§ I come now to the amount of-expenditure for which I shall have to provide in 1903–4—namely, according to the Estimates, £144,331,000. The only item upon which I think I need comment is the charge in respect of the National Debt. Sir Stafford Northcote in 1875 instituted the system, which has existed ever since, of a fixed annual charge. That fixed annual charge had two duties to perform—to cover all the obligatory payments and to provide for the repayment of capital. Of course, as the debt diminishes, the interest paid out of this fixed sum becomes less and the Sinking Fund becomes greater. That is the simple way in which the Fixed Debt Charge works. The system is one from which I think the country has derived very great advantages. Certainly I have no intention of departing from it. On the contrary, I hold most strongly that it is in the highest degree necessary both for the maintenance of our credit and the stability of our finance, that a fixed debt charge should be maintained; and maintained at such a figure as to provide a Sinking Fund for the extinction of debt adequate to the amount of the debt. It is rather curious to notice that the debt at the time when Sir Stafford Northcote instituted this charge, which he fixed at £28,000,000, was almost precisely the same as it is now. It was then £769,000,000, as against £770,000,000 at the present time. But it will be remembered that the interest on the debt at that time was 3 per cent., instead of 2½ per cent. as it is now. Therefore, a very much larger proportion of this fixed charge of £28,000,000 had to go in payment of interest, and a very much smaller sum in extinction of debt than would be the case with a fixed charge of that amount now. I estimate that an annual charge of £25,500,000 would now be as effective for the redemption of the debt as £28,000,000 was at that time. The amount of the annual charge has been varied more than once. I shall be perfectly prepared, if necessary, to defend the variations that have taken place; 245 but I do not consider it necessary to trouble the Committee by doing so at the present moment. The amount of the annual charge fixed in 1899 by the right hon. Gentleman who preceded me at the Exchequer was £23,000,000; of which £17,250,000 went for interest and £5,750,000 for extinction of Debt.
§ It now becomes necessary to reconsider the amount to be allocated to the annual charge. The Committee know that there is at present a considerable sum, amounting to about £4,500,000, interest on the war debt, which is at present outside the I fixed charge. It is quite clear that it is not good finance that that amount should remain outside the fixed charge. It would be absurd to have one portion of the interest on our debt inside the fixed charge and another portion outside. Therefore I propose to bring the interest on the war debt within the fixed charge. In determining the amount at which that charge should be fixed there are certain considerations which the Committee must remember. One is that, in pursuance of the memorable conversion scheme which was carried out by my noble friend Lord Goschen, and which will always be associated with his name, Consols have now become 2½ per cent. stock, and the charge for interest is lightened by ¼ per cent., which amounts to an annual sum of £1,250,000. Another consideration is that, as a consequence of the war, we have added no less that £159,000,000 to the National Debt. Before, however, deciding finally what shall be the annual debt charge, the Committee should bear in mind another consideration; and that is that, in pursuance of the arrangement made by my right hon. friend the Secretary for the Colonies, we confidently hope to obtain from the Transvaal this year—and it will be obtained immediately—£4,000,000 out of the proposed guaranteed loan in repayment of colonial expenditure which we had previously provided for out of Imperial funds, and in the course of the three following years a further sum of £30,000,000, by way of contribution towards the expenses of the war. Bearing all these considerations in mind, I come to the question at what amount should the annual debt charge be fixed, so that it should not be too heavy a 246 burden for the taxpayer, and yet bear a proper proportion to the a amount of the debt, I think there is nothing so well calculated to raise and maintain our credit as large purchases on account of the Sinking Fund. I have therefore decided to fix the annual debt charge at £27,000,000.