Lords Sitting of 21 March 1823

NATIONAL DEBT REDUCTION BILL.—
On the order of the day for going into a committee on this bill,
The Earl of Liverpoolsaid, it was not his intention to go into a long discussion, as the subject of the national debt, so far as regarded the application of a sinking fund, had been frequently under the consideration of the House, though he knew that many persons, who originally supported the principle of a sinking fund, entertained doubts of the correctness of the opinions which they had formerly entertained on the subject. But, being called upon by his public duty to do so, he had particularly turned his attention to the question, and he had never seen any reason to alter the opinion he had formed of the expediency of the measures adopted in 1786, and remodelled in 1792. He wait sure that no person who considered that a war had intervened which had continued for 22 years, could be surprised that all the consequences which had been anticipated had not resulted from the measures then adopted. He did not propose into prove, that the principle had been carried into full effect; but, notwithstanding all that he had heard, he was prepared to assert, that the country had possessed one great means of carrying on the war, by its endeavour to give effect to the principle of the sinking fund. When, however, a period of peace arrived, it became necessary to get rid of the artificial system which had till then been acted upon, to simplify the public accounts, and to establish a real sinking fund upon its only true basis—an excess of income over expenditure. With this view, the
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House of Commons considered the subject, and certain resolutions were adopted, which formed the basis of the bill now before their lordships. That basis was, that there should be a clear surplus of income of not less than 5,000,000 l. to be applied to the reduction of the national debt. When the resolutions of the House of Commons came before their lordships he had stated his views on the subject, which were, that a sinking fund should be left to accumulate till it amounted to the one hundredth part of the national debt; after which it would be for parliament to consider whether it had arrived at the point when it might be proper to deal With it in another manner. It was admitted that it was desirable that this should be Combined with a simplification of the a accounts, and that borrowing by government from the fund should be done away with, and such a system adopted as would at once show what the sinking fund really was. This had been delayed until the present moment; and their lordships had now before them the bill founded on the two principles to which he had referred. At the commencement of the present year it was found there was a clear surplus of revenue over expenditure of 7,200,000 l. It had, therefore, been proposed to repeal taxes to the amount of 2,200,000 l., and to apply the remaining 5,000,000 l. to the purposes of an efficient sinking fund, which it was proposed should accumulate, until it amounted to the one-hundredth part of the debt funded and unfunded. As the noble lords present were all, he believed, agreed as to the expediency of having a sinking fund; it was unnecessary for him to go into an argument to prove that expediency. It was scarcely possible for any statesman or legislator to think of going on during peace, without paying off a part of the debt incurred during war. From the alternations of peace and war that had hither to taken place; it was, impossible for any one not to take into his calculation, that there would be in the time to come similar alternations; and it ought undoubtedly to be the policy of the government to place the country in a situation to commence war, wherever its honour or safety required it. If, during a period of peace, no part of the debt incurred during war was paid off, not only must we commence war under great disadvantages, but ultimately certain ruin must ensue. It was true, that during every war in which we had had a man time

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superiority, the wealth of the country had increased, not merely nominally, but substantially, in every branch of its industry. During the war of 1756, a great increase had taken place in the wealth and resources of the country; and in the last war a still greater. In every war, in short, except the American war, the general wealth of the country had greatly increased. Let it not be understood from this that he was an advocate for war. On the contrary, it produced evils of the greatest magnitude, not only during its continuance, from the great change of property which it occasioned, but also from its retroactive effect, on the transition from war to peace. Thus, during the last was, how much was heard of the distresses of annuitants, of mortgagers, of persons with fixed incomes; and, when peace came, the retroactive effect was felt by the landed proprietors in the fall of the value of the produce of the soil, and in the lowering of their rents. It might be said, that those evils were produced by the Bank stopping payment; but the fact was, that in the war of 1756, when nothing of that kind took place, similar evils were produced. It was not as an argument for war, that he stated this; but with view to a right understanding of the resources of the country. Happily, all, the interests of the country had recovered, or were recovering, from the evils produced by the war, and by its retroactive effect. Our manufactures might be carried on at a smaller profit than heretofore; but they were carried on upon more solid basis. There was much less of speculation, and much more of real and substantial business. The agricultural interest was undoubtedly still depressed; but it was evidently recovering. This, therefore, was the period when a steady course ought to be pursued, for the purpose of liquidating a part of the debt incurred during the war; for the country should be forced by circumstances into war, the most ruinous consequences must ensue, if nothing had been done during peace to liquidate any part of the debt. With respect to the amount of the sinking found, it was obvious that some amount must be fixed upon. Parliament had determined upon 5,000,000 l.; and he saw no objection to that amount. He knew that some difference of opinion existed in another place, as to the real amount of the sinking fund; but into that question he would not
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now enter. He would merely observe, that as the annuities were now sold, that could be no doubt that there was a difference of income over expenditures to that amount. It might be said, that they ought not to look to one advantage without regarding others. Undoubtedly, if, in considering the important measure, that state had been wholly overlooked, it might properly, become the subject of animadversion. But he would state to their lordships what had been done with respect to the remission of taxation. From 1816 down to the present period; 22,000,000 l. per annum of taxes had been remitted—that was, there had been taken off full one-third of the whole taxation of the country during the latter years of the war. Now, let the reduction of rents or profits be put as low as they might, their lordships would find the reduction of taxation far exceeded it. Under these circumstances, it was thought highly expedient to look the financial system of the country in the face; and it was impossible to place that system upon a solid basis, without an efficient sinking fund. He therefore conjured their lordships not to think of giving up a measure which had been approved of by statesmen, whatever their differences might be upon other questions, which could alone, during peace, place the country in a situation to commence war, when its honour or, its safety required it, and which formed the best security for all the interests of the country.
The Marquis of Lansdownsaid, he could not refuse his assent to a bill, by which it was intended, for the first time, to simplify the sinking fund, and place it upon that true foundation on which alone it ought to rest; namely, the surplus of revenue beyond the expenditure. He was himself the first man to suggest to that House the propriety of getting rid of the cumbrous machinery of the sinking fund, after the substance had disappeared; and, though the noble earl had then cautioned him against the danger of the principle he contended for, it was a satisfaction to see the same, noble earl adopting that very principle in his bill, by placing the sinking fund on the only true and intelligible ground upon which it ought ever to have rested Though it was true, that it had been the custom at every period when the subject was reduced into parliament, to praise the sinking fund, to extol the benefit of its

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operation, and the wisdom of its founders, it was somewhat curious to observe, that the panegyric always ended with some injurious encroachment. Though it never was mentioned but to be praised, it never was praised but to be undermined. After the sinking fund had worn away by those practices, and when nothing remained of it but a display of figures, the only effect of which was to employ a number of clerks, the sum represented being gone to all substantial purposes, it was felt necessary to give an appearance of having that which we had not, by means of the complicated machinery to which he had alluded. Disapproving as he did of this, he could not but concur in a measure calculated, as far as it went, to correct the delusion of which he complained; but, as if, by some fatality, delusion was always to be mixed up with the notion of a sinking fund. We now professed to have an income above our expenditure, to the extent of five millions; when the fact was, that it was only three millions. It had been admitted by a high authority in another place, that our expenditure was 47 millions, and our income 50 millions, leaving only a balance of three millions for the sinking fund. By that operation, and the sale of the half-pay and pension annuity, there was an appearance of increase; but at the expense of whom? Of that very posterity whom we professed to relieve to the amount of five millions, while we took from them the two millions necessary to make it up. He did not trust to his memory in this instance; for he had the authority of a published speech of the noble earl opposite, in which he took credit, at the commencement of last session, for the advantage that would be derived by posterity, from the falling in of the half-pay and pension annuity; yet that very fund of which the noble earl had boasted as a relief to posterity, was the one with which be now went into the market to make up the sinking fund. It was, in fact, saying to posterity, after reciting in the bill that it was fitting they should be relieved by means of a sinking fund—after saying that we had that surplus which we had not—"You shall be relieved to the extent of five millions instead of three millions; but to enable us to do so, you must allow us to borrow two." He would therefore contend, that the bill partook of the character of delusion, by holding out a surplus which did not exist. Under
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this impression, it was his intention to propose, either in the committee or on the bringing up of the report, that the sum of three millions should be substituted for five millions, in order to get rid of the delusion. One benefit which the noble earl had stated as arising out of the operation of a sinking fund, had struck him with some surprise. He had represented it as likely to prevent those great changes of property, which arose out of the transition from war to peace. If ever there was a period at which such an argument ought not to be brought forward, it was at the end of a long war, during which this country possessed a greater sinking fund than ever was anticipated by the most sanguine speculators. Surely the House would not deny, that a greater change of property had never taken place in any country than we had since experienced in this—a change only inferior to that produced by revolution; and yet it was produced in spite of the nostrum proposed by the noble earl, as a certain remedy against such an evil. He was ready to admit, that great advantages might be derived from a sinking fund in time of peace; at the same time, he did not believe, that any abstract proposition could be laid down as to its being always necessary in time of peace to lay by so much surplus revenue for a sinking fund. He considered government perfectly at liberty, without any breach of public faith, to appropriate the surplus revenue in that way, which seemed most advantageous to the country. There might be periods of peace, when it would be proper to have a sinking fund; but, would it not be absurd to say, that under all circumstances, such a fund should be created, and that sums should be taken from the public purse, and kept apart, which, if employed in the remission of taxes, would improve the resources, extend the commerce, and benefit the agriculture of the country? He was disposed, under the circumstances of the country, to go some way towards providing a sinking fund. He could not shut out from his mind the probability of an approaching war in the peninsula. He was, therefore, more desirous than he was at a former period, to see this country possessed of a surplus revenue to a considerable amount; applicable, first as a sinking fund, and next, to meet any extraordinary situation in which the country, might be placed.

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Under these circumstances, he would not object to a sinking fund of three millions. The noble earl had stated the large amount of taxes which had been taken off. He was glad to hear the noble earl dwell on this subject; because he had often been told in that House, that taxation had little to do with the existing distress. Looking to all the circumstances of the country, he felt no inclination to oppose the formation of a sinking fund to the amount of the actual surplus. There was nothing connected with our internal affairs, of greater importance than the preservation of the character and honour of the country, by the payment of the interest of the national debt. He was happy to see so strong a disposition in parliament—notwithstanding there were men who wished to relieve one class at the expense of another—to adhere strictly to the preservation of the public faith.
Lord Kinginsisted, that the present bill contained a manifest delusion. There were, in fact, but three millions applicable to a sinking fund: the remainder was borrowed from posterity. The present was an amphibious sort of measure. It was partly the work of the last, and partly the work of the present chancellor of the exchequer. Its incongruity reminded him of certain animals in New South Wales, which appeared to be part bird and part beast.
Lord Ellenboroughregretted, that the noble lord (Bexley) who had been so long at the head of the exchequer, had not given their lordships the benefit of his opinion on this occasion. He thought with his noble friend, that the real sinking fund was not five, but three millions. If there was a sinking fund of five millions, taxes to that amount might be taken off. But it was clear, that if taxes were taken off to the amount of five millions, the expenditure would exceed the income by two millions. The noble earl had told them that the improvement of the revenue had now, for the first time, enabled government to settle the sinking fund on a firm basis; but, in point of fact, the revenue was smaller now than it had been at many previous periods. It was not, therefore, the increase of revenue alone that enabled their lordships to entertain this measure; it was the diminution of expense, acting in concurrence with the improved state of certain items in the revenue. At the present moment, he conceived their lordships must see the ne-
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cessity of keeping up the establishments of this country, and of enabling her to maintain her high situation amongst the states of Europe. God only knew how long they might retain the blessings of peace!
Lord Bexleythought the establishment of a sinking fund necessary, to prevent any uncertainty with respect to funded property. He defended the plan adopted for getting rid of the half-pay and pensions, and maintained, that there was an actual surplus revenue of 5,000,000 l.
The bill then went through a committee.