is displayed by the Amendment Paper. The right honourable Member for Wolverhampton does not object to make provision for the finance of the year, and it is perfectly clear from his speech that he does not materially object to my proposals for new taxation. What he objects to is the permanent reduction of the fixed Debt charge, and, therefore, objecting to that, his view would doubtless be that further new taxation should be proposed in addition to that which I have suggested. The honourable Member for Northampton takes an entirely different view to the right honourable Member for Wolverhampton. The honourable Member for Northampton, not having approved of our expenditure, has put down an Amendment on the Paper to leave out the first paragraph of the right honourable Gentleman's Amendment, and I know from his previous statements on the subject and his undoubted consistency of opinion that the honourable Member for Northampton believes that the reduction in the provision for the repayment of Debt is sound finance. Then we come to the right honourable Gentleman the Member for the Forest of Dean. He does not agree either with the right honourable Member for Wolverhampton or the honourable Member for Northampton. He only objects to providing so much of the expenditure as is included in what he describes as adventures in Africa or in those provisions for securing the greater strength and efficiency of the Army which he endeavoured to defeat last year, but in which he did not succeed in obtaining the support of the House of Commons. Finally, the right honourable Baronet and the honourable Member for Bolton object both to what they mistakenly call, I think, the diminution of effort to pay off Debt, when all I propose is really that we should devote more annually to the payment of Debt in proportion to the amount of Debt than was done before. But they regret also the imposition of any fresh taxation which is injurious to trade. I do not want, after the speech of the right honourable Member for Wolverhampton, to go at any great length into the questions of fresh taxation which I propose. I think a better opportunity of dealing, for example, with the wine duties will undoubtedly occur in Committee. But this much I will say—that if it be assumed, as I think the right honourable Gentleman does assume, that fresh taxation is necessary; if it be also true, as I believe it is felt practically unanimously to be, that a certain proportion of that taxation should be indirect, I look upon it as absolutely impossible to suggest any additional taxation which would less interfere with trade and industry than the additional taxation on wine. I refer, of course, to the trade and industry of this country. Wine is not an article which is produced in this country, or, at any rate, it does not employ any large number of people like spirits or beer or other subjects of taxation in the production either of the raw material or of the article itself. The trade connected with wine here is purely a distributing trade, and therefore I maintain that in selecting wine for additional taxation I have selected an object which is an article of luxury, and, though I do not deny that, in anything imposing any new indirect taxation there must be a. certain interference with trade, I believe I have less interfered with trade than by any other new indirect taxation which could be imposed. The right honourable Member for Wolverhampton said with regard to the increased duties on wine that they might raise a difficult question with foreign countries and with the Colonies. But then he argued that practically any increase in our duties on wine did not affect either foreign countries or the Colonies, because any increase of those duties would be paid by the consumers here.


I said that such increase would have the effect of diminishing the trade.


I have gone very carefully into the trade and as to the probable effect of increased duties in diminishing the consumption of wine. There may be a certain diminution of consumption—I admit that—but it will be very small indeed according to the opinion of the expert authorities whom it is my duty to consult in such matters, when compared with the total amount of wine which is introduced into this country. Almost the whole of the speech of the right honourable Member for Wolverhampton was devoted to what is the object of his attack in this Budget—the reduction of the fixed Debt charge. It would have been the natural result of his opinion if he had moved the Amendment which stood in his name. Why did he not move that Amendment, and stick to his guns, I cannot for the life of me imagine. He placed that Amendment on the Paper as the representative of the Front Bench opposite, who I imagine lead the Party opposite. It was an Amendment which I suppose might have attracted the confidence and support of those who sit behind the right honourable Gentleman. It appears not to have done so, for he himself ran away from his own Amendment and moved that this Bill should be read a second time this day six months.


In case there should be any misapprehension upon that point I wish to say that I in no way ran away from moving the Amendment. Nothing would have induced me not to move it except that it was pointed out from the Chair that if I did so it would limit the area of the Debate. It was in order not to limit the area of the Debate that I did not move my Amendment, and for no other reason whatever.


I am surprised that an old Parliamentary hand like the right honourable Gentleman did not think of that sooner. But, of course, if his Amendment succeeds, the Budget will be defeated and the Government will resign office. He would then possibly take my place. I wonder, having regard to the divergence of opinion, on these matters, that have been expressed—and which I cannot help still thinking has been somewhat at the bottom of his withdrawal of his Amendment—what he supposes would be likely to be the success of a Budget which he might himself propose. In the Amendment which the right honourable Gentleman placed on the Paper he asked the House to affirm that it is of opinion that it is inexpedient permanently to reduce the annual charge for the National Debt. That is a very sweeping statement. He asks the House to affirm it without the slightest qualification of time, or of amount, or of circumstances. He does not say that in a time of prosperity you must not reduce the permanent Debt charge, but he says that you must not at any time make any reduction, but that at whatever amount the National Debt may stand the permanent annual fixed Debt charge of £25,000,000 is still to continue. If the National Debt is reduced to £100,000,000, to £50,000,000, or even to £30,000,000, still the taxpayers of the country must go on paying £25,000,000 until the whole Debt is extinguished, quite irrespective of whether it is possible—long before this happens—to purchase the Debt in the market at all. Again, the Amendment is irrespective of circumstances. The country may have been for years engaged in a great war. It may have suspended during that time, as it naturally would, the Sinking Fund for the National Debt. It may have incurred an increased Debt; it may have emerged from a great war, half ruined and bleeding at every pore, and yet, directly peace is restored, according to the Resolution which the right honourable Gentleman intended to ask the House to pass, £25,000,000 a year would again have to be paid or provided by the taxpayers for the permanent Debt charge. I do not know whether the right honourable Gentleman intends it, but that is what his Amendment says, and I am bound to say, if he intends anything like it, to my mind it would be financial purism gone absolutely mad; and if he lives, as I hope he may, for the next 10 years, and if, during the latter part of that time he should happen to occupy, as I very much hope he may, the position of Chancellor of the Exchequer, I absolutely defy him to put such a view of the fixed Debt charge into practice when the time comes for the great reform to which he referred in his speech. There was one thing upon which I wished to congratulate the House in the speech of the right honourable Gentleman and the speech of the honourable Member for Haddington. We have had quiet and fair argument on the proposition I ventured to make. We had not that quiet and fair argument the other night; we have not always had it in the country. I have had plenty of abuse. I think the right honourable Gentleman the Member for West Monmouth, when he fell foul of the Treasury Minute the other night, which was not my Minute at all, but a mere figment of his own imagination, must have been thinking of some of those ecclesiastical controversies in which he has recently been engaged, and of the language which they have generally provoked. But to-night we have discovered that abuse is not argument, and that misrepresentation of your opponent's proposal does not strengthen your own case. Both the right honourable Gentleman the Member for Wolverhampton and the honourable Gentleman the Member for Haddington have gone a long way in admitting the strength of the reason which I put forward in support of my proposal. The right honourable Gentleman the Member for Wolverhampton frankly admitted that there were in the matter of the Sinking Fund at present great difficulties which had arisen since 1885. He stated that the premium arising from the fact that the Government on behalf of the Sinking Fund and the National Debt Commissioners on behalf of the Savings Banks were competing against each other in the purchase of Consols was a serious matter. That was also frankly admitted by the honourable Member for Haddington. But that very argument was derided the other night by the right honourable Gentleman the Member for West Monmouthshire. His contention was that my defence of the reduction of the fixed Debt charge was absolutely fatal to the whole of the Sinking Fund, and he added that my argument was that the more we took off the Sinking Fund the more secure it would become until there was nothing left of it, and then it would be absolutely secure. It would be impossible to give a more absurd and unfair version of my proposition; which was, that if you largely increase—as you must under the proposal of the right honourable Gentleman the Member for Wolverhampton—the sum annually given to the reduction of Debt while at the same time the market for Consols is seriously narrowing, the premium at which you have to purchase Consols must go on increasing. The right honourable Gentleman charged us with placing the real defence of our proposal upon the price of Consols at this moment, and said that if that argument were carried to its logical conclusion it would stop the payment of the Debt altogether. It is a very old saying that logic is a good servant, but a bad mistress. I should never have supposed, from his past financial and political career, that the right honourable Gentleman was such a slave to logic as he has shown himself in this matter. The right honourable Gentleman actually mistakes the premiss of the argument. I have never put forward that Consols standing at a premium of 110 or 111 was sufficient in itself to justify the reduction of the fixed Debt charge. What I did do was to point out that in the purchase of a certain amount of Consols for the reduction of the Debt we are paying nearly £2,000,000 more than we would have to pay for the reduction of the same amount of Consols in 1903. I said that that was a loss to the country. And so it its. Will any honourable Member deny that? Can they pretend for a moment that it was not desirable to avoid that loss if it could be properly avoided? My argument was not that, on account of this loss, great as it is, the reduction of the Debt should be stopped now; but it was that we should not do what I believe would certainly tend to increase largely that loss in the future by adding largely to the amount of interest set aside annually for the reduction of the Debt when the market for Consols was every year considerably narrowing. That has been my argument throughout, and I will add this to it now. It is not only a matter of the premium at which Consols may be bought; but I say, speaking after a conference with high authorities—not that it is not my opinion alone, for that would be worth nothing—that were we to go on as the right honourable Gentleman the Member for Wolverhampton desires us to go on, without making any reduction in the fixed Debt charge, we are in measurable distance of the time when it will be practically impossible to purchase the Consols we require at all. The right honourable Gentleman the Member for Wolverhampton frankly admits that there are both sense and truth in that argument. But his reply is that our difficulties will vanish if we put an end to the competition in the purchase of Consols between the Savings Bank and the Government.


I said it would remove your difficulties to a great extent.


Precisely. And that is to be done by enlarging the powers of investment of Savings Bank deposits in securities to other securities, such as Colonial securities? But I want to know how far honourable Members opposite are prepared to go in that particular direction. I have heard of foreign countries who receive deposits in their savings banks and spend them and hold nothing whatever against them. They might as well give an I. O. U. to those who deposit their money with them. How far are we advised to go in the purchase of securities, that are certainly of less value than those which are guaranteed by the Government of this country, to be held against deposits in our Savings Bank? I noticed the action of the right honourable Gentleman the Member for Monmouthshire while the right honourable Gentleman the Member for Wolverhampton was referring to that matter, and I never saw a more vigorous disclaimer of what I believe he regards as an even greater financial heresy than mine, than was announced in the demeanour of the right honourable. Gentleman at that moment. When the right honourable Gentleman addresses the House in this Debate I trust he will not fail to denounce the financial heresies on his own Bench in the same vigorous language as he used towards myself. Let me put this to the House. You cannot deprive the National Debt Commissioners of the Consols they hold on behalf of the Savings Bank to any large extent. If they are to keep up, in the first place, the nest egg, which all are agreed they must hold—namely, Consols as against deposits—they must hold a considerable amount of Consols for that purpose. Then, the right honourable Gentleman attaches, as he said, very high value to the redemption of the Debt through the process of terminable annuities. That is carried out through the great blocks of Consols that are held by the National Debt Commissioners being cancelled and terminable annuities set up in their places. Now, I ask, how can you continue the system of terminable annuities if the National Debt Commissioners do not hold Consols on behalf of the Savings Bank? The right honourable Gentleman may say, let them hold the large amount of Consols they hold at present and it will be quite sufficient to work the terminable annuities. So it would, no doubt. But we are bound to remember that it is impossible to exaggerate the difficulty of investing these largo sums in any new security except by means of Consols. It is a comparatively easy thing to invest £10,000 or £20,000, or even £100,000 in a new high-class security. But when you come to investing many millions a year, as we have to invest on behalf of the Savings Bank, if we allow the National Debt Commissioners to go into the market and invest seven or eight millions a year in, for instance, Indian Government securities—which, I think, are not much more than 120 millions—how long would it be before you would run up the price of these securities to the full value of Consols, and how long would it be before you ceased to be able to obtain any of them in the market at all? Further, it should be remembered that if you allow the investment of the money of Savings Bank depositors in any security beyond those we can guarantee, it does seem to give a kind of limited or quasi guarantee to the securities chosen—a course that might be fraught with great difficulty and danger to the country. I do not deny that the position of the Savings Bank and its funds is one of very great difficulty. I have admitted that more than once. We pay a high rate of interest, and we invest at a high premium. It may be necessary to enlarge the area of investment; but I must say that I look upon the proposal with a good deal of doubt and hesitation. I think the whole question is one of such difficulty at the present moment that it deserves a thorough and exhaustive inquiry. That inquiry should include not merely the area of investment, but also the rate of interest and the limit of deposits in the Savings Bank. It is not for the good of the working classes that the Savings Bank should be a charitable institution. We have paid during the last year or two—and the House has voted it cheerfully—a small sum to make up the deficiency in the income of the Savings Bank rather than raise this difficult and complicated question, and rather than take the only other alternative of reducing the rate of interest by ¼ per cent., which would deprive depositors of a very considerable annual amount—an amount far greater than the sum the House has voted by way of relief. But as soon as the stress of the discussion we are now engaged in is over it is my intention to place myself in communication, so far as I can, with honourable Members on both sides of the House who take an interest in this question—for of all questions it is one that should be divorced from Party politics—with a view of ascertaining in what way and by whom such an inquiry as I have suggested may be best and properly carried out. But whatever might be the result of such an inquiry, I should be still at variance with what the right honourable Gentleman the Member for Wolverhampton has said to-night. Whatever you may be able to do with the Savings Bank money in the future, I still differ absolutely from his view of the fixed debt charge. He thinks it should be immutable. I do not. That is the difference between us. I have looked back to the Debate which occurred when the fixed debt charge was instituted in 1875, and I find that Mr. Gladstone stated as his strong opinion that attempts to fix an annual sum for the repayment of the Debt, which should never be departed from, had been tried before, and had always failed; and in answer to that statement, what did Sir Stafford Northcote say? Why, Sir, he admitted in the frankest language that, although he proposed this with the idea of making the provision for the repayment of the Debt more certain than it had been before, yet he quite felt that in circumstances of many different characters it might be necessary for Parlia- ment to alter the law in this matter, and that it would be altered. Well now, Sir, there is one point to which the honourable and learned Gentleman the Member for Haddingtonshire alluded on which I should wish to say a word. Circumstances have changed, undoubtedly, since those which existed in former years by the fact that Consols are now irredeemable until 1923. When my right honourable Friend the First Lord of the Admiralty converted Consols and lowered the interest on the Debt it was necessary to give a considerable fixed term to the holders to induce them to convert. Conversion would have been impossible without it. But what has been the result so far as the taxpayers are concerned? When Consols were redeemable at short notice, if they rose above par and remained above par for a considerable time, of course it was open to the Chancellor of the Exchequer of the day to do what was done by my right honourable Friend and convert them into stock bearing a lower rate of interest. That was to the great advantage of the taxpayer in two ways—because he not only secured a lower rate of interest to be paid, but it would bring the level down to par again, so that in the repayment of the Debt Consols could never stand at a high premium. I do not know whether I have made myself quite clear. But this has been altered now, largely owing to the fact that Consols are irredeemable until 1923. You have them risen to this premium and you cannot reduce them. My belief is that that premium will probably largely increase in future years before it begins to decrease. Well, Sir, that being so, what is the result of the right honourable Gentleman's view? He would compel the taxpayer of the present day to pay a high premium for the reduction of Consols, and at the same time he would deny him any benefit from the reduction of the rate of interest on the Debt which, so to speak, has been bought by bringing Consols up to the premium at which they now have to be redeemed. Sir, I contend that that proposition is utterly unreasonable as regards the tax-payer of the present day. I contend that it is another reason why he should be entitled, as I have argued before, to any benefit that may accrue to the country from the reduction of the rate of interest on the Debt. And remember this. Some persons have argued as if the provision which we make for the reduction of the Debt was properly included in the expenditure of the country. Sir, it is nothing of the kind. The provision that we make for the reduction of the Debt is surplus revenue, set aside, and properly set aside, for that purpose. But it is surplus revenue all the same, raised by taxation, and what is asked by the right honourable Gentleman opposite is this—that we should keep on year by year practically adding to that surplus revenue devoted to the reduction of the Debt even when, as in the present year, for that purpose it is necessary to impose fresh taxation. Sir, that contention appears to me to be utterly unreasonable, and therefore more likely to bring about an agitation against the Sinking Fund than anything that I can conceive or anything that I have proposed. For what is it that I have proposed? Why, Sir, it is just this—that, in the first place, we should practically bespeak the terminable annuities that fall in in 1902. Why? Because, Sir, the taxpayer, to my mind, is entitled, not only to the benefit that may arise from the reduction in the rate of interest on the Debt, but also he is entitled, at any rate, to some benefit from the reduction of the amount of interest that is annually paid owing to the reduction of the amount of the Debt itself. He has received no benefit from that second source since my right honourable Friend reduced the fixed debt charge by £2,000,000 in 1887. Sir, since that time the amount by which the annual interest paid on the Debt has been reduced, by the reduction of the amount of the Debt itself, has been no less than £2,100,000 a year, and therefore I say that I am fairly entitled to ask, on behalf of the taxpayers of the present day, that they shall not be charged that additional taxation, having, as I have said, reduced the rate of interest on the Debt by that amount, and that this £2,000,000 should be applied to their benefit in that way. But while I do that I maintain a sum approaching £6,000,000 this year, and annually increasing in future years, to be devoted to the reduction of the Debt in future—more, I will venture to say, than would have been considered sufficient in the past, and far more than in several past years would have been considered sufficient to devote to the re- duction of the Debt. And, further, I am sure that having, so to speak, bespoken the terminable annuities which will fall in in 1902 they should not fall in at that time and then be devoted to the reduction of taxation, or anything of that kind, by extending them until 1911 and setting other terminable annuities in their place until 1923. Well, Sir, these are my proposals, and I contend that it is an absurd and ridiculous exaggeration to say, as it has been said, that they are fatal to the credit of the country or to the reduction of the National Debt. What was said when my right honourable Friend the present First Lord of the Admiralty made a similar proposal on similar grounds in 1887? Then he was told that his proposals were fatal to the credit of the country, and fatal also to the reduction of the Debt. But what has happened? Have these prophecies been fulfilled? No, Sir, not at all. The credit of the country since that time has stood higher than it ever stood before, and the provision made for the reduction of the Debt since that time has been greater than in any similar number of years in the past century. Sir, there is one thing to which the right honourable Gentleman appears particularly to object. He says, "You are doing this in a time of unexampled prosperity." Well, I gather the right honourable Gentleman does not object to a temporary suspension of the Sinking Fund, and when I suggested the other night that, instead of this proposal, if I had merely consulted my own convenience, I might have proposed to the House, on sufficient grounds, the temporary suspension of the new Sinking Fund for a couple of years, I heard the right honourable Gentleman the Member for West Monmouthshire say I might have done it for one year. Well, Sir, if it is so wicked, so immoral, so dishonest, and all the rest of it to permanently reduce the fixed Debt charge in a time of unexampled prosperity, why is it moral, and honest, and courageous to simply suspend temporarily the Sinking Fund in a similar time? Why are we so wicked for proposing permanently to reduce the fixed Debt charge in a time of prosperity? Why should we have escaped condemnation if we had merely proposed the temporary suspension of the Sinking Fund? Sir, to my mind the alternative course would have been infinitely more dangerous to the future reduction of the Debt than our proposal. I have placed before the House on more than one occasion the reasons which to my mind amply justify us in dealing with the fixed Debt charge, quite apart from the financial exigencies of the year. The strength of these reasons, although he does not agree with my conclusions, has been admitted by the right honourable Gentleman the Member for Wolverhampton. But for the temporary suspension of the Sinking Fund there could only have been this reason, that it would have been proposed in order to avoid the imposition of taxation in a year of unexampled prosperity. Do that once and you may do it in any number of successive years on the same grounds. There would be no security whatever for the new Sinking Fund if it were suspended on such a ground as that. Therefore, Sir, I do not understand the condemnation which right honourable Gentlemen opposite have placed upon the one proposal while they are ready to condone the other. But, Sir, the right honourable Gentleman the Member for Wolverhampton, towards the close of his speech, quoted some observations I made last year and this year with regard to the prosperity of the country. His quotation was perfectly accurate. I have admitted that the country is prosperous. If the right honourable Gentleman likes it I will adopt his own words and say we are living in a time of unexampled prosperity. But we are also living in a time of unexampled expenditure. How is that expenditure defrayed? The other night, addressing the House, I referred to the date, 1875, at which Sir Stafford North-cote established the fixed Debt charge. I quoted the figures for which he then had to provide for the Army, the Navy, and the Civil Service. I compared those figures with the amount which I have to provide for in the present year. The total showed that I have to provide, in this year, under those three heads, for an expenditure of over £31,000,000 more than Sir Stafford Northcote had to provide for in 1875. And how has this great increase in expenditure since that time been defrayed? Sir, this is an important matter which, in view of the suggestions made by right honourable Gentlemen opposite, I think honourable Gentlemen on this side of the House may do well to consider. Here are the figures. Taking the same ob- jects of duty in Customs and Excise in 1875 and in the present year the yield of indirect taxation for Customs and Excise in the first year was £47,766,000, and this year it is estimated to be £56,977,000, an increase of indirect taxation of £9,211,000. But, Sir, if you turn to direct taxation, what do you find? You find that in 1875 direct taxation produced £17,576,000, but this year it is estimated to produce £43,986,000, £26,410,000 more than it produced in 1875. Then the income tax stood at 2d. in the pound and produced £4,000,000, now it stands at 8d. in the pound and produces £18,300,000. The death duties—well, Sir, I really will refrain from alluding to the death duties because I always notice that the pleasure which the right honourable Gentleman the Member for West Monmouthshire naturally experiences when he looks back on his handiwork of 1894 is quite eclipsed by his evident disgust at the fact that the proceeds of that Act are being expended by his political adversaries. But take the whole case, and this is absolutely clear, that the great increase in the expenditure of the country since that time when the fixed Debt charge was instituted by Sir Stafford Northcote has been mainly defrayed from direct taxation. Well, now, this evening the right honourable Gentleman referred to the action taken by Mr. Gladstone in 1860, when he appropriated the long annuities to a considerable amount instead of continuing to devote that annual sum towards the reduction of the National Debt—when he appropriated those annuities in aid of the reduction of the burdens of the country under the head of indirect taxation. Well, Sir, at that time the burdens of the country under the head of indirect taxation were considerable, far greater than they are now, and I daresay Mr. Gladstone was perfectly justified in appropriating this annual sum which fell in then and devoting it to that purpose. Sir, No one will contend that the present indirect taxation is as heavy now as it was at that time. But there is a heavy burden on the taxpayer, and it is the burden which has to be borne not so much by the indirect as by the direct taxpayer at the present time. Why are we, if Mr. Gladstone is to be praised for his conduct in 1860 in this matter, to be blamed because we decline to pro- pose the increase of the burden of the direct taxpayer in order to raise the sum annually devoted to the reduction of the Debt to an amount far greater than has hitherto been considered necessary? Sir, I can only say this, that I look back with some suspicion to an argument which was addressed to the House last Session by the right honourable Gentleman the Member for West Monmouthshire in the Debate upon the financial relations between Great Britain and Ireland. The right honourable Gentleman then prognosticated the finance of the future, and his idea of the finance of the future was this, that all indirect taxation except the taxation of alcohol should be abolished, and that the void should be made good, partly, I suppose, by reduced expenditure, but mainly at the expense of the direct tax-payer. That, of course, is the view, practically, I suppose, of the entire Party opposite; they would be opposed to any increase of indirect taxation; they desire to reduce indirect taxation. If they are contending now against the reduction of the fixed Debt charge, the idea at the bottom of their minds in this contention, I take it, is this, that the income tax should be increased this year in order to retain the fixed Debt charge at £25,000,000, and that it should be so continued until that happy time arrives, between 1902 and 1904, when they possibly may be sitting on this Bench and may propose a really democratic Budget. Well, Sir, if my proposals made this year incidentally make it a little more difficult for right honourable and honourable Gentlemen opposite to carry out such an idea as that, I do not think on that account that they may less commend themselves to my honourable Friends on this side of the House. But, Sir, the right honourable Gentleman the Member for Wolverhampton charged me finally with having violated what is described as the war chest of the country. Well, Sir, I attach great value to the Sinking Fund as the war chest of the country, but a war chest must not be always kept too tightly locked, even in time of peace. Let me remind the House of what happened in the years 1884 and 1885. In the year 1884 an amount of £6,800,000 had been devoted to the reduction of the National Debt, the greatest amount from the fixed Debt charge that had yet been devoted to that purpose. A very few weeks after the close of that financial year the Prime Minister of the day had to come down to the House, at the time of the Russian war scare, and propose a Vote of Credit for £11,000,000, which was hurriedly voted and wastefully expended, and with this result on the Sinking Fund—that it had altogether to be suspended for the whole of that year. And why? Because the country was not in that state of preparation for war in which it ought to have been; and because the money that should have been devoted, and more properly devoted, to that preparation, had been used in paying off the National Debt. The real resource of this country, after all, whatever may be the value of the Sinking Fund at a time of crisis, is in the pockets of the taxpayer. We have set up an engine for obtaining the funds we may need in any such crisis to an extent which our forefathers never could have dreamed of, having regard to the present wealth of the country, and that is the engine of direct taxation. I say that it would be wrong to impose such a burden on the direct taxpayer—a limited class, a comparatively small class, when compared with the whole of the country—as would prevent that engine, important as it is, from working with real and thorough efficiency at a great time of need. I say that you have no right to do what you really propose—namely, to impose additional direct taxation in order to keep up the fixed Debt charge to a greater amount proportionately to the amount of Debt than it has ever been at before, to keep that up and increase it automatically quite irrespective of the possibility of buying Consols, or of the price at which they are to be purchased. I say any policy of the kind ought, in my belief, to be rejected by this House as an impossible, pedantic, and unfair interpretation of the meaning and intention of the fixed Debt charge.

MR. HARWOOD (Bolton)

said the Chancellor of the Exchequer had spoken of windfalls as though they were unexpected meteors revolving in the financial heavens. The fact was, however, that they were prophesied at the time. Sir Stafford Northcote foresaw that there would be someone prowling about after these so-called windfalls, and prophesied exactly what had happened. To come to the House, therefore, and talk of this as some surprise was beyond the conception of anyone who understood reasonable book-keeping. There were only two reasons which would justify a reduction in the Sinking Fund—war and bad times. According to the Chancellor of the Exchequer's own confession, neither of these prevailed now. He said it was quite true that we were in a state of great prosperity, but it was also true that our expenditure was greater than ever before, and that therefore we were perfectly justified in paying off a smaller proportion of Debt.


I argued that we were justified in paying off a greater proportion of the Debt, and so we are.


understood the Chancellor of the Exchequer to say that although we were more prosperous we were more expensive than in 1875. He would remind the House of the objection he had made to the way the Chancellor of the Exchequer brought forward his Budget Statement, so as to include the Post Office and the Telegraphs in the national expenditure. That was not national expenditure at all, and in the figures he would give he would exclude the Post Office and Telegraphs. In 1875 when Sir Stafford Northcote was Chancellor of the Exchequer the total expenditure was £75,025,000, that on the Post Office and Telegraphs, £4,194,000, leaving a net expenditure of £71,000,000. In 1899 the current total expenditure, according to the Chancellor of the Exchequer's Statement, was £111,000,000. That on Posts and Telegraphs was £12,191,000, leaving a net expenditure of £98,390,000. Another thing had to be considered, and that was, that in 1879 the population of the country was 33,000,000, while in the present year it was 40,000,000. If the population had been 40,000,000 in 1875 the expenditure would have been £86,000,000—that was taking man for man and person for person, and at the same ratio £98,000,000 in 1899. It was well known that the income tax was the best gauge of the power of the people to bear taxation. A penny in the pound income tax yielded in 1875 £1,900,000; this year it yielded £2,250,000. If we were to take the test according to population and power to bear taxation this particular year we ought to be able to stand an expenditure of £100,000,000, whereas in reality our expenditure was only £98,000,000, and instead of taking £2,000,000 from the Sinking Fund we should have been no worse off than in 1875 if we had added £1,500,000 to it. We were in reality paying in proportion to numbers and ability £1,250,000 less than our forefathers in 1875. If in 1859 the average payment towards the redemption of the National Debt had been £1 per head of the population, now, if we paid off £25,000,000 per annum, the average would have been only 12s. 6d. per head. The Chancellor of the Exchequer said that we were accumulating capital, spending money now which we ought to have spent in previous years. We were accumulating what capital, and what assets? Some said that we had a better Fleet. We were all proud of that, but what of the future? The future might have its own difficulties. It might be possible that aluminium may become practical for constructing warships, and our successors would have to spend money. It was not safe for us to presume that posterity would not have their own duties as onerous as ours. We had no assets for this enormous expenditure. The Chancellor of the Exchequer might say we had the Suez Canal shares, but our greatest assets were our coal fields, and these were being exhausted. According to the statement made by the Chancellor of the Exchequer there would be in 1905 £9,250,000 of terminable annuities at his disposal, and when we saw this large sum looming in the future it was a good reason why we should consider the whole matter carefully, and make up our minds to a broad general policy in dealing with the National Debt. What should that policy be? He was sure that the country felt that we should get rid of the Debt in a reasonable time. Some people said that it was an advantage to have a National Debt. A Debt might be an advantage for others to trade in, but he never heard that it was an advantage to those who owed the money. He should be slow to acknowledge that the financial ability of the country was unequal to the task of providing that accumulated surpluses should be employed in the extinction of Debt. Six hundred millions was the amount of the debt for the French War. Would anyone say that that was an asset, or that it was unreasonable to pay off the cost of that war? He held that every thoughtful patriot would be delighted to see an end of the Debt. A scheme to pay off the whole Debt would excite the popular imagination. We derived great strength from our Navy, and as much from our Army, but our greatest strength, even from a physical point of view, was in the smallness of our Debt, and it would become greater still if there were no Debt at all. His next point was the particular way in which the taxes were raised. It was quite obvious that we might be told that it was ridiculous with one breath to say, "Add to your taxation," and with the next to condemn the imposition of taxation. He did not object to fresh taxation, but to fresh taxation injurious to trade. He held that the proposed new taxation was the most expensive and most foolish method by which to raise money, because it discouraged trade. It discouraged trade in two ways. In the first place it disturbed trade, and there was nothing worse for any trade than disturbance and uncertainty. Now, the wine trade was peculiarly sensitive to disturbance of that kind, because it was necessary that large stocks should be kept. In the second place it discouraged trade in general. One was amazed to hear the Chancellor of the Exchequer proclaim doctrines which were sometimes apparently accepted in the House, which would be laughed at in any gathering of moderately intelligent schoolboys. The most expensive way of raising money is by putting on a tax of any kind which prevents us trading with other countries. We heard of keys and open-doors," and closed-doors," but the worst possible use to which you could put a key was to lock your own door. The notion that seemed to possess the mind of the honourable Member for Sheffield was to send your commodities to everybody else, but not to let them send anything to us. But if we sent goods to another country we must, directly or indirectly, take back from it some other commodity. He did not care for the heresies about, exempting some countries from taxation and not others, and he hoped they would not take that backward step. They ought to welcome any country in sending us commodities, being quite sure that in the long run we should have to send it something in return. Another reason why he objected to the new taxation was that it would discourage temperance. They were all agreed that the people ought to be encouraged to drink refreshing light alcoholic liquors rather than the heavier, but now we were asked to take a retrogade step. In 1860 the import of wine into this country was only 600,000 gallons, but now it was over 6,000,000 gallons. Now, all knew that duties discourage trade, but the proposed duties would differentiate in favour of the choicer wines as against the cheaper. For instance, they would involve an increase of 8 per cent. on the lighter wines and only 1 per cent. on the choicer wines—thus punishing a class of people whom we ought to take care of—all the more because they made themselves so little heard in the strife of politics—the class of poor professional people and the struggling middle classes. The Chancellor of the Exchequer said the duties would not make any difference in the consumption of the light wines. But they knew that in the time of John Knox claret was the common drink of Scotland. He would venture to say that, in all their excellent qualities, the Scots would have been better still now if they had retained their national drink of claret, and that it was not to the advantage of Scotland that they had turned, by the force of excise and customs laws from claret to whisky. As to our own nation, he believed that the wit and buoyancy of its great days would not have been possible had they soaked themselves in beer. The lightness and the buoyancy and the wit were due to the light French wines which the people drank. He would not speak of free trade as if it were a goddess before whom we ought to bow down and worship, but he begged the House not to go back upon it. He held that free trade had made the nation great and prosperous. He begged the House to hesitate before agreeing to the new duties, because they were retrograde from the point of view of temperance, and unjust in the point of view of trade.

Upon the return of the SPEAKER, after the usual interval,

*MR. COHEN (Islington, E.)

said that his right honourable Friend, in the powerful speech he had just delivered to the House, began by twitting the Member for Wolverhampton that he had not moved the Amendment now before the House in the form in which he had put it on the Paper. He had been a Conservative long before the new Sinking Fund was established, but that did not make him any the less regret and deplore that for the second time it should be a Conservative Chancellor of the Exchequer who was reducing the amount set aside for the redemption of the Debt, and that it should be the Party opposite, of which he had never had the honour of being a member, which stood up for and was seeking to maintain that solid and sure basis on which the finances of this country had been established, and to which, in his opinion, its prosperity and power were pre-eminently due. The House had listened with a great deal of interest to the very lucid way in which the Chancellor of the Exchequer explained his proposals when he introduced the Budget. One passage in particular gave him intense pleasure. After explaining the sums which had been applied to paying off the Debt, the right honourable Gentleman said that he did not want to alter the practice which had prevailed, which was the only safeguard which this country had from something like financial ruin, and he said, "Long may this practice prevail." It did prevail for about three-quarters of an hour, for before the right honourable Gentleman sat down the practice had been put an end to by the hand of his right honourable Friend himself. He hoped the House would bear with him while he examined the reasons by which his right honourable Friend had defended his proposals. He dismissed at once the suggestion that the proposals had anything to do with the fact of there being a deficit in this year's Budget, and he did so for two very excellent reasons. The Chancellor of the Exchequer himself assured them that it was only a coincidence. In the absence of that assurance it might have been natural to have connected the deficit with the reduction of the Sinking Fund. He was quite sure that the House would accept the assurance that for two years his mind had been applied to this subject, for the right honourable Gentleman had told them that he was strongly opposed to the prac- tice of reducing the Sinking Fund in order to remit taxation. There appeared to him to be a very thin line separating the reduction of the Sinking Fund in order to relieve taxation and refraining from imposing taxation when the source to which they had to come to supply the necessities of both was the same identical source of the new Sinking Fund. For those two reasons we must take it the reduction of the Sinking Fund had nothing to do with the case. He wished to examine those reasons. If it was an unpardonable financial sin to reduce the Sinking Fund in order to remit taxation, it was difficult to see how it could be easily justified if it was only to avoid imposing taxation. The right honourable Gentleman had given as one reason the high price of Consols, and the imprudence of buying them at 110 when they would be redeemable at par in 1923. There seemed to him to be some little confusion in the minds of honourable Members with regard to the expression "redeemable in 1923." It was quite true that they could not be redeemed till then, but who was going to say that they would be redeemed in 1923? He had been in business himself for over 30 years, and his experience induced him to say that he would be a very bold man who would express an opinion in 1899 as to what would be the state of the world in 1923, and what would be the state of the National Debt in that year; and of all the problems the most insoluble was what would be the price of Consols in that year. He had known of fluctuations in the market for 30 years, and he should be very loth to express an opinion as to any particular year, much less for 25 years. He would now pass to what his right honourable Friend laid stress upon. Let it be admitted that it was unwise and not economical to go on buying Consols at premiums which might be possibly higher and higher. What was the answer? His right honourable Friend explained the point the other night, for he said that £75,000,000 would be too much for the Savings Bank to lock up in terminable annuities. Speaking for himself, he would rather do that than reduce the Sinking Fund. Supposing his right honourable Friend had created terminable annuities to obtain £1,000,000 of the £2,000,000 which he had reduced the Sinking Fund by, half his difficulties would have been solved by one stroke of the pen, and the other £1,000,000 could have been found by another easy process. He thought it could be shown that there were inequalities and irregularities which might arise in connection with the new stamp duties. He did not complain of the stamp duties suggested on foreign and colonial bonds, although he did not think it would work in the manner contemplated by the Chancellor of the Exchequer. They did not believe that bonds to the bearer should pass almost free from taxation as they did now, and it was unjust that they should. He should be the very last person to try and arrest by such duties the formation of good, sound, and solid companies. If companies were sound, and their prospects were good, they could very well pay a great deal more than they were now paying; but if they were unsound, then the more that could be rescued from their capital for the benefit of the Exchequer, the better it would be for the community at large. The stamp duty question could not be undertaken this year, and so he would pass on to the suggestion of his honourable Friend the Member for Haddington, that the way to reduce the competition which forced up the price of Consols would be to extend the field of investment, and in particular Savings Bank deposits. He had himself in past years advocated that the State should guarantee the Indian Debt. He could not argue that point now, but until that had been done and the law was altered the Chancellor of the Exchequer could not put Savings Bank deposits in Indian stock. It was interesting to observe that it was only two years ago that his right honourable Friend the Member for Wolverhampton was pressing, with the approval of the country, upon the Chancellor of the Exchequer and the noble Lord the Secretary for India, the necessity of the British Exchequer coming to the aid of India, which, was then very depressed, and now two years after, notwithstanding famine and war and devastation which had occurred in India, it was India which had the surplus and England the deficit. His right honourable Friend had referred to the competition in the market for Consols, and that competition was at the bottom of the whole thing. He was very glad in- deed to hear his right honourable Friend to apply himself to that question with such a, sympathetic attitude, which he was sure was welcomed by the whole House. He believed that the House of Commons would be glad to see a powerful committee constituted capable of examining into this question to see how far it would be safe and proper for the Savings Bank money to be invested in stocks which had not got the guarantee of the Consolidated Fund. Every depositor was entitled to have the State guarantee, although he did not say that it would be a wrong step to put the same money into securities which had not got the guarantee of the Consolidated Fund. It would, however, be a very serious step, and one which should not be sanctioned without a very careful inquiry. Then there was the proposal of the Member for North Islington, which struck him as being very ingenious and perhaps a practical suggestion. He should not, however, be prepared to adopt it without some amendment. This question was becoming more urgent every day, and ought to be inquired into. He did not think the local debts of the county councils and other local bodies should be resorted to, because they needed no encouragement to borrow, and it was quite possible that if the terms were reduced it would act as a stimulus to those bodies to create debt, and it would be in the interests of the House rather to safeguard that disposition. Those were questions which showed that the inquiry should be a. serious one. He apologised to the House for the length at which he had intruded upon their attention. He had tried to examine the reasons which his right honourable Friend urged in support of his proposals, and he would only say in two or three words what were the reasons which occurred to him which operated against them. The Chancellor of the Exchequer dealt very eloquently in introducing his Budget upon the large amount which he had to provide for the Army and Navy. He did not regret that expenditure. On the contrary, he desired that it should continue. His right honourable Friend had said that they all hoped for a great deal from the coming Peace Conference, but, speaking for himself, he hoped it would dispel some of the illusions regarding armaments. Those large arma- ments in his opinion were the most powerful protection against a European war, which might be precipitated if any great Power were to lessen its armaments and thus expose itself to the attack of other better equipped nations. If such expenditure was to go on, as he thought it should do, it seemed to him that such expenditure suggested and required at the same time provision being made for the continuance of the reduction of the Debt. No one contended that under no circumstances should the Sinking Fund be suspended, but the very reason which induced every reasonable and thinking man to acknowledge that, under certain circumstances of commercial trouble, the suspension of the Sinking Fund was necessary and even legitimate—those very considerations strengthened the necessity for reducing the Debt in times of prosperity. He believed in the en-endurance and in the permanence of the commercial supremacy of this great capital, but they could not shut their eyes to what was going on every day. Their labour troubles were more frequent and more serious than they used to be. Foreign competition was far more keen and far more insidious than it used to be in former years. There might be times when they might not have an income of £112,000,000, and when they would not be able to do what they were doing now. If they would not buy Consols at a premium to pay off the Debt, were they going to wait until they were at a discount? If such a time arrived it would be because they had some great commercial trouble or possibly a political crisis, and that would be just the time when they should suspend the operation of their Sinking Fund. In his opinion the welfare and prosperity of this country would continue with its responsibilities, and foremost amongst those responsibilities, in his judgment, was the continuance of the system of the automatic increase in the provision made for the reduction of the Debt, which was the sole fabric on which their sound system of finance and their great material prosperity and political power had for a long time been maintained.


said the words of the honourable Member who had just sat down showed that on the Liberal side of the House they were essentially purists in finance. They did not ask whether a thing was popular, but whether it was right or not. His right honourable Friend, and a great many others on this side of the House, held that it was undesirable to reduce the amount of the Sinking Fund. He did not believe anyone would say that if the country was given the chance of choosing between being taxed to the extent of £2,000,000 extra, or of that amount being taken from the Sinking Fund, they would decide in favour of the former. Human nature was so constituted that it preferred to pay off debts as soon as possible. Supposing any of them in that House were to buy a coat, and the tailor said, "You must either pay me £5 down or you must give me an I O U from your great grandchild." There was no one who would hesitate about giving an I O U on his great grandchild, although it would be more reasonable for him to pay for it himself. He was astonished at the argument used in favour of reducing the Sinking Fund which was put forward by the right honourable Gentleman. He said they owed it to their great armaments that they were not at war at present with some foreign Power. His argument amounted to this—that they were not at war, and if they had been they would have incurred a large debt. That was a very astonishing argument. The right honourable Gentleman had said that on the Opposition side of the House they thought his proposals were wicked and immoral. He confessed that he did not go so far as to think that the Chancellor of the Exchequer was politically wicked and immoral on account of his proposal in regard to the Sinking Fund, but there were other grounds upon which he thought both the Chancellor of the Exchequer and his colleagues were politically wicked and immoral. The Chancellor of the Exchequer appeared to think that the right honourable Gentleman the Member for West Monmouthshire always regretted that the spending of the result of the death duties was in the hands of the present Government. The right honourable Gentleman had cause to be proud of the death duties, and he (Mr. Labouchere) could perfectly well understand the regret and sorrow of the right honourable Gentleman that they should be spent upon such foolish pro- jects as the Uganda Railway and other absurdities. He opposed the fresh taxation suggested by the Chancellor of the Exchequer, as he thought that if more money was required it ought to be provided by those who could best afford to pay. The rich ought to pay for the poor. The Chancellor of the Exchequer had pointed out that he had to provide for an expenditure which exceeded that for which Sir Stafford Northcote was responsible when he was Chancellor of the Exchequer by £31,000,000, and had asked whether it was his fault. It undoubtedly was, because he should have stopped and have refused to agree to such an expenditure, but he has allowed it to go up. He had not the control of his colleagues. He should always weigh the policy and the expenditure entailed by that policy which his colleagues proposed, and refuse the money if he does not think, or he imagined that others will not think, that the expenditure is legitimate. The right honourable Gentleman Should always bear in mind that he was the people's representative, and must always look after the interests of the community at large, and not after any particular fad of the Government of the moment. The Government, according to the right honourable Gentleman, had increased their expenditure by £17,000,000. He was informed that the figure was £19,000,000.


I do not know whether the honourable Member would care to know what I really did say, but, if he would, I might tell him that what I did say was that the estimated expenditure, including the contribution to the Local Taxation Fund, for the present year had increased by about £19,500,000.


said the House should bear in mind that, while it had been pointed out that the expenditure had increased by leaps and bounds between the date when Sir Stafford Northcote was Chancellor of the Exchequer and the present time, more than half of the expenditure was due to the enormous increase of our armaments. A very large amount had been expended on the Navy, owing to the declaration which had been made that we intended to maintain the supremacy of the sea. That meant the supremacy of the World, and nobody could be surprised that, when such a declaration was made by the country, that other nations should increase their navies. It was not a fact that this country had been enforced to increase its Navy owing to the action of Foreign Powers. It was quite the reverse; other navies had been increased because of our declaration. What did the supremacy of the ocean mean? It meant that all foreign countries held their Colonies and their commerce at our mercy, and that if they did not agree with us we could bombard their ports. It was impossible for him to suppose that other nations would allow it. When Napoleon threatened to have supremacy over Europe he for a time succeeded, but, having united all Governments against him, he very effectually lost that supremacy. This country had gone no further. We had not only declared our intentions to maintain the supremacy of the sea, but we had stated that we intended to enter into some species of alliance with the United States of America, and that that country and ourselves had a mission to seize upon and civilise any part of the world which we desired to possess, and which did not happen to belong, to any civilized nation that particular moment. What happened with regard to Fashoda, a town in the interior of Africa, which certainly did not belong to this country; and whether it belonged to Egypt or not was a matter of opinion. When our troops got there they found the French in possession. Whether the French were there rightly or wrongly it was not necessary to discuss, but at all events the representatives of the Government of this country refused to enter into any discussion before they withdrew, and threatened them with an ultimatum that if they did not withdraw without discussion we should compel them to do so by force of arms. They withdrew because they were sensible people, and knew our Navy was stronger than theirs. But honourable Gentlemen must not forget that that would be a great object lesson to other countries who might combine and lay down a declaration that we should not be masters of the sea. We should probably unite all the nations of the world against us to contest that supremacy. Did not the Chancellor of the Exchequer and the First Lord of the Admiralty see how absurd their contention was that this country's fleet must be equal or superior to that of any two Foreign Powers. Let them suppose that we were engaged in a war with France and Russia, and that we only had a Navy equal to those two Powers, if Japan joined the Alliance against us we should be at her mercy. In his opinion the whole contention was one of the most foolish that possibly could be put forward. The result of it was that there was a war expenditure in the time of peace which was constantly increasing. It was supposed that our safety in this respect lay in the fact that we were so much richer than other nations, but he would remind the House that we were not richer than the whole of them if they found it necessary to combine against us. He recollected perfectly well that when this House was first asked to vote for a large Navy the argument put forward was that the Army was so small. Now that we had a large Navy, the House was informed that it was necessary to have a large Army, and the expenditure was consequently growing. The House was told that expansion was the law of our existence, and therefore we have expanded. The right honourable Gentleman the Colonial Secretary had informed the House that where our frontiers ran with the frontiers of other Powers it was necessary to have garrisons of equal strength with theirs, so that we had put ourselves into competition with the great Continental nations with their huge armies. With regard to the African markets, he would only say that they were absolutely worthless. In his opinion the proper course would be to look after the old markets that we possessed and endeavour to improve them. The time and money that had been devoted to making markets in Africa was a waste of energy. A nation only had a certain amount of commercial energy, and that was wasted if it was exerted in a wrong direction. At the present moment we had an Army of 10,000 men in South Africa, and the reason for their presence there was that President Kruger had lately been spending money in increasing the defences of his own country. No one dreamt for a moment that he was going to invade Cape Colony, and, with the experience of the Raid, there could only be one opinion as to his wisdom in securing the defences of his country. Yet 10,000 men were sent to Africa at a cost of over £1,000,000 a year. He believed the country would not agree to this immense expenditure in times of peace. Already the Chancellor of the Exchequer admitted that he was reduced at the present time to all sorts of expedients to meet the expenditure. Nobody would object to his reducing the Sinking Fund had the money been required for the purposes of education or Old-Age Pensions, or in any way where it could be employed to greater advantage than in the Sinking Fund. There was no objection to the money being spent; the objection was to the way in which it was spent. With regard to the wine duties, no doubt it would be proved by experts, and proved conclusively, that that increase in the duties ought not to be made. He himself thought it was a great mistake to increase the wine duties as against France and Italy, and it, was a still greater mistake to increase them against our Colonial wine growers. The House was constantly being told that the Colonies ought to be drawn closer to the Mother Country, but in his opinion it was hardly the way to carry out such an excellent sentiment to tax their wines. It was disgraceful when they were told by the Vice-President of the Council how miserable and bad the schools were and how desirable it would be to spend more money on them that such amounts had been spent on armaments. Out of all the money the Government had spent during the time they had been in office they had been unable to spare a penny for the purposes of improving education. In conclusion, Mr. Labouchere said he should oppose any indirect taxation whatever, but he would welcome direct taxation if the money was spent in a proper manner—such as in Old-Age Pensions, education, and any other matter which should be governed by the State for the benefit of, and which would affect, the entire community. He admitted that the Liberal Party was not free from blame in regard to the great expenditure on armaments. They had dallied with the unclean thing, and had actually voted the money for it, but they had grown wiser, and now declared that they objected to it. He hoped the right honourable Gentleman the Chancellor of the Exchequer would withdraw his Budget and bring in a fresh one, where the incidence of taxation was placed upon a sounder financial basis than at present. He should vote against the Budget.

*MR. BANBURY (Camberwell, Peckham)

did not think that the majority of Members on the Government side of the House and the great body of feeling in the country would agree with the honourable Gentleman who had just spoken. Either the conditions of the country warranted a suspension of the Sinking Fund or they did not, and he thought they did. The speech of the right honourable Gentleman the Member for Wolverhampton went to prove that during past years, when prosperity was not so great, there had been enormous reductions in the Debt, and that our prosperity now was not likely to diminish. That surely was an argument in favour of the suspension of the operations of the Sinking Fund. If the Debt was burdensome, and the interest was hard to pay, and if there was a period of unexampled prosperity which it was thought was not likely to continue, then everything that was possible ought to be done to reduce the Debt; but, as had been pointed out, the prosperity of this country was not likely to decline, and, therefore, under the circumstances, he did not see why the Government should not avail themselves of the advantage now before them and reduce the Sinking Fund instead of wasting the money in taking up Consols at so high a premium. He quite agreed with the honourable and learned Gentleman the Solicitor General, who had said it was easy enough to suggest in the House that there were other investments quite as safe as Consols in which the Government might invest, but it was a very difficult thing to find those investments. When one came to consider that £15,000,000 was the amount to be invested in Consols, in 10 years that meant £150,000,000, and it was very easy to say that it could be put in something else, but it was very difficult to find suitable securities. The honourable and learned Member opposite had alluded to the advantage of lending money to local authorities, but he forgot that the Savings Banks were in a peculiar position, because the funds had to be easily realisable. If they lent the money to municipalities they could not realise it when they wanted, and in the event of a run on the Savings Bank it would be very dangerous to have their money invested in such securities. It was a very large question, which required a great deal of consideration, but on one point he agreed with the right honourable Gentleman the Member for Wolverhampton and that was that if the Savings Bank money could be invested in Indian securities it would be an advantage, because India was part of the Empire. That question, however, hardly arose at present, and would require a very great deal of time to deal with it. The right honourable Gentleman wound up his speech by saying that the Sinking Fund was the war chest of the nation, and that statement had been repeated in a great many newspapers. That merely meant that a certain amount of money could be raised without any additional taxation. He did not suppose that any honourable Member would say that the mere act of the suspension of £2,000,000 of the Sinking Fund would prevent the country raising any amount of money should a crisis arise. He might point out that the price of Consols had not been moved at all by the suspension of the Sinking Fund which had been proposed, and the credit of the country had in no way been impaired. He would give them an example. Suppose in five years, by some misfortune, they had a war with another European Power, and they had to raise £60,000,000 or £70,000,000 of money. They could raise it with equal facility whether the Sinking Fund was partially suspended or not; what they would have to do would be to put on fresh taxation to meet the interest on that 60 or 70 millions. The question before them was whether they should put £2,000,000 on their taxation to-day in order to provide for a contingency which might arise in five or six years' time. Was it not better to wait till the emergency arose? He did not suppose the country was prepared to pay extra taxation to deal with an eventuality which had not yet occurred. Now, how had this money been spent? It had been spent in making preparations to avoid war. Last November when they went through a very critical period of their history the expenditure of putting their Fleet in order was something like £70,000. But some years ago, when they had a dispute with a European Power their expenditure to put the national armaments in good order was £11,000,000. Was it not better to suspend a small portion of the Sinking Fund and have no increase of taxation, than to continue the Sinking Fund and then ask for a large amount of taxation? The right honourable Gentleman opposite seemed to think it was an absolute evil to be in debt, but he might point out that many large firms considered it an advantage to be in debt, and he would give them a simple illustration. Take a manufacturing firm which had spent a large amount of money, say £100,000, upon a freehold warehouse. Suppose they borrowed £75,000 on mortgage and gradually reduced it to £50,000, which they borrowed at 3½ per cent. They would not pay off that £50,000 because they could employ their money more profitably in the business. Now, with all due deference to the great ability of the right honourable Gentleman, he thought the proposal of the Chancellor of the Exchequer was a sound one. He had met a good many financial authorities recently, and he had discussed this matter with them, and with hardly a single exception they agreed with him that a partial suspension of the Sinking Fund at the present moment, when the National Debt was reduced and when the national credit was good, was an advantageous circumstance, and a good piece of finance on the part of the Chancellor of the Exchequer.

MR. BUXTON (Tower Hamlets, Poplar)

said the right honourable Gentleman had stated that the only alternative to his proposals was an additional penny on the income tax. He had never heard a Budget speech in which the Chancellor of the Exchequer did not say—what is your alternative proposal? That was not their business, although he might say that there was the obvious alternative of the re-imposition of the tobacco duty. Nobody wanted that relief, and it benefited nobody but the middlemen. If he had carried out that policy there would have been no necessity for going to the Sinking Fund, because the amount of the deficit would have been very small. He said the other day that he was bound to provide for the expenditure, but that was no justification for suspending the Sinking Fund. When there was a great emergency the suspension of the Sinking Fund was justifiable, for that was the purpose for which it was instituted. If circumstances arose under which they could no longer purchase Consols in the market, it would be necessary to deal with the Sinking Fund, but he did not anticipate a day on which such a necessity could possibly arise. He should have thought that the experience that they had had in reference to this matter would have been sufficient to induce the Chancellor of the Exchequer to have refrained from again using the old argument used by the First Lord of the Admiralty in 1887, that if he then dealt with the Sinking Fund and reduced it, it would prevent any future Chancellor of the Exchequer dealing with it in the same way. When the First Lord of the Admiralty made a somewhat similar proposal in 1887 he said that £6,000,000 was a formidable sum to have at his disposal, and he placed it on a safer footing in the future by reducing the annual amount to £26,000,000. The right honourable Gentleman seemed to have totally misconceived the whole aim and object of the Sinking Fund itself, and he said be had taken £2,000,000 from it because it had accumulated since 1887, when the last raid was made upon the Sinking Fund. That was simply cutting against the whole principle of the Sinking Fund. The other day the Chancellor of the Exchequer said that the new Sinking Fund was never intended to be anything but a small unappropriated balance of the fixed Debt charge. He could hardly have read the speech of Sir Stafford Northcote when he introduced the new Sinking Fund, or the return which was issued, showing what was in the minds of those who introduced it. Sir Stafford Northcote calculated that the amount of reduction of the Debt in 1899 would be no less than £10,900,000, and that by the year 1904 the reduction would be about £13,000,000 a year, proving that Sir Stafford Northcote never intended that £28,000,000 should be the permanent charge. The right honourable Gentleman had said that the circumstances had altered since, but they had altered for the better, and the country was more able at present than it was in 1874 to contribute to the reduction of the Debt. He did think that the House ought to consider the position in which the country stood with regard to its great indebtedness. It had been men- tioned the other day that not only was the National Debt £640,000,000, but that they had also £300,000,000 of local indebtedness as well. That was called reproductive expenditure, but it was still a debt of the country. This year the net reduction of that £640,000,000 was only £3,500,000, and under those circumstances it was not too much to ask that the Sinking Fund should not have been further touched, but should have been allowed to carry out its object. He thought they ought to look at the general total of taxation in deciding whether the country was in a position to bear a smaller or a larger charge, and anyone who took the trouble to go into the figures would see that they were now consuming a larger amount per head than they were in 1875, and that the income tax and all other sources of revenue were much more reproductive now than they were at that period. The Chancellor of the Exchequer had said that they ought not to buy Consols at the price which they were at the present moment. It was obvious that if Consols were cheaper they would make a better bargain, and it seemed to be forgotten that if they ceased to buy they would still continue to pay interest on them. Consequently, they would be a better bargain now than at a later stage. A good deal had been said about reducing the price of Consols by finding other investments, and the Member for Haddington mentioned the Savings Bank, and the Chancellor of the Exchequer had practically admitted that there was some force in what had been said to justify an inquiry into the matter. His right honourable Friend the Member for Wolverhampton had pointed out that there were the Two-and-a-half Per Cents, which it would be all the better to extinguish, because they were not stock which was easily dealt with, and they might involve, some £20,000,000 of investments. The Chancellor of the Exchequer, in regard to the creation of further terminable annuities, said he was going to cancel £15,000,000 of Savings Bank stock, and it was said that he might cancel sufficient to make up the £2,000,000 which he had taken from the Sinking Fund. He had also stated that in order to do that it would be necessary to cancel £60,000,000 of stock, and that that would reduce the amount in the hands of the National Debt Commissioners to too small a point. Taking that £15,000,000 for 23 years it would involve a charge of £870,000 a year; and, therefore, to utilise the £2,000,000 would have involved not £60,000,000 of stock, but only £35,000,000. In view of the amount which was at present in the hands of the Savings Bank, he would ask the right honourable Gentleman if he could not see his way to cancel another £15,000,000 in order to spread this charge to the furthest extent possible. Mr. Childers, in 1885, cancelled no less than £70,000,000 of stock, which left him only something like £40,000,000 of Consols, whereas if the right honourable Gentleman did what he had suggested he would still have about £80,000,000 of stock. He thought this was a matter which they might very well bring to the right honourable Gentleman's attention, because if it only involved about £35,000,000 the difficulty might be overcome by creating terminable annuities. The Chancellor of the Exchequer dwelt very largely on the great expenditure of the country as one of the reasons why he proposed to reduce the repayments on the Debt. That was the very last argument which the right honourable Gentleman ought to use as an explanation for meddling with the Sinking Fund. A great many of them believed that a great amount of the national expenditure, especially for the Navy, had been absolutely necessary for the safety of the country, but they believed there was no sufficient check on that expenditure. The Chancellor of the Exchequer and the Treasury had been giving money out with both hands, and nothing tended more to extravagance than the thought that each Department could get as much money as it liked. The only real check in the past, as in the present, was the knowledge that if there were a deficit it must be met by taxation. That knowledge strengthened the hands of the Chancellor of the Exchequer, and made for economy. On the ground of economy, and because it was especially advantageous to the country that it ought not to cease to repay the Debt, and ought not to break that principle for the sake of about £200,000 a year, he should certainly vote for the Amendment.

MR. HUBBARD (Lambeth, Brixton)

said that the indictment raised against the Chancellor of the Exchequer seemed to be drawn on abstract lines. The right honourable Baronet the Member for Wolverhampton endeavoured to prove that in making any proposal for the reduction of the Sinking Fund my right honourable Friend was proving himself a financial heretic. In the matter of financial orthodoxy and heresy, he thought the Committee was very much in the state of the early Church during the Ayrian controversy, when parties were so evenly balanced that orthodoxy and heresy were bandied from side to side. He wished the House to consider the matter from the plain business point of view. He thought they all agreed that a Sinking Fund once set up was worthy of respect, but there was a fallacy in endeavouring to erect into an immutable law a principle that was of general application. In finance, as in morals, circumstances should be allowed to alter cases. The right honourable Gentleman, in moving his Amendment, asked what were the circumstances that could justify the reduction of the Sinking Fund in a time of prosperity. The Government, to be successful, must be run on sound business lines. In all great industrious concerns it was the practice to "write off" a fixed percentage, and that continued in normal years, but not in abnormal years. In a year in which stock had to be renewed, or where there was a large expenditure for plant, or for other purposes, the amount written off would be found to be less, the justification being that the value of the assets had been increased. That appeared to him to be exactly what the Government had done. They had added very largely to the extent and power of the Navy, and in doing that they had endowed the country with the most valuable asset it could have. It seemed to him, therefore, that the Government was justified in diminishing somewhat the amount "written off," and that the Chancellor of the Exchequer had proceeded in a perfectly businesslike manner. There was no doubt that the real justification of the Sinking Fund was the fact that in time of war the six or seven millions now paid would represent a capital sum of 200 or 300 millions raised without any cost to the country. That was an advantage which no other country possessed, and surely it was only reasonable that in a year when they had undertaken so much that the Fund created for the purpose of meeting a war charge should be in part appropriated for the expense of the present year, incurred for the very purposes for which the Fund was created, namely, to provide against the risks of war. The Budget was a popular Budget. Every Budget should be popular, but it was especially necessary at present that they should not put any heavy charge on the people that could be avoided in order that they should not create a reaction against the increase of the Army. Such reaction would be a great disaster, and the Government had very wisely followed the line of least resistance. The right honourable Baronet said that he considered the proper way to reduce the Debt was by fixed payments of fixed amounts. It seemed to him that that was not such a sound proposition as that of the Chancellor of the Exchequer, who said that the reduction of the Debt should bear a certain proportion to the amount outstanding. That appeared to him to be the more logical method. He would suggest to the Chancellor of the Exchequer whether it would not be possible to arrange annuities rather on the principle of payment by instalments of a fixed sum of capital with interest that diminished every year. He would accomplish the same object with greater symmetry and with greater fairness to succeeding years The question of how to find when Consols stood at a prohibitive premium an investment for the Savings Bank Fund was indeed a matter of extreme difficulty, and he was very glad to hear from the Chancellor of the Exchequer that he was willing to appoint a Select Committee to inquire into the subject. Look at the amount they were paying. In 1894 £37,000,000 of Consols were bought, at an average discount of 2½, which was very good business; since 1894 no less than £75,000,000 had been bought at an average premium of 7¼, which actually meant a loss to the country, when the time of maturity arrived, of no less than 5½ millions. That could not be said to be a satisfactory financial transaction. The question now arose, were they going to continue to run the Savings Bank at a loss, or should they reduce the rate of interest? He confessed, if it were possible to avoid it, that he would very much regret to see the rate of interest reduced at a time when they were doing all they could to foster habits of thrift. But they could not, as business people, continue to run the Savings Bank at a loss. They might meet the difficulty by widening the area of investment, and it seemed to him that India stocks formed a very suitable field of investment for the Savings Bank Fund. It would not cause any very heavy burden on the country, because they practically guaranteed them already. Another subject to which he would venture to call attention was that of local loans. The Local Loans Fund was not a very suitable stock for investment by municipalities and local bodies. It was a 3 per cent. stock, which stood at a high premium, and was redeemable as soon as 1912. Local debts of the country had been increasing at even a greater length than the National Debt was being paid off, the increase during the last five years being something like 45 millions. Would it not be possible for the Chancellor of the Exchequer to obtain leave to make another issue, say a 2½ per cent. Local Loan Stock, and to invite the municipal corporations, urban sanitary authorities, and district councils to borrow from it? Would it not be possible to place the Government in somewhat the same position as regards its system of finance as that occupied by the London County Council? He would not refer to the wine and stamp duties, except to remark that the business in foreign securities ran on high and very delicate lines. He thought right honourable and honourable Gentlemen who objected to the reduction of the Sinking Fund were bound to indicate an alternative. The right honourable Baronet had held up to them for admiration the example of Mr Gladstone, who in time of peace refused to reduce the charge on the Debt, but put a penny on the income tax. If the Chancellor of the Exchequer did that, he would meet with even greater opposition than was shown to his present proposals. It was practically impossible for any Chancellor of the Exchequer to endanger his Government by proposing new sources of taxation which would be unpopular throughout the country, and he could not blame the right honourable Gentleman if he declined to walk into the snare laid for him by the Opposition, instead of taking the more cautious course he adopted. There was, however, danger to the country lest the necessity for popularity, or rather the necessity of avoiding unpopularity, should impel them into methods of cowardly, niggardly, or paltry finance. It was, perhaps, utopian to hope that finance, like their foreign policy, might be removed beyond the sphere of Party politics, but he thought that in times of crisis, or when they were preparing for a great national emergency, there might be some co-operation between Chancellors of the Exchequer, present and potential, and that with the approbation of Leaders on both sides, something might be done by the imposition of some tax, direct or indirect, that should, without exemption or fear or favour, bring home to every man in the country the responsibility of his vote. It seemed to him that it was unfair that any charge for any great national object should be laid upon any class exclusively. The great and salutary lesson should be taught that those who have sanctioned expenditure for the national defence should also take their part in paying the bill. He begged to give his most hearty support to the proposals of the Chancellor of the Exchequer, because he was convinced that the line he had taken would meet with the concurrence of the business community of the country, and would obtain, not only the approval, but the gratitude of the country at large.

MR. MOULTON (Cornwall, Launceston)

said that the Chancellor of the Exchequer drew from the various Amendments the idea that there was a difference of opinion among Members of the Opposition on the subject, but the right honourable Gentleman would find that there was no difference of opinion on the main point of the Budget, namely, that increased taxation was to be avoided in the circumstances of the year by diminishing the amount for the repayment of the Debt. It appeared to him that the reasons on which the Chancellor of the Exchequer had based his action were not only equally open to criticism, but were more injurious even than the step he had taken with regard to taxation itself. He admitted that the circumstances of the day were exceptional, but exceptional in a very different way from that in which they were regarded by honourable Members on the other side. He did not agree entirely with the limited view that paying off the Debt was a payment into the war chest, unless it was meant to leave the nation with a greater reserve of strength for any exceptional trial or Calamity. It appeared to him that the sanction of the regular payments of the Debt was far higher than that. It was that while they had a right to call on their successors to assist in bearing exceptional expenditure, they could not do that with a good conscience unless they felt that they too had borne their share of the exceptional expenditure of their predecessors. He was astonished to hear the references of the honourable Member for Peckham to the enormous sacrifices which the country had made in paying off the Debt. It had only paid off one-fifth of the Debt in the sixty years of Her Majesty's reign. Was that an enormous sacrifice for a great nation? The fact was that the figures were so large, and the amount of the Debt itself so overwhelming, that it was considered astonishing that they were not satisfied at a payment of seven millions. That was because it was forgotten that the Debt itself was between 600 and 700 millions. They had tried several methods of reducing the Debt, and of keeping before the mind of the people the duty of doing so. They had invented the system of terminable annuities, and in Sir Stafford Northcote's time a fixed Debt charge was introduced, which was a. most excellent idea. What he felt that they had a right to complain of the Chancellor of the Exchequer for was, that his argument struck at the root of all attempts to pay off the National Debt within anything like a reasonable time. The right honourable Gentleman's argument was that supposing the interest on the Debt was reduced, clearly the taxpayers of the moment had a right to take the benefit of that reduction. But he saw no reason why the fall in the rate of interest should release the taxpayers from a simple duty. Suppose the rate of interest had gone up for some reason instead of down, would that have been a reason for their not paying off the same as they would under more fortunate circumstances? In fact, in his view, as the interest went down, they ought to increase rather than decrease the amount of Debt paid off. A still more dangerous argument was, that as we paid off the Debt and the Debt got smaller, we ought to lessen the amount devoted to Debt extinction. Now that was exactly opposed to Sir Stafford Northcote's principle of a fixed Debt charge. The essence of a fixed Debt charge was that you paid a certain amount every year, and gradually the proportion that went to the extinction of the capital Debt got larger and larger every year. But if they diminished the reduction of Debt in proportion to the amount of the Debt, there was not a man who knew anything about figures who would not say that meant they were not going to pay off the Debt for a whole eternity. But it was further said that they ought to diminish the amount paid off in proportion, not to the amount of the Debt, but to the amount, which was decreasing more rapidly every year, of the Debt in the hands of the public. On that principle they would pay off more slowly than ever. If these arguments were to be treated as a justification for relaxing efforts for the payment of the Debt there was no chance whatever for future Chancellors of Exchequer ever contemplating the extinction of the Debt at all. They had had this year, in support of the action—which might be right or might be wrong—four reasons assigned by the Chancellor of the Exchequer for diminishing the Debt charge in a prosperous year, any one of them being sufficient to excuse, under any circumstances, any future Chancellor of Exchequer, however cowardly he might be in regard to increased taxation, or however faithless he might be to his duty of keeping up the discharge of the Debt, for not keeping up the amount of Debt to be paid off. He regretted more than the diminution of the Debt charge by two millions the reasons which had been assigned for diminishing it. The only way was to fix a standard of sacrifice, and to keep to that through evil report and good report. Unless they did that the sense of duty in regard to paying off the Debt would wax feebler and feebler, and the result would be a recognition by the Government of the perpetuity of the burden, which would be a disgrace to an honourable commercial nation like England. So much for the reasons which depended on abstract matters. Let them turn to the excuses given by the Chancellor of the Exchequer in this particular instance for relaxing the payment of the Debt. Those reasons were equally bad and equally effective in any year; but those which depended on the circumstances of the moment were, if possible, worse. In the first place the Chancellor of the Exchequer said that three or four years hence, thanks to the sacrifices of their predecessors, the interest charged on the Debt would be greatly reduced. That was a strange reason. Because some years hence the interest on the Debt charge would be reduced, they should take advantage of it before it came! But it was still more strange, when they considered that that was the result of the sacrifices of past years, in the hope that the Debt would be got rid of in a reasonable time, to make that an excuse for not imitating those efforts, but for relaxing them. Another reason given was that Consols were very dear, and they had to pay a premium for them it they wanted to buy them back. He did not understand how the present Chancellor of the Exchequer could put that forward effective in the present year. In 1903 there were the Two-and-a-Half per Cents, which could be redeemed to the extent of something like 20 millions, and the consequence was that, instead of taking up Consols about 110 or 111, they could get them at 103. He did not want to rest on that, because he thought that the question as to the effect on the national finances of Consols being at a premium was one that ought to be looked at in the face. Sooner or later it would come plainly before the House that the price of Consols corresponded with the fact that the rate of interest for such a security as that was not much above 2 per cent. They saw the Two-and-a-Half per Cents. going to be paid off in 1905 standing at 103, and those that were going to be paid off in 1923 standing at about 113. Persons who bought these were investing their money so as to receive 2 per cent. upon it. Therefore they had got to consider that in all departments of national finance interest on money was 2 per cent., and when they bought Consols at 110, not only was the capital indebtedness of £100 which was paid off in 1923 got rid of, but also the 2½ per cent. per annum which had to be paid for the intervening years, one half per cent. of which was exaggerated interest. How, therefore, could it be said that it was a loss to buy Consols at 110? He trusted that the Chancellor of the Exchequer would consider what ought to be done in regard to the savings of the nation. Either he must go on purchasing Consols at 110, which he had shown would be a bargain involving no loss, or he was bound to face the difficulty of finding some other method of investing the savings of the nation. If the price of Consols was fictitious, just consider the iniquity of the position which compelled the Government to invest in Consols and in kindred stocks, the balance of the deposits in the savings banks. They were making them buy a security which was not worth the money they were paying for it. He believed himself that it would be found that the fall in interest was the true cause of the rise in the price of the security. Instead of discharging Debt they were taking up liabilities every year which did not appear in the National Debt accounts, and every penny so taken up constituted a 2¾ per cent. liability. The consequence was that they were adding to the liabilities of the country every day. Surely that was a state of things which ought to make them pause. But if our liabilities were greater than we had realised, surely that was a reason why they should still continue to save. Anything was better than at this moment to abandon saving; and that was what was proposed to be done to the extent of no less than two millions a year at this critical moment. He noticed that many honourable Members seemed to think that there was a Heaven-sent method of escaping this rigorous examination of the state of things by reason of the fact that we could use terminable annuities. Now, terminable annuities had completely changed their character since Consols had gone above par, and the amount paid off every year was larger than that taken by private persons on the terminable annuities. Changing £20,000,000 of Consols in the hands of a Government Department for terminable annuities was practically a pure illusion. If we were going to spend £20,000,000 in terminable annuities and to pay a million more in interest on that stock, the only change that was made was that that Department of Government had got a good investment for these millions instead of the National Debt Commissioners. Those sums in the hands of the Government Departments represented the sums that they had to keep at interest in order to meet the liabilities of the Savings Bank Fund. The consequence was that unless they were prepared to enlarge the list of securities in which the Savings Bank could invest, they were doing very little indeed in taking to terminable annuities. He was himself perfectly convinced that when this matter was looked into, when they decided whether they were going to lower the interest on the Savings Bank deposits or not, and when they realised what a fearful thing it would be if, for the next 20 years, they were to diminish their efforts at saving simply because they had to buy Consols at a premium, he thought they would have to take some form of investment so as to prevent a very exaggerated price of Consols. But if he was right in thinking that the true rate of interest had fallen to 2 per cent., they would never get any other value for Consols than that which represented the premium that ought to be paid upon them, because they could not be paid off till 1923. He asked the House what reason was there, at a time of unexampled prosperity, for their shirking the two millions of the burden which last year and the year before, and the year before that again, they had borne. Why should they not pay their fair share this year? It was idle to talk of the nation not paying off Debt till 1923 because Consols could in that year be redeemed at a lower price. Each year the nation changed. The nation of this year ought to face its duty, and they would be unable to maintain their high standard in the years to come if they allowed such trivial excuse as that. How could they expect the nation that would come after to be more conscientious. See what the result would be. There was a Debt of 640 millions, and seven millions were held to be too much by which to reduce it every year, and it was curtailed to five millions. But if they only paid off Debt at the rate of five millions a year instead of seven, that meant that it would take something like 130 years before the existing Debt was paid off. And who would venture to say that throughout those 130 years England would have the same power to bear a heavy Debt as now? This was the heyday of national prosperity, largely on account, of our trade conditions and our position. But it was known that our finest resources—our coal and iron—were diminishing very fast. Could it be suggested that any one of them, as an honest man, could be entitled to say that he was so justified in thinking that the prosperity of England would last another 100 years, that we need not pay off our Debt. By resorting to this species of repudiation they would be lowering the national standard to a great degree. The burden of the speech of the Chancellor of the Exchequer was that the poor did not like taxation, and the Government would not put it on the rich; therefore, what could they do but diminish the payment of the Debt? It was an act of dishonesty towards posterity to actually diminish the standard of Debt discharge fixed years ago and loyally adhered to so long.

*MR. STUART WORTLEY (Sheffield, Hallam)

thought that, as to the propriety of paying off Debt when Consols were at a high premium, almost everything had been said that could be said without going deep into technical details. Honourable Gentlemen opposite must not suppose that he was content with a state of things in which we were gradually converting the National Debt from an irredeemable annuity into a debt which was payable in cash at sight. That was not a satisfactory state of things. It had been assumed all through the Debate that this was a year, not only of prosperity, but also of peace. It was nothing of the kind. If he might borrow the expression used in one of the earlier Debates by his honourable and gallant Friend the Member for the Woodbridge Division, that peace, if it existed, was a precarious peace. It was a peace which we could only maintain by this gigantic expenditure. The peace which the country enjoyed at the present time could not be said to be further from war than was the peace in 1878 and 1885, in both of which years the Sinking Fund was partly suspended, except by the use of arguments too thin to stand the test of examination. In 1878, it was thought fit by Sir Stafford Northcote to suspend the Sinking Fund, as we wanted to prevent Russia from going to Constantinople, and we thereby made such preparations as prevented a war with Russia. In 1885, we suspended the Sinking Fund again to prevent Russia from going to Herat, and in that way again prevented Russia from assuming a position which menaced the peace of the whole Empire. The difficulty of the present Debate was that Her Majesty's Ministers could not, from considerations of international relations, use the arguments which would be the virtual defence of their policy, and he must say that he did not think honourable and right honourable Gentlemen opposite had made fair use of the advantage they thus enjoyed. The present situation was this, that when they reflected upon the events of 1898, there was not a man in the House who could say with certainty that we should not have been at war if in 1898 our Navy and national defences had been relatively to those of other nations such as they were, say, before the initiation of the Spencer programme of 1894. Did any man doubt that if now we were to allow our defensive power to fall behind that of other States, it was more than likely that we should be at war for our national existence? As alternatives to the suspension of the Sinking Fund, they had had specific proposals from a number of Members, but none from the Member for West Monmouth, and it was only from his record that they could venture to guess what his alternatives would be. The right honourable Gentleman was great upon courage, but he had never faced a deficit except by one of three methods. He either taxed those who were certain to vote against him, and from whom he therefore had nothing to fear, or he taxed those who were electorally so insignificant that it required no courage at all to tax them; or to meet a temporary financial deficit he was content to go on with ships without guns, or with guns without ammunition. He (Mr. Stuart Wortley) was glad that the present Government had not courage of that kind. The best part, to his thinking, of the proposed suspension of the Sinking Fund was its presumptive permanence. The present situation consisted of a rivalry for supremacy, and the only way to stop that rivalry and the consequent abnormal expenditure was to indicate to other nations that whatever they spent on armaments, we would spend as much and more. To such contest there could only be one end, and those must win to whom the contest was not a question of mere adventure, but of national existence and of life and death. Such a struggle had now been forced on us by Powers that need not be named; and he was glad the Government, by having the courage to make permanent provision for the expenditure thereby rendered necessary, were doing that which was most likely to remove the causes which led to our present financial necessities.

*MR. MENDL (Plymouth)

said it was fundamental fallacy to treat our armaments as if they were all that was necessary in case of a European war. The possibility of our being able to succeed in the event of war would depend upon the financial reserve we had in hand, and that reserve seemed to him to be very seriously impaired by the proposal of the Chancellor of the Exchequer. Surely, in a time of prosperity, it was our business to do all we could to keep up the payment of the Debt in order to provide for any emergency which might arise. The question of the present price of Consols had really nothing whatever to do with the matter of our obligation to pay off Debt. He was very glad to hear that the Government had agreed to an inquiry into the question of the Savings Banks, and pointed out that since the limit of deposits had been increased to £300, which had, of course, increased competition in the Consol market, Savings Bank investments could not be said to be those of the working classes so much as formerly, and it was not right that the Government should practically make a money present to a class of people very well able to take care of themselves. But the Chancellor of the Exchequer's proposal as to the Sinking Fund simply meant that the Debt would be extinguished in 1959 instead of in 1943, and that meant that for 16 years the country would have to go on paying interest on, and cost of management of, the Debt longer, in consequence of the successive reductions of the Fund made by the right honourable Gentleman the First Lord of the Admiralty and the present Chancellor of the Exchequer. He protested that we had a right to consider the taxpayers of the next generation. He asserted that the proposal was disapproved of by business people of all shades of opinion in the country, and that it would ultimately prove the Nemesis of the Government.


moved the adjournment of the Debate at midnight.