§ Resolution reported—
§ "That it is expedient to authorise the Treasury to raise by means of the issue of Exchequer bonds any sums not exceeding twenty-one million pounds which may be required for the redemption of War Stock and War Bonds created under the War Loan Act, 1900.
§ "That any expenses incurred in connection with raising any such sums, or in connection with the redemption of the said War Stock and War Bonds and the principal of and interest on any such sums be charged on the Consolidated Fund, and, 783 as to the interest, be paid as part of the permanent annual charge for the National Debt."
§ Sir F. BANBURYThe Government propose to deal with the War Loan by the issue of Exchequer bonds. I do not think that the right hon. Gentleman informed the House as to the length of currency of the Exchequer bonds which he proposed to issue. Does he propose to issue year bonds or five-year bonds? If he proposes to issue short bonds, what does he propose to do when they become due? This practically is a permanent addition to the funded debt, and the manner in which the right hon. Gentleman proposes to redeem it is by transforming part of the funded debt into part of the unfunded debt. Everybody knows that there is nothing more dangerous to the finances of the country than to have a large floating debt. I believe that in the case of the Argentine Republic, when its finances were in a bad way—and I am not sure that the same thing did not occur in the time of Ismael Pasha in Egypt—the first thing which the experts called in to advise recommended was to fund the floating debt. We are doing exactly the reverse. We are endeavouring to increase the floating debt at the expense of the funded debt. I do not know how the right hon. Gentleman is going to get out of that unless he holds that the War Loan was not funded debt. I think it was, but at any rate it was debt that could not be repaid for ten years. Personally, I think it should have been longer. Still, ten years is a considerable time. What I wish to know is how the light hon. Gentleman proposes to deal with the situation when the Exchequer bonds become due and what the life of these Exchequer bonds will be?
§ Mr. HOBHOUSEThe hon. Baronet the Member for the City of London has said that this Loan, as it was originally created and as it will exist up to 5th April next, was funded debt.
§ Sir F. BANBURYI said it was for ten years.
§ Mr. HOBHOUSEIf he will turn to the finance accounts of the United Kingdom he will see that this debt has always been described as unfunded debt, and therefore there is no change in the description of the debt, which has long stood as a portion not of the funded but of the unfunded debt. Therefore I beg him to disabuse his mind 784 of the idea that there is any addition to the unfunded debt of the country if the loan takes the form proposed by this Resolution. He asked me what period it was proposed that these loans should cover. He will remember very well that by, I think, 66 Vict, the currency of all Exchequer Bonds cannot be a longer period than six years without special legislation. That is why I deprecated discussion taking place before the Bill was actually seen by the House. I think it would be a pity to make a definite announcement as to the length of time for which these bonds would be current so far in advance of the actual issue, and I think that on reflection the hon. Baronet will agree with me that they will be Comparatively short-term bonds.
§ Sir F. BANBURYWhat is it proposed to do at the expiration of these bonds?
§ Mr. HOBHOUSEI would remind the hon. Baronet that when this War Loan was originally arranged there was a discussion upon the Bill, in the course of which Sir William Harcourt, who was then the late Chancellor of the Exchequer, twice asked the Chancellor of the Exchequer, Sir Michael Hicks-Beach, as to what provision was going to be made for the reduction of debt, and it was clear from the fact that in the original Act there was no provision made for the renewal of the loan that it was in contemplation at that time to extinguish the debt within the course of the ten years for which it was current. But no such provision was made at any time that I can trace, nor was there any declaration by Sir Michael Hicks-Beach, nor can I find in any paper that any actual extinction of the debt within the period of ten years was provided for. In the course of the ten years it is quite true that nine millions of that debt disappeared, being purchased and cancelled. I do not intend in the Bill to make any provision for the extinction of the debt other than that which has been followed in the last ten years.
§ Sir F. BANBURYAbolishing the Sinking Fund.
§ Mr. HOBHOUSEIt is only abolished for one year. The operation of the Sinking Fund will then be resumed, not again to be interrupted in the manner in which it has been interrupted this year. With that assurance I hope that the hon Baronet will rest content.
§ Resolution agreed to. Bill ordered to be brought in.