HC Deb 16 April 1923 vol 162 cc1728-31

I come now to the financial year 1923–24. The Supply Estimates are known to hon. Members, and there will be other opportunities of debating them. I will make but one comment, namely, that the total Supply figure of £436,000,000 is £110,500,000 below the Estimate for last year, of which £45,500,000 is on special expenditure. Hon. Members may have the curiosity to cast their minds back to two-years ago, and compare the achieved results with the recommendations of the Geddes Committee. I will deal only with the Ordinary Estimates, omitting the Special War Services altogether. Ordinary Estimates in 1921–22 amounted to 2668,000,000. For 1922–23 the Departments in their preliminary figures indicated reductions of £75,000,000, and the Geddes Committee, who intervened at this stage, suggested specific economics of £87,000,000. The total suggested reduction was thus £162,000,000, which would leave a total of £506,000,000. The actual Ordinary Estimates for 1922–23 were £473,000,000, and those for 1923–24 are £421,000,000. Allowance must be made for the change with regard to Irish expenditure, representing, approximately, £20,000,600, but, even so, £421,000,000 is far below the Committee's figure. It is true the Geddes Committee hoped to achieve another £13,000,000 of unspecified savings in the course of 1922–23, but the fact remains that, in spite of certain new charges, we have made an enormous reduction. I am encouraged to pursue the Committee's aim by the fact that in two years there has been a drop of £247,000,000 on the Ordinary Estimates. In addition, in the two years there has been a large drop of £82,000,000 in Special Expenditure.

I do not intend to provide any special margin for Supplementary Estimates. If these are found to be necessary in some Departments, I think it is time we reverted to the pre-War practice and to the custom of providing for them out of savings elsewhere, without upsetting the general Budget total.

Consolidated Fund charges I put at £380,470,000, of which Debt Charges account for £350,000,000. Of this £350,000,000, £40,000,000 is for Sinking Fund and £310,000,000 is interest—a decrease of £25,000,060 on last year's Estimate, in spite of the increase of £5,000,000 in the provision for interest on the American Debt. The Committee will remember that we are not free agents in debt repayment. We have responsibilities to the holders of our securities, contracted under the prospectuses of the various issues and ratified by Statute. These statutory repayments are estimated as follows:—In respect of 4 per cent. Funding Loan and 4 per cent. Victory Bonds, £4,428,000; in respect of 3½ per cent. Conversion Loan, £13,500,000, a considerable increase on the figures of the previous year due to the increased total of Conversion Loan owing to the Conversions to which I have alluded. To these sums must be added the amounts required for Victory Bonds tendered in payment of Death Duties—£7,500,000; the Sinking Fund on the American Debt, $23,000,000, and the amount we have agreed to repay this year in respect of American loans for the purchase of silver, viz.:— $30,500,000. Moreover, I shall have some small payments to complete the Canadian Debt settlement, and altogether I cannot put my total requirements at less than £40,000,000. In this figure 1 make no allowance for Depreciation Fund for 4 per cent. and 5 per cent. War Loan, which might in given circumstances involve £32,000,000 per annum, or for the tender for Death Duties of securities other than Victory Bonds. These liabilities have only to be met if the price of the Bonds falls below the issue price, but I hope I may assume that this will not happen during the current year.

I propose, therefore, to include in the Finance Bill a Clause providing a Sinking Fund of £40,000,000 this year, increasing to £45,000,000 in 1924–25, and £50,000,000 as a maximum thereafter—a sum approximately equal, it will be observed, to the yield of the Death Duties. I wish to emphasise the point that the provision of these sums is not for the most part optional. We are bound by contract to provide them. It may be said they could be met, as it was intended to meet them last year, by borrowing, but I feel confident the Committee will riot support this view. We may suggest borrowing for Sinking Funds once, but to suggest it for two successive years would be a serious blow to our credit. It has been one of our greatest sources of strength that we have met all our recurrent charges out of revenue. We cannot pretend that these charges are not recurrent. It should, moreover, be remembered that money spent on the reduction of internal debt returns at once to the investment market as soon as the Government securities redeemed are bought up, and nothing, I believe, will ease the finding of capital for industrial purposes so much as a steady and recognised policy of redeeming public debt.

There is, however, yet another reason. Our debt burden is very heavy. Interest alone absorbs over £300,000,000 a year—50 per cent. more than our total pre-War Budget, and not very much under half our present Budget. Whatever saving we may be able to make in Supply services, the time will come when it will be on debt that big savings for the future will have to be found. A reduction in the interest rate from 5 per cent. to 4 per cent. would save, for every £1,000,000,000 of debt, £10,000,000 a year in interest. I firmly believe that, unless we take proper steps to deal with our debt in time, we may find it, an intolerable burden, perhaps at a moment when other countries who are our commercial competitors may find themselves, for various reasons, more or less free from any such corresponding load. I therefore attach the greatest importance to a steady reduction of debt from revenue. In the next seven years we have some £1,300,000,000 of bond debt maturing, in addition to £2,100,000,000 of War Loan which we can redeem, at our option, in 1929. Much depends on the terms on which we re-borrow this debt—in all, nearly half our total debt. I do not believe we can re-borrow it satisfactorily unless we aid our credit by an avowed and sustained programme of debt reduction from revenue. I am taking every step which prudence and foresight can dictate to prepare the way for my successor who will have to deal with these great conversions.

Sir R. HORNE

Will my right hon. Friend forgive me asking what he is doing in regard to the new Sinking Fund, which was suspended last year? Is he reestablishing that Sinking Fund—the Sinking Fund established by Sir Stafford Northcote in 1875?

Mr. BALDWIN

I thought it was clear from what. I have said that I am proposing to make these provisions in the Finance Bill this year.

Sir R. HORNE

But these provisions, I understand, do not cover that case.

Mr. BALDWIN

My right hon. Friend can discuss that better in Debate.

5.0 p.m.

I come to the total expenditure for 1923–24, which I estimate at £816,616,000, made up of £380,470,000 Consolidated Fund charges, and £436,146,000 Supply Services, or, following the division between Ordinary and Special expenditure, £801,013,000 Ordinary expenditure, and £15,603,000 Special expenditure.