§ I hope the Committee will feel that I have adequately fulfilled the expectation which I held out in October, that, if no additional expenditure were incurred in the interval, there would be a substantial surplus this year, on the present basis of taxation, to go towards reduction of debt. But is that surplus sufficient? In the opinion of His Majesty's Government it is not. It is true that it represents more than 2 per cent. on the total debt, and a Sinking Fund of 2 per cent. would redeem the debt in 26 years—just a generation. This, in ordinary circumstances, would be, not merely an ample, but an extravagant, Sinking Fund. But the circumstances are not ordinary, and, apart from certain minor changes in taxation necessary for other reasons, I am going to call upon the Committee and the country for a further generous effort to improve our credit, and, by present sacrifice, to lighten our future burden and establish securely our national credit. I do so with confidence that the Committee and the country will respond in the same spirit in which they met every call for sacrifice during the War. Even to-day we reap the reward of those past sacrifices. If our position is easier, our credit higher, and our prices lower, than those of other belligerents, it is because we, more fortunately situated than they, were able to raise a larger proportion of our expenditure out of revenue during the War, and, therefore, find ourselves with less leeway to make up now. Though we may find cause for satisfaction in what has already been accomplished, and though, in this sense, virtue has 80 brought its own, but a real reward, we are only at the beginning of the road. Last year we actually added to our debt; this year we must begin to reduce it, and the beginning must be substantial.
The only statutory Sinking Funds at present in existence are those for the Funding and Victory Loans of last year. These amount, at present, to one-half per cent. on a nominal total of £768,000,000, or £3,840,000 per annum. This initial sum, of course, increases automatically as the Funding Loan is redeemed and Victory Bonds are drawn, but the extra sum, above the amount originally required for interest, which I have to consider in the current year is £3,840,000. I will ask the Committee to remember that Victory Bonds are accepted at their face value of £100, and Funding Loan at the issue price of £80, in payment of Death Duties. This means that I have to provide the cash equivalent of these sums, in order to enable the Inland Revenue to pay over the appropriate amount of cash to the Exchequer as Death Duty revenue. The amount required for this purpose in the current year clearly depends upon the amount of Death Duties which may be payable in Victory Loans. I can hardly estimate it at less than £10,000,000, out of the total Death Duty revenue of £45,000,000. Other War Loans have similar Death Duty privileges, and for them I require £5,000,000. Further, the taxpayer has the right to tender National War Bonds and certain Exchequer Bond issues in payment of Excess Profits Duty. This required £60,000,000 in each of the last two years, and I allow the same sum in the current year. Finally, there is a Depreciation Fund for the 4 per cent. and 5 per cent. War Loan, issued by my right hon. Friend the Leader of the House (Mr. Bonar Law), amounting to one-eighth per cent. per month on the original nominal value of the loan. This involves a maximum sum of £31,920,000. Altogether, these obligations amount to £110,760,000 before we are able to touch the Floating Debt. In addition, I have to make provision to meet old debt (mainly external) maturing in 1920–21. Altogether, allowing for reserves, and without basing any hope on the possibility of funding, I must make allowance for having to apply the sum of £160,000,000 of my surplus of £164,000,000 to the reduction of debt in other forms 81 before I can attack the Floating Debt. I ask the Committee to observe that all the Debt received in payment of tax is either cancelled when received, or held by us until drawn or redeemed in the terms of the original contract. Not a penny of it is re-issued to the public. I also call the attention of the Committee to the fact that this calculation is based upon the assumption that the liabilities maturing within the year are paid off as they fall due, and no part of them is renewed or funded.