Lords Sitting of 12 March 1822

NAVY FIVE PER CENTS BILL.
On the order of this day, for the second reading of the bill,
The Earl of Liverpoolsaid, he would state the reasons on which he recommended the measure to their lordships' adoption. Whether they were entitled, consistently with good faith, to reduce the interest of the five per cent stock to four or three per cent, was the question for their consideration. Their lordships were aware, that in funding the navy debt at the close of the American war, it was thought necessary to create a five per cent stock, called the navy five per cents. The act by which this stock was created contained a clause, according to which it was not to be paid or reduced until 25,000,000 l. of the national debt should be redeemed and paid off. But, though there could be no compulsory payment until this condition was satisfied, it certainly was at all times practicable for the government to pay off any quantity of stock, provided the holders were willing to receive their principal in money, or such other terms as might be offered to them. During the remainder of the peace from the end of the American war, and previous to 1793, 10,000,000 l. of the three per cents had been paid off. The question had been agitated, whether the four per cents should not be reduced; and if the peace had continued, some measure of that kind might have been carried. But, with regard to the five per cents, it never had been in the power of the government to reduce them, as their required condition had not been fulfilled. Now, the first question for consideration was, whether there had bonâ fide been 25,000,000 l. of the national debt paid off since the close of the American war? The condition had been repeated in different acts, after the period at which the five per cents were created. But, between the period of the creation of that stock and the year 1793, 10,000,000 l. of the national debt had been redeemed; and since the year 1816 the farther sum of 19,000,000 l. had been redeemed by the operation of the sinking fund. This was a sum which exceeded the stipulated condition, and therefore left no, doubt on that point. There, was, how-
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ever, another circumstance which ought not to be passed over unnoticed; namely, the redemption of the land-tax. He thought, therefore, that no doubt could be entertained of the bona fide fulfilment of the condition under which the five per cent stock had been created. But it was said, that by the 16th and 25th of Geo.2nd, one year's previous notice was required to be given to the holders, before that stock could be paid off. The condition in the act by which the five per cent stock was created was certainly subsequent to these acts; and the argument was, that the act creating the five per cents must have reference to them, because it was provided that that stock should not be reduced until 25,000,000 l. of the national debt was redeemed. But, if it was not enacted that this redemption should be effected according to the conditions of the 16th and 25th of Geo. 2nd, the objection, in his opinion, fell to the ground. The effect of the bargain with the holders of the three per cents was, that they could not be compelled to accept terms for their stock, without a previous notice of one year that government intended to pay it off; but surely the government was competent to pay off that stock at any time, with the consent of the proprietors. The stipulation respecting the redemption of the 25,000,000 l. of debt could have reference only to the actual paying off, and not to the manner of the paying. If, therefore, their lordships were satisfied that 25,000,000 l. had been redeemed, they must be convinced that every thing which good faith demanded had been done. But, he might, if necessary, rely on the equity of the case. What could be more evident than that the government was now only doing what, in the opinion of all mankind, might at any time be done? It had been the invariable opinion both of the buyers and sellers of five per cent stock, that the government was at liberty to pay that stock off at any time. Had this not been the case, the effect of the contrary opinion would have shown itself in the relative price of the public funds. When the three per cents were at 78, the five per cents ought to have been at 120, if it was imagined that they could not be paid off, whereas they had scarcely ever exceeded 108. The reason plainly was, that every person was convinced that that stock was redeemable. He thought he had said enough as to the equitable legality of this measure. It now remained to speak of the

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mode by which it was proposed to carry it into effect. That mode was, calling on the holders of the five per cents to express their dissent. And here two questions arose: first, whether this mode was, equitable; secondly, whether it was expedient. He contended that it was perfectly equitable in itself, more especially as it was only following a course chalked out by precedents. Their lordships would find an example of the same mode in. the Consolidated act. Previous to the passing of that act, particular revenues were charged with the interest of particular funds. The consolidated act, though not a violation of the public faith, certainly made an alteration of some importance to the stock-holder, for many of the public creditors might prefer the security of one fund to another. That act, however, required the persons interested to declare their dissent. When the long annuities were transferred tea different fund, the same principle was followed. With respect to the question, whether the holders of five per cents should take the offer made to them by government or receive 100 l. in money for every 100 l. of stock; no individual could have any difficulty in forming his opinion. It was, therefore, expedient, that as little time as possible should be allowed to elapse, before the measure was carried into effect. If the parties had been required to signify their consent instead of their dissent, the stock-jobbing consequent on such an arrangement would have been enormous. With regard to the foreign relations of the country, since parliament had met, no alteration had taken place which would prevent his majesty from repeating the declaration in his speech at the opening of the session. But he did not mean that his declaration should rest there. Without holding out any expectations as to what might happen in the course of some years, or one year, or even six months, he must say, that he never knew a period in which this country was less likely to be involved in war. When he considered the nature of the measure, he could not anticipate any fitter time for its execution than the present. Were ministers to neglect the opportunity which presented itself of saving 1,300,000 l. a year, and adding to the advantages which not only the increase of the revenue in the last year, but the prospect of a progressive increase afforded? In the whole transaction, good faith had been maintained: and while the
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public interest had been secured on the one hand, the most liberal terms were given to the holders of the five per cents on the other.
The Lord Chancellorsaid, he firmly believed that no man ever entertained any doubt of the 5 per cents being redeemable. If this opinion had not prevailed, there would have been a great difference in the market price between the 5 per cents and other stock but when the 3 per cents were at 78, the 5.per cents had never been more than 108, though, if they had been irredeemable the price would have been 120. If courts of equity had been in the habit of considering the 5 per cents irredeemable, they would not, as had been their practice, have ordered stock, in cases of trusts, to be transferred into the 3 per cents, without regard to the state in which the testator had left the property. But it was stipulated, that 25,000,000 l. of the national debt should be paid off before the 5 per cents could be reduced; and it was required by another act, that one year's notice must be given before the 3 per cents were paid off. A person, for whose opinion he entertained great respect (Mr. Tierney) had expressed in another place his doubts of the legality of the present measure, in consequence of this notice not having been given. But, the want of this notice could give rise to no difficulty, if their lordships were satisfied that the 25 millions required by law had actually been redeemed. What could the 5 per cent holders have to do with the notice to which the holders of the 3 per cents were entitled, if no clause in the act which created the former stock referred to that notice? Then, as to the payment of the sum of 25,000,000 l., that was stated to have been accomplished in two ways, by the operation of the sinking fund, and by the redemption of the land-tax. He must confess, that if their lordships had nothing to guide their judgment but a reference to the first mode of paying off the debt, they might have some difficulty in interpreting this clause of the act. But, they were to consider what the intention of parliament had been. Now, he could not suppose the legislature so forgetful in passing the act in question, as not to know, that debt might be paid off with one hand, and contracted with the other. If he were obliged to give an opinion on the point, he should say, that if 25 millions were actually paid off and cancelled, the condition was ful-

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filled. This, he thought, must be held to have been the understanding of the legislature, as it was the general understanding. But, when the operation of the redemption of the land-tax was taken into the account, there was no doubt of the contract being complete.
Earl Greysaid, it was his duty, as a member of that House, if doubts of the justice of this measure remained on his mind, to state those doubts; not for the purpose of inducing their lordships to reject the measure, but in order that they should, if the doubts appeared to them of sufficient importance, give them a fair consideration. The first difficulty was, the question of the right to reduce the 5 per cents. The noble earl had given a history of the manner in which this stock had been created. It was admitted to be redeemable; but not until after 25,000,000 l. of the national debt were paid off. The question, therefore, was, whether this amount of the national debt had been bona fide redeemed according to the conditions required by law? When on this part of the question, the difficulty, like that mentioned by the noble earl on the woolsack, naturally occurred, namely, whether the payment of a portion of the debt while a debt to a greater amount was contracted, was a bona fide payment. The learned lord had said, that he had no doubt the stock in question had been fully cancelled. Whether the act in question stood in the way of the proposed reduction of the 5 per cents he could not positively say: but he would contend that there was such a reasonable doubt on the subject as called for delay and consideration. Though the debt existing at the time of the act of 1784 had been all cancelled by the operation of the sinking fund, still it appeared to him to be a question, whether the extinction of a portion of the debt, while a greater debt was contracted, was such a bona fide payment as the legislature contemplated. Their lordships were to consider what was the fair meaning of the act, and not what the public thought of it; and if they entertained any doubt, they should not proceed till that doubt was satisfied. Had the public burthens been reduced by the mortgage of the land-tax; or had that tax only been employed to purchase stock, the interest of which would otherwise have been paid out of the estates which redeemed it? If the public burthens had not been reduced, there could have been
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no reduction of debt, but only a change of creditors; and consequently the 25,000,000 l of the 3 per cents had not been paid off in such a manner as to warrant the present reduction of the fives. But it was said, that the act in question was passed as a security to the holders of 3 per cents, and not to the holders of fives. This, in his opinion, made no difference. What the possessors of one kind of stock regarded as a protection, the, proprietors of another took as a notice; and, under any construction which could be put on the act, it was impossible not to see ground for doubt and hesitation whether its provisions had been bona fide complied with. He only expressed his doubts, and wished to satisfy them; and though those doubts were somewhat diminished, by the very positive manner of the learned lord on the woolsack, still they were not entirely removed. He had no interest in the matter beyond that of one who desired to see the faith of parliament observed, and fair dealing followed between the government and the public. If the proposed reduction of interest took place under the pressure of an urgent- necessity, let that necessity be frankly stated: if the House presumed, that it was acting in conformity with law and right, let that right be clearly ascertained, and rigidly fulfilled.—It had been said that there were precedents for requiring the dissent of parties instead of waiting their assent. He thought that it would have been as well if, instead of following those precedents, ministers had taken as their model the example of Mr. Pelham. The bill not only imposed the condition of dissent on the proprietors, but enacted that those who so dissented should be paid off in the numerical order of their dissent Now this was either a threat or an inducement—a threat, if they did not accept of 105 l. of a lower kind of stock, that they would be paid their money at a disadvantage; or an inducement, that those who came in first would be gainers in first being paid. In either case it was a partial and unjust proceeding, which the ministers of a great nation ought not to have proposed, and which it became the. House not to sanction. The noble earl had said, that there never was a situation of the country in which he could hold out greater hopes of a peaceful policy Now, nobody admired a peaceful policy so much as himself; and nobody would more sincerely support the noble ear in main-

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taining that policy: but, when he remembered that the peaceful policy professed by Mr. Pitt in 1792, resulted an one of the most sanguinary wars that had ever desolated Europe, he could not place much reliance on the prophecies of the noble earl. He hoped, if war happened, that we might be enabled to stand aloof; but when he considered the nature of a war between Russia and Turkey, and the state of Europe as left by the late treaties, he could not but dread lest a war in one part of Europe might extend over the whole. It had been said, that in a war between Russia and Turkey we might be neutral: but, would not the issue of an amicable adjustment, or of a warlike declaration, raise or depress the property which was affected by this bill? Why, then, not wait to see the result?
The Earl of Harrowbycontended, that the 24th of the late king did not stand in the way of the present measure. The provisions of that act referred only to compulsory payments at par. It was impossible to conceive that it could be meant that 25,000,000 l. were to be paid off above the new debt contracted, with a sinking fund of 1,000,000 l., which was the amount of the sinking fund at the time of the passing of the act referred to. That the act was not considered as standing in the way of the present measure, was evident from the disproportion between the interest of money vested in the 5 per cents and that vested in other kinds of stock. The 5 per cents had never risen so high as they would have done, had it been understood that they were protected from being paid off till all the 3 per cent stock created since the 24th of the king was redeemed. He could conceive nothing but public convenience without any individual disadvantage from the system adopted of taking opinions by dissent instead of assent. The noble earl had argued, as if government were taking advantage of the fundholder, by requiring his consent to a measure pending a negotiation which, in its result, would affect the term of the agreement. Now, he could see no hardship in this. The negotiation between the two powers alluded to had been going on for a year, and government could not with propriety delay a great financial measure till the result was known. If government were in possession of information that a war was certain, there would be some ground for
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complaint. But this was not the case; and, therefore, there was no ground to delay a measure that would relieve the country, when that delay would only lead to stock-jobbing and inordinate speculation.
Lord Ellenboroughobserved, that as at present advised, and with the information now before the House, he would not scruple to say, that, unconnected as the act of the 24th of the late king was with the act of the 25th of Geo. 2nd, the stocks at 5 per cent interest were not redeemable until a certain portion of the debt was discharged in some other quarter. But, there ought to be a much stronger reference than any he could find in the recent acts, to that passed in the 24th of Geo. 2nd, to connect them so as to interweave them in that close degree, that would bind all the provisions of the one to the body of the other. It was true that the claims set up by dissentients on this occasion resolved themselves into two; the primary objection to this proceeding was, that 25,000,000 l. of public debt ought to have been antecedently discharged; the second, to the intervening period of delay. His general opinion was, that if there had prevailed a universal understanding grounded on the letter of the law, with respect to the right of notice, there was no satisfactory reason why the individuals interested, should be deprived of this their imagined right. Upon this point he would suggest the propriety of calling together some of the learned judges, and taking their opinion.
The Marquis of Lansdownobserved, that he was one of those who, as regarded the principle of this measure, could feet nothing but a disposition to acquiesce, but who, nevertheless, could not help entertaining doubts with respect to the form and mode of carrying it into execution. His principal objection was certainly of a practical nature, and was founded on that provision by which the dissent and not the assent of subscribers was demanded to the purposes to which it was framed. He apprehended that this was a departure from all understood principles of civil justice. It was the obvious effect of the proposed arrangement to confer an advantage on the parties applying n the first instance, and to impose a penalty on those who should be tardy. He had heard no good reason whatever against delay; and if; from any unavowed cause, dispatch in carrying this measure

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was an object with government, it was the more incumbent on the legislature to resist such an attempt. What injury could accrue to either party, by postponing the measure till the 5th July, up to which period the present rate of interest was to be continued?
The bill was then read a second time.