§ Now I come to what, I think, is perhaps a more interesting, and, certainly, in my view, a more important aspect of the finance of last year—that is, the reduction of debt that took place in 1907–8. I want to explain again—previous Chancellors of the Exchequer have done it more than once—the distinction, which, I am sure, is thoroughly familiar to the minds of hon. Members, between what we call National Debt in the strict sense—that is to say, dead-weight debt—and the gross capital liabilities, which include sums borrowed under various Naval and Military Works Acts, Post Office Telegraph Acts, and so forth, each of which has a sinking fund of its own. Dealing first with the dead-weight debt which is popularly recognised as constituting the National Debt, we have during the year that has gone by effected the following reduction in the three categories of which it is composed: The Funded Debt has been reduced by 454 £6,319,000, Terminable Annuities by £1,457,000, and the Unfunded Debt by £10,254,000; so that the capital of the National Debt at the end of the financial year, as compared with the beginning of the year, showed a reduction of £18,030,000. This reduction, I need hardly say, is wholly without precedent. To show how that is brought about, the following figures may be interesting: I pointed out in my Budget speech last year that the net provision that would be available for the reduction of our aggregate liabilities would be no less than £13,400,000, assuming that the Fixed Debt Charge remained at the statutory figure of £28,000,000. But, as the Committee will remember, I increased the Fixed Debt Charge for the year by £1,500,000, making it £29,500,000, thus raising the estimated provision for the reduction of the debt to £14,900,000. In point of fact, the addition during the year to the other capital liabilities—liabilities under the various Acts I referred to a moment ago—was less than had been estimated by £800,000, the actual addition being £1,191,000, as against the estimate of £1,970,000. This raised the net sum available for the reduction of debt to, approximately, £15,700,000, a sum which sufficed to cancel debt to the nominal amount of £16,839,000. The Committee will, therefore, see that while the reduction of the National Debt was £18,030,000, the reduction effected in the aggregate gross liabilities of the State, is £16,839,000. Whichever way you look at it, whether at the reduction of the dead-weight Debt by over £18,000,000 or at the reduction of the gross liabilities of the nation by very nearly £17,000,000, I think that is a result upon which the Committee and the country may fairly congratulate themselves. As I shall show in a moment, it has an important bearing upon the future of our finance.
§ Before I come to the estimate of the revenue and expenditure of the current year, perhaps this will be a convenient point to deal with the anticipated reduction of debt in the year 1908–9. Assuming that the Fixed Debt Charge is placed for the current year 1908–9 at £28,000,000 and I intend to keep it at that; and assuming, further, that no part of the realised surplus of last year is diverted 455 from its statutory destination as Old Sinking Fund, then the estimated amount of the provision which will be available for the reduction of debt in 1908–9 will be £14,376,000. That is made out in the following way: The Old Sinking Fund of last year—the realised surplus of last year—amounts to £4,726,000, the portion of the Fixed Debt Charge of £28,000,000 representing repayment of capital to £9,785,000, and the miscellaneous receipts applicable to the reduction of debt to £500,000, making a total of £15,011,000. Against that I have to set off the estimated borrowings on capital account, of which hon. Members will find the details at the bottom of Table VI., page 5, under the Telegraphs Acts and various other Acts. I estimate the borrowings on capital account at £2,785,000, but from that has to be deducted the amount provided on the Votes for the repayment of principal, £2,150,000, leaving a net addition of £635,000. If you subtract that sum from £15,011,000 you get the reduction of the liabilities of the nation by £14,376,000. I must say here that I am going to make a charge upon that amount, and £600,000 will be diverted for further capital expenditure on new public offices instead of entering upon a fresh loan by way of terminable annuities. Following a precedent of 1897–8, I divert £600,000 from the Sinking Fund which is very properly applicable to bricks, mortar, and land, to a purpose to which I think it may appropriately be applied. The amount then applicable to the reduction of debt will be £14,411,000. Now, when that amount in cash comes to be applied to the actual extinction of debt, I do not think I am going into the region of speculation—at any rate, not into the region of hazardous speculation—when I say there will be further reduction in the nominal capital of the Debt during the financial year to not far short of the enormous amount of £15 000 000, or from £711,476,000 to £696,500,000. Allowing for the estimated increase of £635,000 on other capital liabilities, the estimated reduction of total capital liabilities in 1908–9 is £13,776,000. These are very remarkable figures, and I wish the Committee to allow me to dwell on this point for a few minutes longer, 456 because I wish hon. Members to appreciate how we stand with regard to our financial liabilities and what has been done in the last three years in that respect. I deal first with the National, or dead-weight Debt for a reason that will be apparent later on. I start with the figure showing the total amount of the National, or dead-weight Debt twenty years ago. On 31st March, 1889, the amount of the dead-weight Debt was £697,000,000; the Committee will bear that figure in mind. In 1903, at the close of the South African War that figure had risen from £697,000,000 to £770,700,000. On 31st March 1906, which may be said for all effective purposes to be the time when we first became responsible for the conduct of the financial affairs of the country, two or three months after we came into office, the amount was £743,200,000. On 31st March, 1909, the last year for which I shall have responsibility for national finance, it is estimated that the amount will be reduced to £696,500,000. In other words, the figures will be brought back to what they were twenty years ago. I do not in any way want to depreciate the financial policy of my predecessors, but the figures show that, while from 1903 to 1909 the total reduction was £74,200,000, in the first three years it was £27,500,000, at the rate of about £9,000,000 a year; in the second three years it was £46,700,000, or about £15,500,000 a year.