INCOME TAX BILL.

HL Deb 01 May 1854 vol 132 cc1042-105

Order of the day for the House to be put into a Committee, read.

EARL GRANVILLE

said, that in moving that their Lordships go into Committee on the Bill, as it had been agreed, for the convenience of certain noble Lords, that the discussion on the Bill should be taken on the present stage, it would not be respectful if he did not make to their Lordships a statement, which he would condense as much as possible, in order to induce their Lordships—what he thought would not be difficult—to pass this Bill. He had certainly no intention of going into the history of the income tax, with which many of their Lordships were probably better acquainted than himself;—he need not even go back to what occurred during the last Session, except to notice some remarks which led him to believe that some of their Lordships were hardly aware what was the condition of things last year. A noble Earl (the Earl of Derby), the cause of whose absence from the House he much regretted, had stated, the other night, that, in his opinion, great want of forethought had been shown by the Chancellor of the Exchequer and the Government in having, at a time when they might have anticipated war, abandoned so important a portion of the revenue as the soap duties. ["Hear!"] From the cheers of noble Lords opposite, he inferred that they considered this to be the state of the case, and when the Government came into office last year they found an ample revenue, sufficient for all purposes, and that they had wantonly thrown away a tax which yielded a revenue exceeding a million a year, collected by the soap duties, and this at a time when the income tax, which produced about five times that amount, was about to expire. Now, if there was at that time any feeling, in or out of Parliament, which was stronger than another, it was, that it was absolutely necessary that the Government should either abolish the income tax, or should modify it to meet certain inequalities and injustices which were apparent in its operation; and this feeling had certainly been much encouraged by the course which had been previously taken on the part of the late Government, who, with a very laudable desire to meet the popular demand, had announced in Parliament that it was their intention to make certain modifications in the mode of levying the tax with a view of removing these inequalities. This announcement made a great impression upon the public; and though it afterwards appeared that it was merely a promise of a plan which was not matured, nor indeed formed, this discovery did not counteract the effect of the original announcement, which no doubt increased the public expectation that Her Majesty's present Government would deal in the same spirit with the income tax. This tax had, of course, been one of the first objects of consideration with the Chancellor of the Exchequer, who, he believed he might say, applied to it an amount of labour and consideration, so as to master its principles and its practical working, such as hardly ever before had been bestowed by any public man upon an individual subject, while discharging the other duties of his office. He associated with him several other Members of the Cabinet, who were well acquainted with the subject; and after most anxious consideration, the Chancellor of the Exchequer and his colleagues came to the conclusion, which had previously been come to by every Finance Minister, excepting the Members of the late Government, that it was impossible to modify the income tax in any way that would not increase, instead of diminish, its injustice and in- equality, and that if you meddled with it at all you would impair it as a measure of taxation for great emergencies. With this expectation on the part of the public on the one hand, and this opinion of the Government on the other, it appeared almost inevitable to honest men that you must either endeavour to give up the tax altogether, or confess that it was utterly impossible to propose the modifications demanded. By a most admirable argument of the Chancellor of the Exchequer, accompanied by a proposition which at once met with the favour of the house and of the country on account of its justice, its comprehensiveness, and its effect in relieving to a great extent—as in that very instance of the soap duties—both the manufactures of the country and the wants of the poorer classes of the people, the country and the House were persuaded to accept of the income tax, and also to impose an additional tax, which might be called a war tax. Both these taxes were now in force, and we had them to use as might be necessary in the emergency which had occurred. The manner in which it was now proposed to deal with the income tax was to double the amount payable in the first half-year, so as to give, in round numbers, a sum of about 3,300,000l., and that amount, together with the surplus from last year, would go to make up the deficiency estimated for the expenditure which had already been sanctioned by the House of Commons—an expenditure amounting in round numbers to 50,000,000l. The proposition contained in the Bill, on which he now moved that their Lordships should go into Committee, was a simple one. It merely enacted that during the first half of the current year double that half-year's income tax should be paid. The reasons for making the whole increase payable in the first half-year were twofold. The first was that the whole charge might be received in the current year; and the second was, the possibility of circumstances rendering it necessary for the Government to call for a double tax on the second half-year also. He knew that there were points connected with the past policy of the Chancellor of the Exchequer on which some of their Lordships were anxious to speak; and if any such observations were made, he should be glad to give upon these matters such explanations as he could.

Moved, That the House do now resolve itself into a Committee.

LORD BROUGHAM

wished to state that he still retained the opinions he had always held on the subject of the income tax, and which he had expressed in 1816, at the time he was a Member of the House of Commons, when he objected to continue the income tax beyond the duration of the war that had rendered its imposition necessary—opinions which he had again expressed in this House, when the present tax was imposed ten or eleven years ago; and opinions which he had repeated in 1851, when he renewed the resolutions which he had previously laid before the House upon the subject. After all the discussion the question had undergone, and notwithstanding the inquiries his noble Friend (Earl Granville) said had been made, and the conclusion which had been come to, that no modification of the tax could be effected, but that it would be crippled and rendered entirely ineffectual if the modifications suggested were adopted, he (Lord Brougham) had the misfortune to retain his opinion, that the tax upon income derived from capital, the tax upon income derived from labour, and the tax upon income not derived from capital, but continuing only during a man's life, ought to be differently imposed from the tax upon income of another description where the interest was not confined to a man's life. The answer which was given to the Resolutions he submitted to their Lordships on the occasion to which he referred was, that the Government had not one word to say in favour of the income tax; that they had not one word of argument against the proposition he then made; but that it was the hard necessity of their condition that rendered the imposition of the tax inevitable, and that it was only that necessity which could justify its adoption. This was the admission both of his noble Friend Lord Ripon, and of his illustrious Friend the Duke, whose loss all so deeply lamented. He knew he was taking an unpopular course; but he still retained the opinion that, of all the taxes which could be imposed, the tax upon income was the worst, with the exception of taxes upon food, taxes upon knowledge, and taxes upon the administration of justice. But in the present instance its adoption was a hard necessity. We were unfortunately plunged into a war, the expenses of which must be provided; and, retaining the opinion which he had before expressed against this tax, and which opinion no experience he had acquired during its continuance had in the least degree abated or shaken, he feared he must now say that it had become necessary, not only to continue, but to increase it; and upon that ground alone he should give his assent to the Motion for going into Committee on the Bill.

THE EARL OF MALMESBURY

did not rise to oppose the measure before the House for doubling the income tax; but he nevertheless felt it to be his duty, in the absence of his noble Friend (the Earl of Derby), to address a few observations to their Lordships upon the subject. His noble Friend (Earl Granville) had stated most truly that the proposition was a simple one. And indeed it was so simple that its very simplicity made it one of the principal misfortunes of the country. It was so simple that it became the easiest of all methods of taxation if the public were willing to accept it; certainly, no great talent for legislation, and no great amount of ability, were required for propounding a financial scheme, when the principal instrument for obtaining a revenue was direct taxation in the form of an income tax. It must, therefore, be a considerable temptation to any Chancellor of the Exchequer to make use of this great instrument, which at once relieved him from all difficulties of calculation and enabled him to bring a vast amount of money into the treasury of the State. He had stated that he intended to agree to the proposition of his noble Friend; but he could not sit down without making a few criticisms upon what had taken place in connection with the tax and with the circumstances of the country during the last twelve months. It would be in the recollection of the House that the late Government, after they thought fit to advise Her Majesty to dissolve Parliament, failed in obtaining a majority in their favour at the election of 1852. True, they found themselves with a considerable number of supporters in the House of Commons; but the united forces of the different sections of that House which did not agree with them outnumbered their strength, and it became apparent that whenever those forces chose to unite upon any one question the days of the Government were numbered. However different in opinion from one another these sections were, they formed a coalition—he did not say how, when, or where—but a coalition they formed, and they lost no time in applying their united strength to expel the Administration of his noble Friend (the Earl of Derby). They were not long hesitating in the choice of a subject on which to make the attack with the most chance of success. They might have attacked upon any question, and by uniting their forces have turned them out; but they chose the question of finance as that upon which the trial of strength was to be tried and proved. At once, and without hesitation, they attacked the financial scheme of his eminent and talented Friend the right hon. Member for Buckinghamshire (Mr. Disraeli). He (the Earl of Malmesbury) must say, in reference to the observations of the noble Earl opposite (Earl Granville) that it was most incorrect to say that the right hon. Gentleman's plans in respect of the income tax were not matured. Those plans were completely and fully matured, and the great feature of them was to give relief, as far as possible, from the inequalities and injustice to which the income tax was, he believed, necessarily liable. The intention of his right hon. Friend was certainly to relieve some of the parties to whom his noble and learned Friend (Lord Brougham) had just alluded, from the unequal pressure with which the tax bore upon them. His noble Friend (Earl Granville) had promised in the commencement of his speech that he would explain why the soap duties were remitted, in the face of all the warnings that were given to the Government at the time; but his noble Friend had concluded his address without the fulfilment of the promise. This was one of the points upon which Her Majesty's Government had most exposed themselves to obloquy, and he remembered that a noble Friend of his not now present (the Earl of Ellenborough) made a most earnest appeal to the Government on the subject, foreseeing, as almost everybody else foresaw, excepting perhaps the Prime Minister, that war was inevitable, and that it would be dangerous and improvident to throw away a tax which brought nearly 1,100,000l. a year into the Exchequer. Now, it was not, he thought, too much for the country to expect that, having expelled the late Government upon a question of finance, the undoubted talents of the succeeding Government should have been united upon the subject of their finance, in order to show the public that the expulsion of the preceding Government had been to its advantage and gain. He would, however, appeal to the public, and ask them whether the strongest point of the policy of Her Majesty's Government was their finan- cial policy. Could it be said of them, and was it believed of them, that that was the best part of their policy, and that upon which they might take to themselves the greatest amount of pride? He (the Earl of Malmesbury) did not believe there was a man in the country, even among their own supporters, who would venture to say that that was the strongest point of their policy; and certainly it ought to be the strongest point, because it was that upon which they defeated the late Government, and expelled them from office. It would have been expecting too much from human nature to suppose that the able Gentleman who was now at the head of the financial department of the Government would condescend to follow in the path of his predecessor. So far from doing so, indeed, that right hon. Gentleman (Mr. Gladstone) appeared to have thought it his duty to pursue exactly the contrary course. Thus, upon the question of the income tax, he rejected the proposition of Mr. Disraeli suggesting relief to certain descriptions of persons and property, and which most people admitted would have been an improvement; and he not only held to the old principle, but he extended the tax to another part of Her Majesty's dominions. At the same time the right hon. Gentleman, in order to make the act less unpopular than it would have been, put before the public one of the greatest delusions that had ever been presented to a deceived nation. The right hon. Gentleman made them believe, and he supposed that the right hon. Gentleman believed it himself, that it was more than probable—nay, that it was likely, and that within seven years, the circumstances of the country would be such as to allow that tax to be completely obliterated. After a most impressive and eloquent speech, the right hon. Gentleman wound up his proposition by promising that at that time the income tax should be extinct. Now, the result of the right hon. Gentleman's Budget, he might shortly state, was this: He reduced about 2,700,000l. of taxation; he increased some taxes—he would not take up the time of their Lordships by enumerating them. The right hon. Gentleman, however, reduced and abolished other taxes, such as the tea duties, the soap duties, &c. But the great point to which the attention of the country was drawn, and of which the right hon. Gentleman seemed to be peculiarly proud, and on which he seemed practically to have grounded his Budget, was his having arranged the financial affairs of this country in such a manner that we were certain that at the end of seven years we should be entirely relieved of the income tax, which was now the subject of discussion in their Lordships' House. Now, at any time, it appeared to bins (the Earl of Malmesbury) almost presumptuous in any man to pretend to calculate what might happen in seven years in a great empire like this, particularly at a great and impending crisis. It would almost require a sign from heaven, or the gift of prophecy, for any Minister to calculate a continuous state of prosperity for a period of seven years, which could alone justify him in making such financial arrangements, depending on the result of such prophetic knowledge. But he (the Earl of Malmesbury) was entirely unable to discover, now, or at the time those arrangements were proposed, what had inspired the right hon. Gentleman with such sanguine hopes as to the continued peace and prosperity of the country. He never could understand what there was in the circumstances of the country to justify the right hon. Gentleman in putting forward this delusion, that during the next seven years there would be such an increase of prosperity, which could only exist with continued peace—he repeated he was at a loss to know what, besides his own imagination, induced the right hon. Gentleman to act upon so weak and so unsatisfactory a basis. But the events which had occurred since the right hon. Gentleman brought forward his Budget—those events had increased his astonishment, the more, too, that they had been foreseen by many persons who did not pretend to be gifted with the spirit of prophecy, and ought to have been equally foreseen by the right hon. Gentleman himself, if he were aware, as he ought to have been aware, of the correspondence which entered and left our Foreign Office. He (the Earl of Malmesbury) asked their Lordships for a moment to recollect the dates which he was now about to mention. It was on the 18th April that the Chancellor of the Exchequer proposed to the other House of Parliament to reduce 2,000,000l. of taxation; that was the day on which he proposed to abolish the soap duties and other duties; that was the day on which he proposed to make his celebrated conversion of stock, which had since so signally failed. The right hon. Gentleman proposed to reduce the duty upon tea by nearly double the amount proposed by his right hon. predecessor, and he wound up his picture of finance by proposing the death of the income tax in seven years. That was on the 18th of April. He now asked their Lordships' patience for a few moments while he reminded them of the correspondence which lately occupied their attention, and which was received at the Foreign Office on the 6th of March, that was, about five weeks before the right hon. Gentleman brought forward his Budget. On the 6th of March the Government received from Sir G. H. Seymour an account of the remarkable conversation which he had had with the Emperor of Russia—a conversation which must be present in the memory of their Lordships. There were some passages in this despatch which showed that this distinguished gentleman, at all events, saw the impending storm, and took the earliest opportunity of warning Her Majesty's Government of it:— It is hardly necessary that I should observe to your Lordship that this short conversation, briefly but correctly reported, offers matter for most anxious reflection. It can hardly be otherwise but that the Sovereign who insists with such pertinacity upon the impending fall of a neighbouring State, insist have settled in his own mind that the hour, if not of its dissolution, at all events, for its dissolution, must he at hand. Now, let their Lordships recollect that this despatch was received five weeks before the right hon. Gentleman brought forward his Budget. On the 15th of April, only three days before he submitted his financial statement to the House, the Earl of Clarendon had received from Colonel Rose, our Charge d'Affaires at Constantinople, a despatch inclosing a Report from M. Doria, containing the following important statement:— Prince Menchikoff had verbally expressed the Emperor's wish to enter into a secret treaty with Turkey, putting a fleet and 400,000 men at her disposal, if she ever needed aid against any Western Power whatever. That Russia further secretly demanded an addition to the treaty of Kainardji, whereby the Greek Church should be placed entirely under Russian protection, without reference to Turkey, which was to be the equivalent for the proffered aid above mentioned. Prince Menchikoff had stated the greatest secrecy must be maintained relative to this proposition, and that, should Turkey allow it to be made known to England, he and his mission would instantly quit Constantinople. Vice Consul Cunningham, in a despatch received by the Earl of Clarendon on the same day, reports:— That fresh orders have been received in Bessarabia to prepare for the passage of troops, and to get waggons ready for the transport of baggage. It is said, and such appears to be the case from the amount of preparation ordered, and two corps d' armée, upwards of 120,000 men, will pass, and waggons are ordered to be ready for the 10th of May, O.S. Whenever orders are given to make preparations, the greatest secrecy is enjoined. Hitherto no troops, in addition to the five battalions mentioned in my last, have entered Bessarabia, but it is understood they are marching forward from all directions. With reference to this intelligence, Colonel Rose added:— The tenor of this Report, taken in consideration with that of the Vice Consul Yeames' last Report from Odessa, can leave, I think, no doubt as to the hostile nature of the intentions of the Russian Government. Now it thus appeared that five weeks before the Budget was announced, Her Majesty's Government were warned of the probability of an impending war with Russia; and three days before the Budget that warning was repeated in the despatch of our Chargé d'Affaires at Constantinople. Yet in the face of those warnings the Chancellor of the Exchequer came down to the House of Commons and took off 2,000,000l. of taxes, and at the same time he endeavoured to make the public believe that the circumstances of the country, both at home and abroad, were such as to justify him in stating, that in seven years it was reasonable to suppose there would no longer be any necessity for the income tax. He (the Earl of Malmesbury) said that a Minister was not justified in acting by the country in such a manner. He considered such a course of policy reflected no honour upon that Government to which that Minister belonged; and, certainly, considering the point upon which the former Government had been ousted, he must say that, even if the absence of an individual Member would have been for the advantage of the nation, it did not appear to have been for its advantage that Mr. Disraeli should have been expelled from his office of Chancellor of the Exchequer, and Mr. Gladstone substituted. But what had happened since? War had been declared, notwithstanding the sanguine anticipations of the Prime Minister, who, up to the very last moment, had never ceased to murmur "Peace, peace;" and that war was now raging in all its fury. Of course, the illusions of the Chancellor of the Exchequer at once vanished, and he now found himself obliged to come to the Houses of Parliament under totally different circumstances and ask for a totally different measure. And when he went down to the House of Commons, unless he (the Earl of Malmesbury) were misinformed, he stated not long ago that he believed that doubling the income tax would be sufficient, and he gave the impression to the country that the present generation would be fully enabled to bear the weight of the present war. In that respect he (the Earl of Malmesbury) must beg entirely to differ from the right hon. Gentleman; for, if this turned out to be such a war as he feared it would be, he did not think it would be just that the present generation should take upon itself the whole weight and burden. Posterity, in his opinion, was even more interested than ourselves in the issue of the present struggle; and believing, as he did, that the whole empire of Europe would belong and must belong to that Russian prince who was enabled to obtain possession of Constantinople, and hold it, he could not but believe that it was necessary for this country to spend both blood and treasure, even to the last soldier and the last shilling, in its defence. Certainly posterity was deeply interested in such a cause, and posterity would have no right to complain if it bore a portion of the burden entailed by the present struggle. If it was on any idea contrary to such a principle the Chancellor of the Exchequer had acted, he (the Earl of Malmesbury) must say it was adding a second delusion to the former one; but he believed that the Chancellor of the Exchequer was already convinced that such a state of things was impossible. The Chancellor of the Exchequer had now come down with a newly invented kind of loan. He (the Earl of Malmesbury) was not a financier, and it would be presumptuous in him to attempt to speak at any length upon such a subject before many noble Lords who had had great experience in finance; but it did appear to him, as it might to persons of the humblest capacity, that when they looked at the operations which had taken place with respect to the financial affairs of this year, they were capable of being described pretty nearly in this way:—The Chancellor of the Exchequer appeared to have paid off one kind of stock at par at 3 per cent, and had taken up another at 3½; he had paid off at par one month, and had been borrowing at the rate of 15 discount another month. Whether that was his error or his incapacity he left it for their Lordships to judge. As he had said before, he would not oppose the Motion, but confine himself to the few observations he had made.

LORD MONTEAGLE

My Lords, in performing the duties which I am about to undertake, I do not feel it necessary to follow the course of argument of the noble Earl (the Earl of Malmesbury) who has just sat down. The foreign policy of this country, and the conduct of Her Majesty's Government in the late negotiations, naturally press themselves upon the attention of a noble Lord who has himself filled the office of Foreign Secretary, and to whom that part of the subject is, therefore, peculiarly interesting and familiar. To me, from analogous reasons, it is more natural to call your Lordships' attention to the financial condition of the country—a matter still more essentially connected with the Bill under our consideration. I shall have occasion to bespeak your Lordships' kind indulgence, and I do so the more reluctantly, as being fully conscious how distasteful questions of taxation are to this House, how foreign they are to our ordinary deliberations, and how difficult it is at all times to fix your Lordships' attention to a Bill upon which no adverse vote is proposed. We are now called upon, contrary to our anticipations, to increase the most unpopular of all our taxes—a tax which we flattered ourselves had, last year, been placed by Parliament in a course of gradual reduction and ultimate extinction. In addition to any argument derived from the importance of this Bill in itself, I have also to ask your patient attention on another ground. I believe that the position in which the finances of the empire are now placed, is the most extraordinary and anomalous, I grieve to add the most critical, that we have known for very many years. This startling proposition it will be my task to explain.

In approaching the subject I must beg to guard myself against the supposition of meaning anything individually disrespectful to the right hon. Gentleman who occupies the difficult and responsible office of head of the financial affairs of the country. No one admires more heartily, no one admits more sincerely and unreservedly than I do, the pre-eminent ability, the commanding eloquence, and the excelling and attractive character and endowments of Mr. Gladstone. But, on that very account, I feel myself all the more at liberty to deal frankly with his measures, to consider the principles upon which they are founded, and the consequences to which they lead. If I, from mere personal considerations, were to hesitate in expressing my opinions unreservedly, I should only prove that I had formed an unjust estimate of the Minister whose policy I questioned, and that I forgot, or set aside, the obligations which, as a Member of the British Parliament, I owe to my country and to myself. It is because I feel a high respect for the Chancellor of the Exchequer that I am the more ready to discuss, with the freedom which becomes this Assembly, the financial measures of the present Session. Nay, though it may sound a paradox, whilst gladly recognising the great powers and unbounded Parliamentary influence of the Chancellor of the Exchequer, those high qualifications, in my judgment, augment the danger to be apprehended from some of his measures; and they ought to put your Lordships, and the Members of the other House of Parliament, upon their guard against his financial propositions. I quite admit that the charmer, if he charms not wisely, charms most effectively, for he persuades where he cannot convince. It is, therefore, some relief to me to think that, from the inconsistencies and contradictions upon which I shall have occasion to animadvert, it is scarcely possible to urge an objection against any one part of the Government policy, without having on my side the authority of the same Government in another part of their policy, and being thus enabled to justify, by the authority of the right hon. Gentleman himself, my opposition to his measures. For instance, the amount of the unfunded debt is at one period stated as an evil, and the reduction of that amount is described a public benefit. At the next turn we find the unfunded debt, previously reduced, again augmented to its former amount, or proposed to be raised to a still greater amount, under another name. Again, it has been proposed to adopt, as "the keystone of our system," the obligation of raising, within the year, the supplies wanting for the annual public services. The authority of great economical writers has been quoted in support of what I freely admit to be a noble proposition, wherever it is practical. This great aphorism has been recommended, not only on social and political, but upon moral grounds; yet, hardly were the words cold upon the lips which had uttered them, than we have witnessed a departure from the principle thus laid down, and a proposal made to create a debt of 6,000,000l., and to throw this burden upon our pos- terity. On these grounds I not only find it difficult, for myself individually, to agree with these contradictory propositions, but I feel assured that it must be equally difficult for my noble Friends on the Treasury bench to do so. Whichever alternative we are induced, on conviction, to embrace, gives to each of us the benefit of the Chancellor of the Exchequer's authority, in favour of our conflicting opinions. I cannot, for the life of me, at once make it a cardinal point that the supplies should be raised within the year, and, at the same time, support and approve a measure having a tendency directly contradictory.

It is impossible to deny, that, in combination with many evidences of increasing prosperity, we have to struggle at the present with considerable financial difficulties. We find a surplus of income over our expenditure, yet our credit can hardly be considered to be in a satisfactory state. Our revenue augments, yet we are driven to propose new taxes. We seek to raise a small loan, but the capitalists repeatedly reject our proposals. These contrasts make the present position of the country a most remarkable one, the cause of which we are bound to review, as well as to investigate its probable consequences. It has been, unfortunately, made but too notorious, that a want of cordial feeling has existed during the last year between two great departments—the one within, and the other without, the State. I allude to the interruption of the èntente cordiale between the Treasury and Threadneedle Street. This I sincerely regret. A good understanding between these two great contracting powers is of the highest public importance, provided it be not maintained by any improper attempts at coercion on the one hand, or by any undue subserviency on the other. No papers have yet been moved for or presented, showing the origin, or the decline and fall of this holy alliance; but, if the secret correspondence on the subject is ever produced, I cannot but suspect that the dispatches between the Bank and the Treasury will form an amusing pendant to the Russian diplomatic papers. Indeed, as if to render the likeness more correct—or, I might better say, the identity more striking—the secret memorandum of Count Nesselrode is rivalled by a memorandum equally confidential, of which, for the first time, I have lately heard, and which sets forth the engagements entered into between the Bank and a former Chancellor of the Exchequer.

The anomaly in our position, which I have already noticed, is, that, whilst we gladly recognise around us causes and evidences of prosperity, which continue and increase, many alarming circumstances of an opposite kind are also found to exist, combined with these favourable indications. The state of our public securities is far from satisfactory; our funds are not high; our Exchequer bills barely maintain their circulation at par, or at a small discount. The balances in the Exchequer are low, and our debt on deficiency bills has proportionally augmented. The returns of the Bank bullion and the reserve of notes are becoming more serious week by week. We are called upon at once to double the income tax and to incur an increased debt; yet, at the same time, we are triumphantly assured that we possess a surplus of income over expenditure, amounting to no less a sum than 3,500,000l. Let us inquire what is the cause of these strongly contrasted circumstances. Have we been exposed to any great commercial misfortunes checking our trade and paralysing our manufacturing industry? Quite the reverse. So far from there being any reason to doubt, or to regret, the policy of our late legislation, the experiment, it is now admitted, has signally succeeded. The principle of free trade, irrevocably adopted by both Houses of Parliament, has exhibited no one result to make the country hesitate in its adopted faith. On the contrary, all our measures of that character have succeeded beyond the hopes of the most sanguine. We have seen liberty given to commerce, we have seen the exchanges between nation and nation extending daily, our manufacturers are profitably employed, the consumer is largely relieved, no complaint is heard, no petitions are presented from the agricultural interest, who now recognise the fallacy of that doctrine which taught them that the prosperity of the manufacturers and that of the farmers of England could not co-exist.

The state of our revenue is most satisfactory. Comparing the income of the year closing on the 5th of April, it shows an excess of income over the Chancellor of the Exchequer's estimate in 1853 of no less than 1,350,000l. The public expenditure for the same period has fallen below that estimate by 1,120,000l. Thus an improvement has taken place to the amount of 2,470,000l. Nor is the amount of this advance greater than the rapidity of its augmentation. The surplus of income which Mr. Gladstone estimated (March 6th) at 2,800,000l., produced upon the 5th of August, 3,524,000l. It is true that some portion of this increase has arisen from anticipated payments of the property tax and of the tea duties, which would more naturally have entered into the revenue of the present year. But, making every just deduction, even after the repeal, in 1853, of taxes amounting to 2,000,000l. (the produce of the taxes concurrently imposed not exceeding 700,000l.), our revenues exhibits the unexampled prosperity I have described. I freely admit, in justice and in candour, that the Government are also entitled to claim some further allowance on account of their preparations for the apprehended war, and also on account of the deficient harvest, and its possible, though not well authenticated effects, on the amount of bullion at the Bank. To this may also be added the insurrection in China, which has diminished the tea duties. I give credit for these deductions, valeant quantum, but I have shown that it is not to them we can truly trace the extent of our financial derangements, which must be sought for in some other cause. That cause I shall now proceed to investigate.

I trace whatever is unsatisfactory in our present condition to the unfortunate manner in which the public debt has been dealt with during the course of the last year. This course I consider to have been unexampled; contrary alike to all experience, and to all general principles and authority. In explaining my meaning, I shall distinguish the case of the funded, from that of the unfunded debt, and shall deal first with the latter. At the commencement of the year 1853 the interest on Exchequer bills had been recently reduced by Mr. Disraeli to 1¼d. a day, being a very low rate of interest. On the 14th of February Mr. Gladstone gave notice of the still farther reduction of interest to 1d. a day, or 1½ per cent interest, which was carried into effect on the 11th of March. I believe that 1l. 10s., or 1½ per cent interest, was a lower amount than had ever before been paid upon Exchequer bills. This March exchange of 1853 was, however, carried into effect successfully; 8,477,200l. in renewed bills were taken by the public. A similar reduction of interest was announced on the Exchequer bills exchangeable in June. The advertisement appeared on the 16th of May; the exchange took place on the 10th of June. But circumstances had changed even since March; what in spring was rash, was in summer mischievous. The consequence of the reduction of interest was immediate. Of the June bills, 3,134,000l. were required to be paid in money, and 5,890,000l. only were exchanged by the public for new bills.

It is here right to advert to the effect of these operations on the premium obtainable on Exchequer bills during these changes, the high premium being relied on by the Chancellor of the Exchequer in justification of his proceedings.

1853. Jan. 1st to Jan. 6th	73s. to 69s.
1853. Jan. 6th to Jan. 20th	72s. to 60s.
1853. Feb. 14th	61s. to 50s.

The notice of the reduction of interest was given, be it remembered, on the 14th of February, and the effect on the premium already falling, was as follows:—

Feb. 15th	30s.
Feb. 16th to 18th	25s. to 15s.
Feb. 19th	10s. to par.
March 2nd	16s. to 5s.
March 3rd	3s.

On May 16th a further notice for the reduction of interest on the June bills appeared, and the price of Exchequer bills fluctuated from a discount of 3s., 4s., 7s., 11s., and 17s. per annum to a premium of 3s. or 5s. But even this miserable price was maintained only through the forcible interposition of the Government itself. Between the 5th and the 25th of May, the Chancellor of the Exchequer, acting on behalf of the savings banks, became a large purchaser of these depreciated securities. In nine days the sum of 380,000l. was expended on behalf of the trustees of the savings banks, and 57,000l. for the sinking fund. In the quarter ending October, a further sum of 866,000l. was invested in like manner. It is therefore clear that, had it not been for this artificial support, the Exchequer bills would not have been saleable at all.

But it is necessary to inquire into other concurrent circumstances which afford the means of judging how far these successive reductions of interest were or were not prudent. The value of money in the market is best shown by the rate of discount charged at the Bank of England, which stood as follows in 1853:—

1353. Jan. 1st	2 per cent.
1353. Jan. 7th	2 ½ per cent.
1353. Jan. 20th	3 per cent.
1353. June 2nd	3½ per cent.
1353. Sept. 2nd	4 per cent.
1353. Sept. 15th	4½ per cent.
1353. Sept. 29th	5 per cent.

It is thus shown that the value of money was steadily and invariably progressive for nine months; neither was there anything in the price of Consols which led to any different conclusion. The bullion in the Bank had also been reduced between January and July, 1853, from 19,151,000l. to 17,889,000l. in July, and in October to 15,202,000l. Thus, it will be seen that whilst the value of money was rising, the Treasury persevered in reducing, to an unexampled pitch, the interest payable on Exchequer bills. The result was, as has already been shown, a demand in money for 3,134,000l. of Exchequer bills brought in. It is not improbable that, if the Treasury had been content to let well alone, these Exchequer bills might have floated at their original interest, and the public balances would not have been drained to the amount of 3,134,000l. paid off; but a consequence followed still more dangerous. A general discredit was cast upon these securities by the course so injudiciously resorted to, which discredit these securities have never since recovered. It is, indeed, quite true, that the holders of Exchequer bills have no right to expect that the Chancellor of the Exchequer should maintain the unfunded debt at a high premium, for their exclusive advantage. They, like all other dealers in public securities, are, and must be, liable to the fluctuations of the money market; but, up to the time of the present Administration, the holders had one incidental security, resting upon all experience from the days of William III. and of Halifax, to the present time. It had never been the practice to vary the interest on Exchequer bills inversely to the fluctuating value of money in the market. This seemed to give an undoubted guarantee against so extraordinary a measure as that of the Chancellor of the Exchequer. Holders of these securities could not have been prepared for an unexampled reduction in the interest of Exchequer bills, at a time when the value of money was steadily increasing, as exhibited at the Bank and the Stock Exchange. It is this which has shaken the credit of the unfunded debt, and has compelled the Chancellor of the Exchequer to endeavour, though in- effectually, to support the Exchequer bill market by a large expenditure of savings bank and sinking fund monies. A somewhat singular justification has, however, been attempted for these proceedings. It has been discovered officially, as it appears, that the amount of outstanding Exchequer bills was in excess, and that to pay off and cancel bills to the extent of above 3,000,000l. was a great stroke of financial wisdom. This supposed excess in the amount of bills was scarcely reconcilable with the high rate of premium on such bills, so much complained of; but, even assuming the allegation to be true, it is necessary to inquire whether the measure was successful for its declared object? No such thing. 3,000,000l. of Exchequer bills were paid off, as I have shown, in June; but with what result? Why, that between the 17th of October and the 31st of December, precisely the same amount of bills—namely, 3,000,000l.—were reissued for the public service, at an interest increased to three per cent, or to an amount double that which had been originally paid. These new bills were put into circulation, and disposed of in a manner to prove abundantly the critical nature of the transaction. These impolitic proceedings could hardly fail to have inflicted a formidable blow on public credit. I agree that it may be at times desirable to reduce the unfunded debt. I agree, also, that the interest should be reduced when the general value of money has fallen; but it is surely a principle of financial policy to preserve the elasticity of the Exchequer bill market, so as to admit of the use of these securities, to meet any temporary exigency. More has been done in the last year to damage these securities than in the century and a half preceding. We have been compelled to raise the interest to three per cent, and even at that rate these securities are heavy, and the event of the June exchange is left uncertain. Such were the proceedings taken with respect to the unfunded debt—proceedings which I find it impossible to justify, and difficult to comprehend.

Nor were the steps taken in relation to the funded debt less extraordinary and mischievous than those I have described. I now allude to the measures for the conversion of the South Sea debt, and to the consequences which those measures produced. I should willingly escape this part of the subject; but it is indispensable to consider it, in order to pro- nounce justly upon our present condition, its immediate causes, or probable consequences. My Lords, it is never an agreeable, and it is often an ungenerous, act, to claim credit for the fulfilment of our anticipations of evil. From the days of Calchas to the present, "prophets of ill" have been uniformly unpopular. I have no ambition that way; besides, it is admitted, even by the party bound to feel a paternal interest in the conversion scheme, that it has proved "abortive." Had it been "abortive" only, it should have been passed over by me; but I am prepared to show that it has been not only "abortive," but actively mischievous. It is not the first time that public measures deserve justly to be designated in the words of my late ingenious friend, Mr. Luttrell,— For every evil purpose strong, And mischievous for every good one. The conversion of the South Sea stock, to which I called your Lordships' attention on the 5th of May, 1853, presents one striking peculiarity. It was wholly gratuitous on the part of the Government; it was neither called for, nor expected, by the fundholder, by Parliament, or by the public. It took the whole world by surprise. No complaint was made by the South Sea proprietors. The Treasury had offered to those proprietors three alternatives; "the fancy of the stock market" was excited, and was proposed to be gratified by the tender of an augmented capital at a lower interest, a diminished capital at a higher interest, or by a new species of security, entitled an Exchequer bond, payable forty years after date. But to the attractions of these several proposals the monied interest manifested a most uncomplimentary indifference. In place of commuting 11,133,210l. 12s. of South Sea stock, the sum of 3,063,906l. only was so commuted; and a capital of 8,069,303l. has been redeemed on the inconvenient terms of being paid off in money. What was still more trying was that the Exchequer bonds for 30,000,000l., which it was anticipated the public would eagerly take, and increase by a further and wholly unlimited demand, led to no result more brilliant than the creation of bonds for 440,000l., or less than one-sixtieth of the minimum amount anticipated. I plead guilty to so much of personal selfishness as to rejoice at having been relieved from the official labours which would have devolved on me as Comptroller General, in signing these securities; but the preparations were industriously made, reams of patent paper were manufactured, and plates engraved by eminent artists. Where we can now find such of these securities as have been issued I know not. I have never observed a quotation of their price in the City articles of the daily journals. I doubt whether they have obtained any currency on the Stock Exchange; but I do hope that, as financial curiosities, a few copies may be preserved among the archives of the British Museum, as likely to become interesting to the curious in future times. I have said that these Government proposals were not invited by the South Sea proprietors; yet had those gentlemen fully anticipated the brilliant future which the Chancellor of the Exchequer opened to them, of his own more motion, they would, in thankfulness, have bent upon their knees before him. Not accepting any one of the three fanciful offers of the Treasury, they became entitled to demand money for their stock at par. The result was, that, in addition to the 3,000,000l. already paid for Exchequer bills, a further sum of 8,048,000l. was required by the holders of South Sea stock. Thus, being paid off, at par, their 100l. in the morning, they were enabled before night to re-invest in three per cents at about ten per cent profit on their capital. I cannot but congratulate these fortunate fund-holders at the gratuitous boon so unexpectedly conferred upon them. I have no doubt that they are most worthy and respectable persons, who will turn the wealth granted to them to the best account. One great corporation, with which I have the honour of being connected, have come, I much rejoice to say, within this privileged class. By the bequest of the late Viscount Fitzwilliam, the University of Cambridge became a considerable holder of South Sea stock. After the announcement of the Government plan, I was asked my opinion by some learned friends connected with the University, respecting the resolution most expedient to be adopted by them. I did not venture to recommend an acceptance of the proposals of the Chancellor of the Exchequer, but rather suggested that the University should bide its time, and stand still, waiting events. The decision adopted by the University did not differ from the suggestion I had made to my learned Friends; and the trustees of the Fitzwilliam Museum, to their satisfaction and to mine, have added nine or ten thousand pounds to the funds of their noble institution. I am confident they will never forget the noble-hearted statesman to whom they owe so much. What- ever may be their apprehensions of his proposed University measures, I feel confident that, in the commemoration of our benefactor, we shall always toast the Minister who, unasked, has given us 9,000l. for University purposes.

It now behoves your Lordships to inquire seriously what has been the result upon the resources of the country of this enormous drain upon the reduction of the Exchequer balances. I have shown that our difficulties are not connected either with an increased expenditure or a diminished receipt. I trace them to a far different source. I attribute them, as I have stated already, to the operations of the Government on our public debt, and I fear that the measures now proposed will only tend to aggravate those difficulties still more. This is, however, a matter which should rest on evidence, not on assertion. The demonstration upon which I am about to enter may, I am aware, appear dry and uninteresting. This House is not accustomed to give a very minute attention to financial details; it is, however, our unquestioned right, and it may be our imperative duty to discuss them. I consider this to be the case, on the present occasion. From such of your Lordships as are familiar with the facts I must ask an indulgent toleration, whilst I repeat that of which they are well informed. From others, to whom the subject is novel, I must entreat a patient hearing, whilst I explain the somewhat complicated facts of the case. This will enable both classes to decide whether my arguments are solid or fallacious, and will test how those arguments ought to be dealt with, and regarded, by the House and by the public.

The revenue received during each quarter stands nominally in the custody of Her Majesty's Exchequer. In reality, though placed to my credit, it lies in a much safer place of deposit—namely, in the Bank of England. Till within the present time your Lordships have possibly partaken in that general prejudice which has existed in favour of preserving a large available balance, as a matter not wholly unimportant to the public credit. You may have been led astray by what is now thought to be a vulgar delusion, that for nations, as well as for individuals, it is desirable and advantageous, more particularly in a fluctuating state of affairs, where income is uncertain and expenditure heavy, that an abundant balance should be reserved at our bankers. I remember well that the late Sir Francis Baring (grandfather of a noble Friend who sits near me, Lord Ashburton) advised a near relative of my own to keep constantly at his command a floating balance of 100,000l. for contingencies. "You know not when this money may be required, or how it may be made available," observed the sagacious merchant. My kinsman replied, "I quite concur in your advice, and shall certainly keep the 100,000l., as you suggest, whenever I can get it." The counsel, and the reply, have hitherto appeared to me alike reasonable; but our Chancellor of the Exchequer has unfortunately acted upon a principle in opposition to that recommended by Sir F. Baring. He possessed, till lately, a large available balance; but be seems to have considered it a nuisance, of which it was expedient to rid himself, at the very time when it was most required for the public service. The Exchequer balance in April, 1853, amounted to 7,800,000l. In April, 1854, it was reduced to 2,700,000l., showing a diminution of upwards of 5,000,000l. At no former period was this result more to be regretted than at the present, when the exigencies of a just war have required the exertion of all the powers of the State, financial as well as military. We have seen our brave army marching forward for the defence of the weak against the strong; we have seen our fleets bearing the flag of England to the Black Sea and to the Baltic, in vindication of the cause of truth, in defence of the independence of nations, and in maintenance of the balance of power in Europe. The acclamations of the people have accompanied the advance of their protectors. We have also seen that which was still more sublime and more touching than any movements of fleets and armies. We have seen the congregated multitude in our land on their bended knees before the Dispenser of all good, praying for protection, victory, and an honourable peace, and praying with a more humble confidence because they felt assured that our cause was just and our motives disinterested.

My Lords, far be it for me to suggest that mere pecuniary considerations, or any financial triumph, can be compared with the more elevated and holier thoughts to which I have ventured to allude. In a subordinate degree, however, I cannot help thinking that the possession of the available cash balance of 5,000,000l., applicable to the duties which we now have in hand, was not wholly to be despised. It would have added to the strength of England, it would have augmented our military and naval superiority; and, I may even hint, it would not have lessened the efficacy of the diplomatic interposition of my noble Friend the Secretary of State (Lord Clarendon). If we had preserved that 5,000,000l., how different would have been the tone of the present discussion in Parliament, how striking the contrast on the Continent between the inconvertible paper of Russia, the depreciated currency of Austria, the expensive loans of other European countries, and the strength and independence of England resulting from our prudent forethought and accumulation, and supported, as it would have been, by the cheerful readiness of Parliament to vote new taxes if required.

A somewhat singular discovery had, however, been made. We are in the days of such discoveries. In justification of this voluntary reduction of our national resources, it has been said that it was fortunate we possessed no larger balance at the Bank at the present time; for if Parliament had possessed a control over such a balance, we are assured that the country would have shrunk from the demands made upon it, and would have refused to grant the further Ways and Means required to support the exigencies of the war. I reject altogether this supposition, and reject it not without some indignation. Among our causes for just national pride, the conduct of Parliament, and especially of the House of Commons, is not the least memorable. May it ever be so! The present war is one in favour of which the people are in advance of the House of Commons, and Parliament is in advance of the Government. Never has there been more unanimity displayed among the people, and such an absence of party feeling in both Houses, than in making the requisite provision for carrying on the war. The Government, too, have earnestly discharged their functions. The House of Commons voted, without hesitation or division, a sum of 4,315,000l., in addition to the ordinary estimates for the year. All that had hitherto been required for our Army, Navy, and Ordnance, has been freely supplied, to vindicate the righteous cause in which we are engaged. By this generous course the House of Commons have given a noble refutation to the unworthy estimate of their public spirit formed by the Emperor of Russia. It seems that the northern Autocrat treats our reformed representation as having given us a bourgeois Parliament, unlikely in any circumstances to support the expense of a war, and insensible to our national honour. If by a bourgeois Parliament the Emperor means a House which owes its origin and its main responsibility to a constituency formed of the middle classes, it has now been shown that such a Parliament is not inclined to shrink from any sacrifices when the honour, the dignity, and the real interests of their country are at stake. It is true that, having wasted balances which would have provided abundant resources for every present want, till the new taxes should become productive, we have been compelled to resort to the more vulgar method of running in debt. The increased property tax, which was the mode recommended for meeting the war expenditure, could not be relied upon for some months to come. Parliament therefore voted all that was asked of them, 1,750,000l. in Exchequer bills, as a species of vote of credit. This is not proposed to be added permanently to the general unfunded debt, but to be used as a temporary advance to meet the opening of the war. These bills are chargeable, as I understand, upon the income of the year, and the balance of the public accounts would, after providing for our armaments, have still exhibited a surplus of about half a million. It must not be forgotten that the whole of these calculations were based upon an estimated additional war expenditure, exceeding by 4,300,000l. the ordinary supplies in time of peace. We did not then make provision for a state of peace to be completed hereafter by supplemental measures into a provision for a state of war. We voted a war expenditure, and after doing so even furnished a surplus. The calculations showed a sum of 1,000,000l. for the extraordinary expenses of the Army; an additional sum of 832,000l. for the land forces; for the Navy, 1,253,000l.; for the Ordnance, 793,000l.; for the Commissariat, 88,000l.; and for miscellaneous services, 299,000l. This, undoubtedly, was a war Budget, if ever a war Budget has been framed. I am far from suggesting that the Government pledged themselves that this estimate might not be exceeded. It would not have been wise on their part to have done so, or reasonable in the House to have required it. If unforeseen circumstances should demand greater disbursements, let the Government come down to Parliament and state their case. Parliament will then, I feel confident, be as ready and willing as it had already proved itself to be, to contribute the fullest amount necessary to meet the public exigencies. But do not let the Government, in order to justify increased future Estimates, assert that the Budget already voted was a peace Budget, and that additional votes are demanded to provide a war Budget. Let the additional demands made upon the public rest upon their true basis, and the House of Commons will not fail to do its duty. Four millions had already been granted for the Russian war. The vote of 1,750,000l. in Exchequer bills being calculated to give immediate activity to the ways and means provided by the new taxes, this operation was of the nature of a discount of a security due at a future time. This, be it remembered, would have been altogether needless had it not been for the waste of the Exchequer balance produced by the failure of the Chancellor of the Exchequer's scheme for converting the South Sea securities.

But the mischief has gone further, and it now becomes my duty to call your Lordships' attention to the relation existing between the state of the public balance, the Bank of England, and the trade and commercial credit of the country.

Here it should be kept in mind that, whilst the receipt of revenue is daily and continuous, and the lodgments made to the Comptroller General's account at the Bank take place three times in each week, the heaviest demands upon the public, the interest of the debt, the civil list, the judicial and diplomatic salaries, with many other charges of the same kind, become due on the quarter days in January, April, July, and October. If the Exchequer balances on these quarter days are adequate to meet the whole charge on the Consolidated Fund, no difficulty can arise, nor is any advance required from the Bank of England. The dividends are then paid from the balance, and the growing produce of revenue goes to the current expenditure, and to accumulate a balance for the following quarter. This occurred in 1847, 1848, 1849, 1850, 1851, and 1852, during which years the balances occasionally amounted to 7,000,000l., 8,000,000l., and even, on one occasion, to 9,000,000l. But the case is far otherwise when the public balances have fallen to a low figure. Assuming a case like that of the 5th of April, 1854, the cash balance amounted only to 2,040,255l. 17s. 3d., and the charges to be provided for, including debt and sinking fund, required no less than 7,437,676l. 15s. 9d. The amount wanting to meet our requirement was struck by the Treasury at 5,397,420l. 18s. 6d. Deficiency bills (being Exchequer bills made out in large sums payable to the Bank of England or order, and never put into general circulation) were authorised to be issued. The amount represented by such securities is transferred by the Bank to the credit of the Exchequer account, and the necessary payments follow in course. In the meanwhile tile growing produce of the revenue is from time to time applied in discharge of these deficiency bills, which are taken up and cancelled. It thus follows that, according as the balances in the Exchequer are found to be insufficient to meet the charge on the Consolidated Fund, a proportionate amount of deficiency bills is issued as securities to the Bank, from which body a temporary loan is made equal to the amount of the deficiency to be made up. The result is that the Bank has a direct interest in the state of the Exchequer balances; because, though a Government loan on deficiency bills may occasionally bring with it some pecuniary advantage to the Bank, yet at other periods it may be felt as a serious inconvenience. The interest charged on deficiency bills is generally extremely moderate, and below the interest on ordinary Exchequer bills. In the olden times the Bank possessed the power to act at their own discretion, and had generally a disposition to meet the wants of the Government in this respect. But by the Bank Act of 1844 the position of the Bank was altogether changed. That Statute placed the Bank under severe, and (as is considered by some high authorities) most salutary restrictions, prohibiting the issue of circulating paper beyond the amount of the reserve of notes. Now, let it be supposed that the amount of such reserve was 2,000,000l. only, and that the Government necessities required an issue of 4,000,000l. on deficiency bills: the resources of the Bank would thus be below the Government requirements by a sum of 2,000,000l. What could be done to meet such an exigency? In order to be enabled to comply with the demands of the Government, the Bank would necessarily be driven to place a restriction upon commercial discounts. They would limit their amount or their duration, and, by running off their private securities, and by withholding capital from the commerce of the country, they would ob- tain a power of satisfying the political demands of the Government. This is no imaginary hypothesis, as will appear most clearly by a reference to the proceedings of your Lordships' Committee of 1847, where the whole subject was carefully sifted. It is true that the report of the Committee in that year, so far from meeting the assent of the Government of the day, was opposed by them, acting in combination with many of their political opponents and predecessors. It was, however, carried by a majority of independent Peers, and I trust it will not on that account forfeit its claims to your Lordships' confidence. That Report stated the question which I am now discussing, in the following clear and intelligible manner:— On the advances from the Bank the dividends and the public credit may to a considerable extent depend, and any interruption in the performance of these engagements would be attended with the most serious consequences. Their bearing on the Act of 1844 is shown in the evidence of the Governor of the Bank and of other witnesses. I will not rely upon the evidence of witnesses opposed to the Bill of 1844, however conclusive that evidence may be. I prefer mainly to rest on the authority of others who were the most favourable to that Act. The Governor of the Bank was asked:— Q. 362. "In October, 1847, there were no deficiency bills. In October, 1846, there were such bills to the extent of 3,466,000l.; in January, 1843, they amounted to 8,560,000l. If there had been a demand upon the Bank in October, 1847, for the ordinary amount of deficiency bills, in what condition would the Bank reserve have stood? The answer given was:— If we thought such bills would have been required, we should have lent money for such a period as to enable us to make an advance upon the deficiency bills out of the money that would be returned to us by the public. The Report then continued:— The effect would thus have been, that, had deficiency bills been required in October, 1847, the amount of accommodation then given to commerce must have been considerably lessened in amount, or limited in duration; the increased pressure and panic which such an operation could not have failed to create may easily be inferred from the preceding parts of this Report. This question is so important, and is so vitally connected with the operation of the Act of 1844, that it is necessary to pursue it further. The immediate effect of such a demand for Treasury advances is admitted by the Governors of the Bank:— Q. 365. "The means of meeting these deficiency bills would then have been, that by so arranging your securities you would have taken out of the hands of the public a sufficient sum to meet the advance to the Government?"—A. "Certainly. If I were not unwilling to occupy further your Lordships' attention upon this part of the subject, I could refer to much additional evidence. The experience and scientific knowledge of one who is, I rejoice to know, a Member of this House, but who was then examined as Mr. Samuel Jones Lloyd, is entitled to peculiar weight. That of Mr. Norman and Mr. Cotton was to the same effect, and is, I need hardly add, of high authority. The latter gentleman, being himself a leading Bank director, observed:— If you had not money in the till to pay the dividends when we advanced upon deficiency bills, we must have reduced our other securities. When I say the amount in the till, I mean a surplus amount. It can hardly be denied therefore, that, to carry into effect the Act of 1844, it is absolutely necessary for the Treasury to keep at command adequate Exchequer balances. If those balances are to be largely and habitually reduced, it will be found inconsistent with the safe working of that Act. The low balances, produced by the financial policy of the last year, must have been injurious to the Bank and to the public, and, if persevered in, must tend to cripple the commercial interests of England. It is true that Parliament has been assured that no difficulty existed on the part of the Bank in making these advances on deficiency bills; we are assured by the Chancellor of the Exchequer, on the contrary, that this operation is profitable and agreeable to the authorities of Threadneedle Street. Mr. Tompson Hankey, the late Governor of the Bank, is, however, of a different opinion. On the 23rd of March he observed that— Mr. Gladstone had stated that when the Government borrowed money on deficiency bills it was a source of no inconvenience to the Bank; but, on the contrary, was rather an advantage. With the greatest deference to the judgment and abilities of the right hon. Gentleman, he felt bound to express a totally different opinion. It might be convenient and even advantageous to make such advances when money was plentiful, but that was very different from being under the necessity of lending money to the Chancellor of the Exchequer under circumstances which might oblige him to ask for that accommodation. At the present there were strong indications of a rise in the value of money, and he feared that the right hon. Gentleman had understated his requirements. Mr. Thomas Baring confirmed all these anticipations on the 12th of April. From his position as a leading merchant, as a bank director, and as a gentleman of high intellectual superiority, the following declaration, made by him in the House of Commons, is entitled to the most respectful attention:— He could see no cause for alarm or apprehension, except by mismanagement; and, after all that had passed, he trusted that the Chancellor of the Exchequer would, in future, show more prudence than had been displayed in the last year. It should be remembered, before making deficiency bills the basis of our system, that circumstances might arise which no Government could foresee; in which assistance, if demanded from the Bank, could not be afforded without interfering very largely, under the present banking system, with the condition of the banking community. If the Act of 1844 was to be fairly tried, the Government must not resort to the system of keeping small balances, and obtaining the aid of the Bank by deficiency bills. Great injury would arise to public credit if the system of relying on advances from the Bank were resorted to. He protested against it, as a policy fraught with danger to the financial prosperity of the country. I earnestly entreat your Lordships to consider calmly the facts which I have laid before you. I have proved that the lowering of the Exchequer balance had, of necessity, the effect of increasing the demands of the Government upon the Bank. I have proved that such increase created the risk of casting a pressure upon the commerce of the country. I have proved that both these consequences were connected with the unfortunate financial operations of the last year. I have laid before you the anticipations of the Committee of 1847. The evidence then given by Mr. Prescott, Mr. Morris, Mr. Lloyd, Mr. Norman, and Mr. Cotton, confirms the views of the Committee. Seven years after this inquiry, I have shown you that the same opinions have been reiterated by Mr. Thomas Baring and Mr. Thomson Hankey. Can I be called upon, or is it possible, to increase the force of such a demonstration?

But other parts of the question require observation. The mode in which the public debt, the sinking fund, and the resources of the savings banks have been employed, cannot be excluded from the notice of your Lordships. In the observations which I am now about to make, I disclaim altogether attributing to the Government a violation of the law; I question, however, the use which they have made of the discretionary powers vested in them by a Statute of doubtful policy. The ordinary Exchequer bill is, as your Lord- ships are aware, a Government security, current for twelve months, and at maturity generally exchanged for new bills, or paid off in money. If left unpaid, it is receivable in taxes at par. There are also two other classes of the same securities, the nature of which, with your Lordships' permission, I shall proceed to explain. There are the deficiency bills, to which I have already adverted, passed to the Bank, under the 57 Geo. III. (48), as a security for advances, and charged on the growing produce of the current quarter. There is also a third class of securities, commonly described as consolidated fund bills, issued under the 16 and 17 Vict. (c. 110), which are chargeable, not on the current quarter, but on the quarter next ensuing. They resemble, in fact, the ordinary deficiency bills, except that they are payable at a longer date. In the absence of any arrangement made with the Bank to take up these securities, and in the event of a difficulty of disposing advantageously of Exchequer bills in the market, the sinking fund and the resources of the savings banks have been largely resorted to in support of the proceedings of the Government. Your Lordships are aware that the sinking fund has of late years produced a very considerable annual sum applicable to the reduction of the national debt; but at various times this fund has been applied, not for the purchase or extinction of stock, but for the purchase of deficiency bills. The sum of deficiency bills so purchased in 1853 amounted to 1,500,000l., and, in the April and current quarters of the present year, amounted to 1,625,732l., these purchases being made by the sinking fund. The result of this operation is practically to increase the balance in the Exchequer, and, by diverting the sinking fund from its more immediate objects, and applying it in aid of the general expenditure. This has been done largely. The ordinary supply bills have also been purchased by means of the sinking fund. Similar purchases have likewise been made on account of the trustees of savings banks. These purchases amounted between the 5th May, and the 26th November, 1853, to 1,247,000l, together with 550,000l. in February and March. Your Lordships will be pleased to distinguish between two funds held by the trustees of the savings banks. The one consists of the deposits in cash paid in by the contributors, which the trustees are bound to invest either in funded or unfunded securities; the other is the capital stock already invested and held by them. I quite admit that, in regard to these deposits the trustees are fully justified in exercising their discretion, and in selecting the securities which they prefer, whether funded or unfunded. I admit, likewise, that, in making their selection, they are fully justified in considering the convenience and the interests of the Government. But much more than this has been done. Not only have the deposits been invested, but the capital stock held on account of the savings banks has been sold out and realised in cash; the value received for such stock has then been invested in the purchase of Exchequer bills for the purpose of sustaining a depressed market; and those Exchequer bills have afterwards been converted into new stock, without the previous knowledge, though not without the general authority, of Parliament. The 9 Geo. IV., c. 92, gives a warrant for the proceeding; but such an interference with the market may be carried to an enormous and dangerous extent. The savings bank funded property has in three years increased from 32,000,000l. to 35,000,000l. If this great sum were to be applied to similar operations in the stock market, the steady value of the public securities would not be safe, the money market being made liable to artificial fluctuation, produced by the acts of the Government. Whilst I recognise the legality of this course, sanctioned as it is by law as well as by successive high authorities, I very much doubt the expediency of the practice, unless in cases of great emergency. Consolidated fund bills have also been purchased in a similar manner, though not funded. 550,000l. of these securities are held by the savings banks, and 240,000l. by the Bank of England. This has gone on for a considerable time; yet even this questionable assistance did not restore the value of Exchequer bills, or prevent the Exchequer balance from being reduced to the small sum I have already stated. This reduction, it must be ever borne in mind, had been produced, not from any falling off of the revenue, nor yet from any great increase of the ordinary expenditure. It was a consequence of the unfortunate interference with the public debt in 1853. To meet this difficulty, by applying the sinking fund, not in the payment of permanent debt, but to remedy the mistake of the Government, and to avert the consequence of their own act, was hardly dealing fairly and justly with the exigency of the case.

I congratulate your Lordships that I now approach the last topic on which I am compelled to trouble you. I have already endeavoured to show the danger arising from the trial of any inconsiderate experiments upon the public funds. I apprehend the repetition of this danger. A new plan is now proposed of raising farther ways and means, to the amount of 6,000,000l.; and I am compelled to state that I consider the new scheme of borrowing to be full of risk, if it should be carried into effect. Before considering it in detail, I must remind your Lordships that no declaration had been more emphatically and repeatedly made, by high official authority, than that which has affirmed the intention and obligation of raising the supplies within the year. It is so material that I should avoid all inaccuracy on this point, that I must beg leave to refer to the original words used. I find it reported that the Chancellor of the Exchequer stated, on the 6th of March:— To resort to the money market for a loan would be a course not required by our necessities, and therefore not worthy of our adoption. On the 22nd of March, the right hon. Gentleman again observed:— Much had been said to disparage the raising supplies for the war in the year; but he hoped that nothing which had been said would induce the House to depart from that principle, sound upon moral, as well as economical considerations. The House should adhere to the very utmost of its power, to the valuable principle of raising supplies within the year. On the 12th of April the right hon. Gentleman is reported to have used language still more conclusive:— It is probable that some portion of the remaining amount of 1,750,000l. Exchequer bills may be issued from time to time, but I have no reason at present to expect that it will be necessary for me to apply to Parliament for any further grant of Exchequer bills this Session. The keystone of my system is invariably to ask the House to provide an income which will more than meet the expenditure of the year. I have thus given your Lordships the repeated and consistent declarations made on the 6th of March, the 22nd of March, and on the 12th of April. On the 21st of April, when Parliament was not sitting, I was astounded to read an official notice in the Gazette, informing the world that an additional sum of 6,000,000l. would be required without delay; and that it was sought to be borrowed in the very manner which the three previous declarations of the Chancellor of the Exchequer had re- pudiated as contrary to moral principle, and as inexpedient on political and on economical grounds. I have heard it hinted that this demand on the public ought not to be considered as a loan. What, then, is it? It is undeniable that we are invited to raise a sum of money intended to be repaid in three series of 2,000,000l. cash in the years 1858, 1859, and 1860. In that last year it was anticipated by the Government that the 6,000,000l. would be paid off; but it was not one whit the less a loan on that account. The object was undeniably to borrow 6,000,000l. and to tax those who were living in 1858, 1859, and 1860, for the benefit of ourselves. I feel perfectly certain that no injustice would be greater than to attribute to the Chancellor of the Exchequer, when he disclaimed, on the 12th of April, any present intention of raising money by means of Exchequer bills, an arrière pensée of raising 6,000,000l. by Exchequer bonds. The idea is so inconsistent with the known integrity and uprightness of his character that I hold it to be due to him, indeed and due to myself, to reject it with indignation. The public will, however, expect to be informed what has occurred between the 12th and 21st of April to justify so great a deviation from the original resolution announced to Parliament. But to proceed.

I have already shown your Lordships not only the dangers but the mischiefs which resulted in 1853 from dealing capriciously with the public debt of the country. I regret to say that I see still greater danger in the mode in which the present loan is proposed to be raised. What is the proposition of the Treasury? A loan of 6,000,000l. is to be raised, and raised under a covenant wholly unprecedented, as I believe; namely, on the security of three equal instalments to be repaid by the public in 1858, 1859, and 1860. Now, whilst admitting the great abilities of the Chancellor of the Exchequer, and giving my full confidence to the Government for wisdom and uprightness of intention, I am not disposed to recognise them as prophets as well as statesmen. I may be excused for the remark that, even with a nobleman at the head of affairs, who from birth and ancestry may claim the power of second sight, I doubt whether the Cabinet can pretend to inform us in what position the country will be placed in the years 1858, 1859, and 1860. We may find ourselves at that period in a crisis like the present, and struggling with events similar to those which have now driven us to abandon our most steadfast and most wisely conceived pre-determinations; yet Parliament is invited to cast upon each of these three unfortunate years, empirically selected, in addition to all these ordinary demands for the public service, the heavy obligation of raising a further sum of 2,000,000l. per annum, and this for the purpose of fulfilling engagements into which we are required by the Government to enter. If your Lordships seek a conclusive test of the expediency of this measure, let me take the liberty of putting to you one question. How should we now stand if those who have preceded us had, ten years ago, placed an additional burden of 2,000,000l. on each of the years 1854, 1855, and 1856. If, at a moment like the present, when called upon to meet the charges of a war, to double the property tax, and to make those mighty efforts which the circumstances of the times imperatively require, we found ourselves also bound to repay 2,000,000l. sterling of debt during the present year, knowing, also, that a similar amount was required in the two following years, in what condition should we now be placed? I ask the boldest and the wisest among you to favour me with a reply.

I have carefully abstained from making one single observation on the expediency of the loan as bearing on the interests of the lender. I have confined myself exclusively to the question of its public policy. The proposals of the Government may possibly be accepted, for they may be offered on conditions rendering the new loan an advantageous investment. Whether it can be rendered profitable and acceptable to the lenders, and acceptable and at the same time profitable to the country, is a question on which I will not enter, as I am unwilling to drop one word which may be interpreted as throwing any impediment on the proposals now pending. I should much rather have been spared the necessity of touching on this subject at all for the present; but the Bill before us has been moved on the part of the Government, and it would have been manifestly impossible to discuss this legislative measure without considering, at the same time, those supplementary arrangements by which this measure is to be accompanied. Parliament is asked to vote additional supplies. Parliament is asked to vote ways and means to provide for such additional supplies. For my part, I am ready to vote for both. I foresee no proposal which the Government can make towards the vigorous conduct of the war which I shall not be ready to support. But, nevertheless, it is our duty to consider, and to discuss frankly, but candidly, whether the mode proposed for the accomplishment of this object is the wisest and the most efficient which could have been devised. The financial proceedings of the last year have occasioned our greatest difficulty: the mode of raising money now suggested will, I fear, increase that difficulty; yet, in pointing out that fact to your Lordships, it is far from my intention to countenance so transparent a fallacy as one of which I have lately heard much. It has been stated, in a manner calculated to raise some disquiet, that the public indebtedness of England is not only greater than that of France, but of all European countries taken together; greater, perhaps, than the whole obligations of the continents of Europe and of America united. Surely such an observation is misplaced, and is calculated to produce unreasonable apprehension. It is obviously fallacious to measure the indebtedness of any country by the positive amount of its debt. It can only be fairly judged of by its relative amount; that is, by the proportion which the debt bears to the property on which it is charged. A small burden may be more oppressive to a poor state, than a heavy debt to a rich and prosperous empire. Enormous as is the national debt of England, when it is compared with our great and rapidly increasing pecuniary resources, we ought not to consider it as any very alarming burden. Unpopular as it is to say so, and paradoxical as it may sound in some ears, I believe that England is taxed more lightly than almost any other European State. It is my conviction that our public burdens weigh less on the energies and comforts of our people, and at the same time afford better security to the public creditor than can be shown in any of the old countries of Europe, or in the new ones beyond the Atlantic. But we ought not to forget that, as I have formerly urged in this house, "stability and repose are the primary elements of all public credit and confidence." Stability and repose also afford the best opportunities for the development of profitable industry, and the employment of private capital; and it is from the accumulations of private capital that public credit derives its best support and its permanent security. We have no cause for apprehension, if we abstain from rash fiscal devices. I speak with all respect. But if unhappily we are induced in support of the public expenditure to rely upon ingenious contrivances, unsupported by experience, and unsanctioned by authority, then we may fear that what has constituted our ornament and our strength—decus et tutamen—may be placed in jeopardy. May this risk be averted!—nullum numen abest, si sit prudentia. We must not make fortune, or even genius, our guiding divinities. Believe me, the public credit will not bear perpetual intermeddling, founded on notions light or fanciful. Our safest course is to adhere to sound general principles, tested by experience, and regulated by practical common sense. I have no desire to impede the measures of the Government in any way. On the contrary, I sincerely wish to render them any small assistance in my power to offer. This I feel it to be the duty of one as humble as I am, under circumstances so trying, and events so momentous as those which crowd around us. But I have also felt it my duty to place my views frankly before your Lordships, protesting against the adoption of novel and fantastic schemes. Having had some official experience on questions of this description, for a quarter of a century; being freed from the bias of political office during the last fourteen years, unswayed by the influence of party in discussing this measure, though attached to the principles which I have ever professed, and to the friends with whom I have generally acted, and whose regard I am equally anxious to deserve and to retain, having conscientiously formed the opinions I now express, I should have failed in my duty had I hesitated publicly and unreservedly to state them.

THE DUKE OF ARGYLL

said, he would not attempt to follow in close detail the financial arguments of the noble Baron who had just sat down; but there were some general observations which had been made in the course of the debate to which, with the permission of the House, he wished very briefly to address himself. It could not have escaped the notice of their Lordships that the noble Earl opposite (the Earl of Malmesbury) and the noble Baron upon that side of the House (Lord Monteagle) and taken somewhat opposite views of the merits of this question; perhaps he ought rather to say that they had addressed themselves to different branches of the same subject. The noble Earl opposite had addressed himself almost exclu- sively to the Budget of last year, whereas the noble Lord who had last spoken had referred to financial operations which were altogether separate from the Budget, though too often confounded with it by noble Lords on both sides of the House; for he (the Duke of Argyll) had observed that the presumed failure of those other financial measures had been dwelt on, again and again, in order to throw discredit on that great financial scheme, the Budget, which had been carried out with the most complete success. He had no wish to follow the noble Earl into a discussion of the circumstances which had led to the change of Government in December, 1852, but he must say that that was a subject on which the noble Earl and his Friends had no reason to congratulate themselves. He (the Duke of Argyll) thoroughly agreed with the noble Earl when he said that the policy of a Government coming into office ought to be consistent with the principles which its Members had professed, and the measures they had advocated, when in opposition. But how did that apply to the noble Earl and his Friends? For how many years of imperturbable opposition had they professed a continued adherence to the principles which they must have known must sooner or later be abandoned? And when they came into office, what did they do? They found themselves unable to carry into effect any of the proposals they had made; and he thought that the noble Earl and his Friends ought to be the last to throw out a challenge in this respect, inasmuch as the late Government, of which the noble Earl was so prominent and so distinguished a Member, could not in any way be cited as having followed up the principles which the noble Earl extolled, and of which he had so justly expressed his approval. It was quite true that the late Government had been turned out upon a question of finance; but it was giving a most erroneous view of the matter to represent that the question in issue was one of finance merely; nearly all the great questions which had recently been before Parliament might, in some sense, be described as questions of finance. But it was a fact, patent and acknowledged, that the late Government had not carried out—had not even enunciated—any one single principle of finance. The noble Earl had said that the right hon. Gentleman the Chancellor of the Exchequer was prepared with a plan. He could only say that the answer which he gave, when a question was put to him upon the subject, was scarcely consistent with the supposition of his having been so prepared.

THE EARL OF MALMESBURY

said, his right hon. Friend had completed his plans, and was understood to make some reference to the proposed modification of the income tax.

THE DUKE OF ARGYLL

could only say that those who succeeded the late Government in office had been of opinion that that proposal for a modification of the income and property tax was a most mischievous proposal; and he confessed for himself, that, after a most careful consideration of the question, he entertained a strong opinion that its adoption would greatly have increased the evils of the income tax, and would have had the effect of entirely breaking down that system of finance which Parliament had repeatedly approved; and as to the other portions of the right hon. Gentleman's scheme, they were neither new nor original, but had been before the country for years, and the late Government, in embodying them into their financial scheme, had merely taken what they already found made to their hand, and, as it were, caught at as a straw to save themselves. However, he would not dwell upon this point, but would pass on to another suggestion which the noble Earl had made—that the Government ought not to have abandoned so large a portion of the Excise duties in contemplation of war. But the fact was that the Budget of last year was not framed in contemplation of war, and had no reference, and could have no reference whatever, to the complications then existing in Europe. The noble Earl, indeed, had stated on the 16th of April there was a despatch from Colonel Rose which ought to have led the Government to believe that war was then impending. He had referred, however, first of all to the "secret correspondence;" and he must ask, since that reference had been made, why the late Government, in preparing their own financial measures, had not considered them in reference to the memorandum of 1844? At the time when the late Chancellor of the Exchequer made his proposition to break down the income tax, the noble Earl opposite was in possession of that memorandum; he was aware of the complications which had arisen in consequence of the dispute between Russia and France in reference to the Holy Places; yet it never appeared to have occurred to him that that memo- randum—in which every one of the principles brought out in the "secret correspondence" was laid down—threw any new light whatever upon those complications. The noble Earl, being new to office, had his attention expressly directed to the existence of this memorandum; he knew that dangerous complications had arisen; he was in receipt of despatches. [The Earl of MALMESBURY: No, no!] He was able to prove that the noble Earl was in the receipt of despatches, both from our Ambassadors at Constantinople and at St. Petersburg, stating that the Eastern question had assumed a most threatening and momentous aspect; yet with all this knowledge, with the knowledge of the existence of a memorandum identical with the "secret correspondence" in principle, he did not seem to have thought that it cast any light whatever upon the policy of the Government, but considered, and most properly considered, that we might proceed with our financial schemes in this country without reference to the events which were then taking place abroad.

THE EARL OF MALMESBURY

said, the late Government had been beaten on the Budget on the 16th of December; and if the noble Duke would look at the blue book, he would see that the despatch to which he had referred was not received until after Lord Derby had resigned. All, therefore, that he could do, was to write a private letter to Lord Cowley, which had been alluded to by Lord John Russell in the House of Commons, desiring him to pay all attention to the subject.

THE DUKE OF ARGYLL

said, whether this particular despatch had been received or no after the Budget was prepared, the Eastern question had, for many months, assumed a very serious aspect, and the noble Earl was fully aware of the principles by which the Emperor of Russia wished to be guided. Passing, however, from the "secret correspondence," which had been rightly characterised as a great "mare's nest," the noble Earl, while be stated that a despatch had been received from Colonel Rose, on the 15th of April, which ought to have alarmed the Government, took care to conceal—he might have forgotten, but public men bringing such charges ought not to forget, but ought to possess themselves fully and accurately of the facts—that on that very day there was received a formal declaration from the Russian Minister, communicated by authority, direct from St. Peters- burg, containing the most solemn and emphatic assurance that all the rumours with respect to the intentions of Russia, to which the visit of Prince Menchikoff had given rise, were entirely unfounded, and that the Emperor of Russia had no intention to make, and no desire to provoke, a war. He (the Duke of Argyll) maintained that they had no right to regard that declaration as deceptive—that they had no reason whatever to believe at that time that that solemn statement made on behalf of the Emperor of Russia would prove to be so entirely illusory as it had since turned out to be. The words of the declaration were these:— You will assure the Ministers of the Queen, in the most positive terms, that the intentions of the Emperor are still the same, and that all the idle rumours to which the arrival of Prince Menchikoff in the Ottoman capital has given rise—the occupation of the Principalities, territorial aggrandisement on our Asiatic frontier, the pretension to secure to ourselves the nomination of the Greek Patriarch of Constantinople, hostile and threatening language held to the Porte by our Ambassador—are not only exaggerated, but even destitute of any sort of foundation; that, in a word, the mission of Prince Menchikoff never has had, nor has now, any object but that which your Excellency has been instructed to communicate to the British Government."—[No. 138.] It would be well that the noble Earl should remember that document, as well as the reports of Colonel Rose, and should also remember that Lord Stratford do Radcliffe was then on his way to Constantinople, and that the Government had every reason to hope and every assurance to believe that war was not impending, and, consequently, were perfectly at liberty to frame a Budget without reference to the complications of the Eastern question, which at that time there was the best reason to hope would be settled by negotiation. With respect to the financial operations discussed by the noble Lord who had preceded him (Lord Monteagle), he must say that there had been a great deal of exaggeration as to the degree of importance attached to those operations—great exaggeration had been made use of, and the intention of his right hon. Friend the Chancellor of the Exchequer had been greatly misrepresented. It had been said that he had proposed to convert the whole of the national debt—a statement which was wholly at variance with the very humble manner in which his right hon. Friend had pointed out the possible effect of the plan. This was his language:— I shall not commence this explanation of the intentions of the Government by dwelling in any degree upon the importance of the subject. I would rather, if I could, after viewing the amount of public interest which it has excited, endeavour to moderate such expectations as may have been formed in the public mind. I do not recommend the proposition that is now before the Committee as a proposition which can effect any sweeping or fundamental change; but I venture to recommend it to them as a proposition which is just and prudent in itself, and which will probably lay the foundation for more extended improvements in future."—[3 Hansard, cxxv. 810.] He (the Duke of Argyll) could not at all reconcile the two lines of argument of the noble Earl and the noble Baron—for the latter had most ruthlessly overthrown all the noble Earl's arguments derived from the war. The noble Baron had admitted that the finances of the country were at that time, as they were still, in a most satisfactory state; that every expectation held out by the Chancellor of the Exchequer with respect to income had been exceeded, and that the expenditure had fallen short of his anticipations. Surely this was a state of things in which a Finance Minister might feel himself justified in making an experiment with respect to some portion of the debt. But the noble Baron had gone on to speak of practical difficulties, and of the possible consequences of the plan. He (the Duke of Argyll) maintained that to speak of difficulties which should alarm the country, with a surplus of income over expenditure of 3,500,000l., was an entire delusion. It might be true that his right hon. Friend was not entitled to make the experiment—that there were indications in the money market which ought to have prevented his making it. He could only say that the money market was watched by eyes as keen as those of any Member of that House, and that his right hon. Friend, having taken the opinions of men as competent to advise him as any men could be, thought that the time was one when the experiment could be made. The very description which the noble Baron himself had given of the state of the revenue showed that, had it not been for the change of circumstances which had taken place, the experiment would have been perfectly justifiable. The harvest had, as every one knew, been greatly deficient, and the warlike position of affairs had wholly arisen since the time when the Budget was proposed. In fact, the circumstances of the country had totally and entirely changed, and in a manner which there was no reason to apprehend. The noble Baron had talked much of the great injury done by the large advances to the Government by the Bank; but he (the Duke of Argyll) contended that, whatever might be the theoretical effects upon commerce of such advances from the Bank to the Government, they were chiefly to be apprehended in times of difficulty, and that when there was a rising revenue, and large balances of receipts over expenditure, no such danger could be expected. The greatest possible exaggeration had been used in this respect, both with regard to the Budget and the subsequent proposition for the reduction of stock. He believed that at no period of its history had this country entered on a great struggle with such high confidence and such immense resources.

EARL GREY

My Lords, I can by no means concur with the noble Duke in thinking that the speech of the noble Lord near me (Lord Monteagle) was either uncalled for or calculated to increase the difficulties of the situation in which the country is placed. It was far from uncalled for. I admit that it is absolutely necessary that the Government of the day should have very great liberty of action with respect to financial measures. Parliament—especially this House of Parliament—cannot interfere with advantage while measures of finance are in progress, and much must be left to the discretion and judgment of the Government. If the Government acts without due discretion, and without judgment, it will generally be found too late, when the country feels all the consequences, for Parliament to interfere with advantage to correct the evil. But it is of great importance, although we cannot retrace our steps or correct the errors which have been committed, that we should carefully investigate those errors, and see, as far as we can, what mistakes have been committed—because it is this subsequent investigation which is the real effective check on the Government in all their measures—a check which it is most important for Parliament to maintain. In this view, I think the House and the country very deeply indebted to my noble Friend near me for the very able manner in which he has examined the financial measures of the Government. And, my Lords, I must confess my disappointment when the noble Duke, having answered, as it seemed to me, at disproportionate length, some remarks of the noble Earl opposite, with respect to the comparative merits of the present and the preceding Governments—when he came to the really difficult part of the question, instead of replying to the very able and elaborate examination of the financial measures of the Government made by the noble Baron, he brought his observations to a close without even attempting a reply. I must say that I think, on so serious a subject—a subject of the deepest interest at the present moment—the course which the noble Duke took must have disappointed your Lordships and the country. I think we had a right to expect something more from a Member of the Government, after the severe—not in tone, but in the facts, and in the examination of the facts—after the severe manner in which their measures had been handled in the speech of the noble Lord. I will not, after that speech, enter much into detail, but so strong is my conviction of the necessity of looking into this subject closely, that although there is very little, in the speech of the noble Duke to answer, I must call your Lordships' attention to some of the facts established with reference to the financial arrangements of the Government during the past year. The noble Duke has said that the plan for the conversion of certain descriptions of stock was wholly unconnected with the Budget of last year; but it seems to me that there was a very close connection between them. If I were to go into the subject, I should be rather inclined to say, even with regard to the alterations of taxation contained in that Budget, that I cannot agree in the description given of them by the noble Duke. I am not prepared to give that unmixed praise which is assumed by the noble Duke to be due to the measures of the Government; but I think that that subject was sufficiently discussed at the time, and I have no wish to enter upon it again. With respect, however, to the plan for the conversion of stock, we were not last year in a position to discuss a measure of that nature. Certain advantages were anticipated on the one side, and predictions of disappointment put forward on the other; but there was then only the opinion of one man against the opinion of another, and there was very little possibility at that moment of coming to a certain conclusion. Now, however, we are in a different position. We are able to examine the measures which were then adopted by the light of experience, and, so examining them, we are to judge of their effect. Now, my Lords, it appears to me that whether those measures of Her Majesty's Govern- ment were rash or not—whether the result is to be attributed to misfortune or imprudence—this much is quite clear, that the experiment they then made has been a very losing one for the public. My noble Friend (Lord Monteagle) has fully shown this, and has made clear the manner in which the loss to the public has been incurred, by the instance he has given of the Fitzwilliam Museum. I myself was recently travelling in a railway carriage, in which I overheard two gentlemen discussing, not at all confidentially, the good fortune of a lady who had been an owner of South Sea Stock, and who, having been paid off by the Government at par, at a time when Consols were at their lowest, had secured the same income as she had had before by investing 85l. out of every 100l., putting the remaining 15l. into her pocket. This, of course, was an advantage which this lady had gained at a corresponding loss to the public. There is another way by which the loss to the public may be shown in a no less striking manner. You are going to borrow six millions of money. The necessity of that loan is entirely occasioned by the Chancellor of the Exchequer having paid off these stocks. If you had had in your Exchequer the eight millions which you have issued to the holders of these South Sea Stocks, you would not have been called on to borrow six millions to restore the balance in the Exchequer. It is proposed to raise those six millions by the issue of bonds at 3½ per cent, with certain advantages, which raise the real cost of the loan, so that, according to the most sanguine calculations, the money will not be raised at a lower rate than 3¾ per cent. But at 3¾ per cent the loan will impose an annual charge upon the public of 225,000l. a year. With those six millions you have cancelled so much 3 per cent stock; you have, therefore, relieved yourself of a charge of 180,000l. a year. The happy result of this well-considered operation is this:—supposing you borrow no more than six millions, you will have paid off one set of men six millions and borrowed six millions of another set of men, and thrown away 45,000l. a year for ever, that is to say, you have incurred, for no earthly object, a liability which (even at the lowest rate of interest the Chancellor of the Exchequer will have to pay) would have given 1,200,000l. more to meet the cost of the war. I have heard it said that it is unfair to judge by results—that we ought not to condemn any Government because they have failed in their measures, which may be due to the circumstances of the times. In my opinion, however, that which distinguishes an able financial administrator from a financial administrator of an opposite character is, that an able administrator is sagacious in foreseeing what is the condition of the country, what will be the effect of his measures, and in so framing his measures that the country shall reap advantage by what he does. To tell me that the result was not foreseen is, in other words, to say that the Government was wanting in foresight and judgment. When a measure of this kind is proposed, those who object can only say, "We do not think it wise—we do not think it will answer." It is only by the result that the real sagacity of the Chancellor of the Exchequer is to be judged. But in this case I must go a little further. I must say that there were not wanting the most obvious and weighty reasons which ought to have prevented any such measure being attempted at such a time; because, let me remind your Lordships, that the noble Duke himself has said there was very little to gain—it was very hard to reflect on the Chancellor of the Exchequer for his extravagant expectations, because he never expected to get much. Well, I say, if be never expected to get much, that is a strong reason against incurring very considerable hazard.

THE DUKE OF ARGYLL

I did not say he expected very little. I said he expected very little immediate result; but that if the scheme succeeded, it would lay the foundation of great advantages for the future.

EARL GREY

I am glad to hear the explanation of the noble Duke. I thought he had represented the right hon. Gentleman the Chancellor of the Exchequer as speaking with great modesty as to the results of his proposition. With regard to the immediate advantages, at all events, the Chancellor of the Exchequer stated the utmost possible gain at 25,000l. a year; but then, we are told his great object was to lay the foundation for the conversion of the great mass of 3 per cent stock into 2½ per cent stock. That must be considered really to have been the great object of the measure. Now, I confess, for my own part, there was nothing at this time last year to warrant the opinion that such a reduction could be effected in the rate of interest on which the bulk of the debt had been advanced. I do not think that at this time last year there was anything to justify the expectation that we were even approaching a time in which any serious impression could me made on the interest borne by the great bulk of the debt. The average price of Consols in the quarter when this scheme was propounded was 99l. 13s. and some odd pence—certainly something under par; and even this price of Consols was in excess of that which they might have been expected to bear according to the value of money required for commercial purposes, for it must be remembered that Consols are generally dearer than other securities in proportion to the income they yield, because trustees and other persons will invest in Consols, and not in any more hazardous investment; at the same time the margin is always a small one, and the price of Consols must be regulated by the real value of money for commercial purposes. I say, moreover, this time last year the value of money for commercial and industrial purposes was rather rising than falling. This is what I always anticipated would be the effect of the measure of free trade, and I recollect arguing in the House of Commons that one of the strongest proofs that the Corn Laws were injurious was the very low rate of profit; that the low rate of profit combined with a low rate of wages arose from the field for the employment of capital and industry being unduly restricted by those laws; and I always anticipated that, when we removed those restrictions, the rate of profit would rise. It is obvious, from the great demand last year for various industrial occupations, that that view was a correct one. Then, I say, at all events it was in the highest degree doubtful whether the right hon. Gentleman's view of the proposed advantages of his scheme could be correct; it was, at all events, clear that no serious impression could be made on the rate of interest of Consols, and that no object of that kind was to be gained worth any considerable risk. Further than that, surely the most ordinary prudence would dictate that this operation—at any time a doubtful and critical one—opening what may be called a battery against the 3 per cents—that such an operation ought not to be attempted when there was any cloud in the sky, whether of politics or commerce. Nothing but the prospect of a complete absence of disturbing conditions in trade and politics could possibly justify the bring forward a proposition of this kind. There was no hurry. These stocks had existed above a hundred years, and, to say the least, if you wished to reduce the rate of interest, you were bound to wait for a favourable opportunity. Was the opportunity favourable? The noble Duke told us its failure was partly owing to the deficiency of the harvest. I believe it was. But was any man, having the slightest knowledge, ignorant in April of last year that the harvest must be deficient? First, you cannot reap where you have not sown; and it was notorious the breadth of wheat sown in the autumn of 1852 was very largely below the ordinary amount, in consequence of the very unfavourable weather. I never tools up an agricultural newspaper that did not calculate the amount of wheat sown, some as much as 25 per cent below the average, and in my own county the deficiency was very large indeed. The spring was very late; the snow had lain on the ground to a very late period; the ordinary agricultural occupations were retarded, and what spring wheat was sown was sown in land imperfectly prepared. That there must be a deficiency in the harvest was as notorious in April, 1853, as the fact is now. I do not say you could estimate the extent of the deficiency. I do not say you must have known there would be a deficiency in other countries, and that we should have to pay so high a price as we have paid for the necessary supplies from abroad. But I do say it was only a question of degree, and no man having an ordinary knowledge of agricultural affairs could have been ignorant that the harvest must be under the average. Then, again, with regard to the political aspect—was the sky of politics free from cloud. The noble Duke has himself given the best answer. He has himself shown that the clouds were gathering so early as the time when the preceding Government were in office, and he has declared that they ought to have seen those clouds. I learnt from the conversation across the table to-night that it was the object of the noble Duke to show that a former Government had been as indiscreet as the present Government in proposing a Budget without regard to the state of the Eastern question—

THE DUKE OF ARGYLL

What I said was this: That the state of the Eastern question ought not in fact to have influenced the conduct of either Government; but if it told at all, it told on one as much as on the other. I distinctly said that in neither case ought it to have affected financial operations.

EARL GREY

I am very glad to know what the noble Duke intended to say. Undoubtedly he used the words, the state of the Eastern question was very serious, because the words "very serious" caught my ear. However, I am quite contented with the explanation of the noble Duke. Whatever his opinion may be, I think the opinion that has been formed by the great majority of your Lordships on reading these despatches is the same as my own, namely, that the question was very serious; that the political horizon was by no means without clouds—clouds so gathering and so threatening, that it is perfectly inconceivable how the Chancellor of the Exchequer, with those despatches before him, could come to an arrangement, the probable effect of which would be this—that he might be called on to pay off 9,500,000l. of stock, a part of it at the end of six months, and a part of it at the end of twelve months. How he could feel confident that at the end of twelve months from that time it would be convenient to pay off those stocks—and if he did not feel confident it was great rashness to bind himself to do so—is to me perfectly incomprehensible. I must go further, and say it was hardly fair to the parties to whom you made those propositions—they being ignorant of the correspondence that was going on, and you having the papers before you—to ask them to submit to a conversion of their stock to stock of a different description, by which they would have made a considerable sacrifice of income. It appears to me a very questionable proceeding in point of public morality. Fortunately, the holders of that stock, instead of suffering, have been the gainers, because, although they had no official papers before them, although they had no despatches to consult, they were more sagacious than the Chancellor of the Exchequer in foreseeing the future, and although he could not see that it was likely to be disadvantageous to the public to pay off this money at the end of a certain time, they were sagacious enough to see that it was very advantageous to them to receive their money rather than to consent to a conversion of the stock. I say then that the arrangements proposed last year to Parliament and adopted by them were imprudent and injudicious; and, although I do not wish to censure the Government, I see much in the management of our finances during the last few months to justify the censures of my noble Friend (Lord Mont- eagle). I will not travel over the same ground any more than is necessary to explain the observations I have to make on the points to which he has adverted. I think, in the first place, it was very injudicious, with a prospect of a long and expensive war before him, to allow the balances of the Exchequer to be so low. I entirely concur on this point with my noble Friend, and with the other authorities who had expressed their opinion that after the Act of 1844 it was incumbent on the Government to avoid placing themselves in such a position that they should not be able to maintain sufficient balances in the Exchequer, and I was surprised that the noble Duke, in answering that observation, should have said that the evidence to which his noble Friend had referred was given in 1847, at a period of great distress. No doubt, the evidence was given immediately after the great distress of 1847. But are you sure distress will not recur, and is there anything in the evidence which does not rest on general principles? If I am not mistaken, the person who had the chief part in passing the Act of 1844—Sir Robert Peel—when he recommended that that measure should be passed, expressed an opinion that when the measure should have come into operation it would be the duty of the Government to take care that the balances in the Exchequer were not unduly reduced. But, my Lords, I must say, what alarms me even more than this fact that these balances are allowed to fall so low without measures being taken to replenish them—what alarms me even more than this—is the ground taken elsewhere in defending this course, and the language held upon the subject. We have been told that it is very immaterial—that it is a matter of comparatively slight importance that the balances should be reduced so low, and that such heavy demands should be constantly made on the Bank; but, further than that, a very important statement has been made, to which I beg to call your Lordships' particular attention. In commenting on the amount of deficiency bills, it was stated by the right hon. Gentleman the Chancellor of the Exchequer that those deficiency bills did not represent the real amount of the deficiency at the beginning of the quarter. The argument, if I am not mistaken, was, that the deficiency at the beginning of the quarter had hitherto been improperly taken—that it was taken as if the whole amount due to the public creditor was paid at once, whereas in point of fact it was spread over several days, so that accruing revenue covered a considerable part of the advances made by the Bank, and in this way the formidable deficiency last quarter of 5,800,000l. was reduced to 2,800,000l. And it was added—and this I think the most serious statement that has been made—that the Chancellor of the Exchequer had thought it his duty to regulate the issue of deficiency bills with reference to actual demands, and that by this course the amount of deficiency bills in the last quarter was reduced from 5,800,000l. to 2,800,000l. Now I cannot help thinking that a very important principle is involved in this statement. Surely, the Bank of England ought to be in a situation on quarter-day, when the dividends became payable, to pay at once every public creditor who should come upon it. In the old Loan Acts there is a clause imposing most imperative obligation on the Chancellor of the Exchequer, that he shall, by that day, pay to the cashiers of the Bank such a sum as will enable them to discharge the whole of those demands. There is no discretion whatever left to him. He is bound to place the whole sum to the credit of the cashiers of the Bank on the very day it is due. I have not been able to refer to the later Loan Acts, but I am told this stringent provision is omitted; but, though omitted, the practice has been always to adhere to the wholesome rule laid down in the old Loan Acts. From the time that we have had a public debt, the Chancellor of the Exchequer for the time has invariably written to the Bank of England requiring such advances as would place him in the possession of funds which should be sufficient to pay the whole dividends on the day they were due. Am I to understand from the statement reported to have been made in the other House, that the present Chancellor of the Exchequer, departing from the wise rule followed by all his predecessors, has thought himself justified in following a different rule, calculating that the whole amount due will not be called for at once, and that one part will be covered by accruing revenue, so that he can safely leave the cashiers of the Bank without money necessary to meet the demands that might be made? Mark how dangerous that is! The Chancellor of the Exchequer, if I rightly understand what he is reported to have said—I hope I do not—may presume in this way that 3,000,000l. is the amount which will not be called for at the first moment. But it is not beyond the bounds of probability to suppose that we may have, in the process of time, a Chancellor of the Exchequer more venturesome, more rash than the right hon. Gentleman who now holds that office. Some future Minister of Finance may calculate a little more boldly, and he may happen to be 200,000l. or 300,000l. beyond the mark, and leave the cashiers of the Bank without the means of meeting the whole of the demands made upon them. What is to happen? Are the cashiers to give the public creditors the same answer which a dun receives from gentlemen in difficulties—"Call again to-morrow?" There Will be no other resource, and is it right and fitting in any Chancellor of the Exchequer, no matter how able and ingenious he may be, be he the ablest or wisest man in England—ought it to be in the discretion of any man in England to leave things in this state, that the cashiers, when called on to pay the public creditor what is due to him, should be compelled to ask for time? I think this is a matter of the deepest importance. Unfortunately, I have never been called upon to attend to the technical details of these matters, and may not, therefore, thoroughly understand them. I have had no opportunity of consulting more than one or two friends, and I may err in judgment; but I have paid attention to what has passed in another place, I have referred to the Loan Acts, and to my understanding it is a subject of serious importance. If it once comes to be suspected by the public that there is not enough money in the hands of the proper officers of the Bank to pay the whole sum due, the very notion that such a state of things exists will render it certain that the difficulty will arise, for every one who has money in the funds will immediately ask for his money. And, my Lords, I for one have been brought up to attach the highest importance to maintaining intact that honour and credit which this country derives from the circumstance of our never, in our greatest difficulties or most pressing emergencies on any one occasion having been driven to disappoint even for a moment the just expectations of the public creditor. I must add that this seems to me the more alarming, viewing it as an indication of a general system of policy. We are now at the beginning of a war. We do not know how long that war will last, nor how severe may be the strain on the resources of this country, and it is calculated to excite great alarm among those who look into these matters, to find at such a time such indications of a dangerous policy as those to which I have alluded. Allow me to remind your Lordships that it is by mistakes of this kind that we may be brought into a situation where we might find it difficult to maintain the standard of value. It must be remembered that there are many persons in this country who are very anxious we should give up cash payments. They form a party by no means inconsiderable either in number or in influence, and they do not conceal their desire that we should return to a system of inconvertible paper issues. I entirely acquit Her Majesty's Government of any sympathy with that party. I am quite convinced they desire to maintain that standard of value which we now have; but while I give them credit for this feeling, I cannot forget that Mr. Pitt and his Colleagues were also very far indeed from wishing to depart from the standard of value. What happened then, and what may happen again? What happened then was this:—By a series of steps, no one of them very important in itself, but collectively producing a very great effect, gradually and imperceptibly was the country brought into a situation where those who had the conduct of affairs saw that cash payments could not be maintained without a degree of pressure and without sacrifices which they were not prepared to encounter. They had recourse, in that emergency, to the fatal course of Bank restriction; and having once done that, they were drawn on little by little to the depreciation of currency by the consequences of which this country is still so great a sufferer. Is any one ignorant how seriously the country has been injured—how vastly the burdens of public and private debt have been increased, by the course then taken—how we are now paying interest on 1l. where 15s. was borrowed—how numerous landlords raised money for the improvement of their estates, and are now called upon to pay a debt measured in gold, but contracted in paper, and consequently find themselves, by no imprudence of their own, virtually involved to vast amounts. This is matter of history. We know such a state of things was then produced in the manner I have described, and I say, when I observe the rash and venturesome system of policy which seems to be indicated by the course Her Majesty's Government have taken, and especially by this new plan of altering the accustomed method of calculating the amount of the deficiency bills, I am very much alarmed lest we be brought to a similar state of things to that which existed at the period to which I have alluded. Because, what is the object of making such an alteration in the system of calculation? It is not to effect a saving to the public, because by the arrangement existing between the Government and the Bank, interest is only charged by the Bank, as I am informed, on the actual amount of its advances; the only possible object, therefore, of changing the mode of calculating the amount of the deficiency bills is to make a more plausible appearance to the public in the statement of accounts. That is the single object to be gained. But instead of this being advantageous, it is to my mind exactly the reverse, because a great security is withdrawn against falling into a similarly fatal course to that pursued in the last war, by the attention of the country and of Parliament being roused as early as possible to the first departures from the sound system—the first erroneous steps; and the moment the deficiency bills begin to augment public attention is called to it, yet at the time when this is so important we learn from the speech of the Chancellor of the Exchequer that he is, without being able to show that he will gain a single sixpence, about to introduce a change, with no other earthly object or effect than that of blinding the public to the real amount of the deficiency bills. I feel the more strongly on this subject because I cannot have much confidence in the foresight of Her Majesty's Government. We have had lamentable proof of that deficiency of foresight in the loss which has been sustained by that which the author himself has termed the abortive attempt to convert the 3 per cent stocks. But on another and more striking example of the same want of foresight already adverted to by my noble Friend, I must say a very few words. I refer to the very extraordinary circumstance of our having been told on the 6th March, that the policy of the Government was to raise the money for the war of the year within the year. That statement is renewed upon the 10th of April; yet, on the 21st of April, a loan is publicly announced. I could hardly believe my eyes when I read that announcement. I refreshed my recollection by reading over again the speech reported to have been delivered by the Chancellor of the Exchequer on the 6th of March, in explaining the financial position of the Government. I find the war spoken of as a state of things actually existing, and the Budget of the right hon. Gentleman is filled with such allusions as those to which I have adverted. The Chancellor of the Exchequer says:—"I do not mean to guarantee that the money I now ask will be sufficient to conduct operations for twelve months." He does not mean to guarantee for the whole expenses; but he tells us 25,000 men are to be sent to the East, and he has calculated the expense of sending and employing them in the East, as well as the expense of the fleets in the Black Sea and the Baltic. And having made all these calculations, the right hon. Gentleman makes a most able and eloquent speech, and supports the view, in which most people concur, that it is very desirable, not only on political, but on moral grounds, in war, as long as possible to continue to defray the expenses of the war of the year within the year. He says he does not say it is always possible to go on doing so, but we ought to do it to the last moment; and at present to ask for a loan would be unworthy of their character as Englishmen. I am not quoting the right hon. Gentleman's exact words, but this was the effect of what he said on the 6th March; and then, my Lords, on the 21st of April public notice is given that a loan of 6,000,000l. is required. Shall I be told that it is not a loan, but merely an advance until the taxes shall come in? I think that will hardly be said. It is perfectly legitimate to use that argument with respect to an advance on Exchequer bills, which, if the Government are right in their calculations as to the expenses of the war, will be paid off by accruing revenue, and therefore the first issue of 1,700,000l. Exchequer bills may be fairly taken in that light; and if the Government have been right in their calculations as to the expenses of the war and the produce of the revenue, no doubt these will be paid off; but when you come to a payment so distant as four years, the case is altogether different. There is then no pretence of defraying the expenditure of the year from the revenue of the year within which it is incurred. You are borrowing for futurity, and it does not rest with Her Majesty's Government, not even with the Parliament of this day, to say that in 1859 or 1860 they will be able to meet that debt in the manner proposed. I confess the mode of raising this loan appears to me a great aggravation of the imprudence which has already been committed. What are you going to do? You are going to raise money with the imperative obligation to repay in full in 1858, 1859, and 1860. Who is to tell us what will be the state of the country four years hence? Supposing such obligations had been contracted four years ago, would it not be very embarrassing to meet them now? Why should the old settled policy of the country be departed from in this matter? Suppose this war goes on, the flame of European war once kindled, changes may take place, and new parties come into the field, as was the case in the last war. Something may arise to induce Austria and Prussia to take part with Russia, instead of against her, and the whole Continent may be involved in a long and arduous struggle. If that should be the case, is there any reason to suppose the funds will not go down as they did in the last war? And then, when the funds are between 60 and 70, you may have to pay off these bonds at par, perhaps at the most inconvenient moment that could be selected. Instead of thinking it a recommendation that this loan must be repaid in four years, I think it infinitely aggravates the ground of complaint that a Minister should undertake to predict what will be the state of things four years hence, when he has shown that he has not been able to foresee what it will be in three weeks. I say this mode of managing the finances of the country at the outset of war, inspires me with the deepest alarm, and should inspire the country with alarm. I have no wish to embarrass Her Majesty's Government. I can assure them I have observed much that I disapprove, and much might have been stated in this House, not without effect, in condemnation of their measures. I have never come forward to express an opinion unfavourable to their measures, except when I thought the public interest imperatively required it; but on this occasion, believing they are entering on an incorrect and imprudent course of financial administration, at a moment when that administration requires the clearest judgment and calmest consideration, I feel bound to state, as strongly as is in my power, the opinion I entertain, in the faint hope that it may open the eyes and meet the support of those more capable than I am of doing justice to the subject, and have some effect in arresting Her Majesty's Government in a course which, in my opinion, will be most prejudicial to the interests of the country.

THE EARL OF DONOUGHMORE

thought that the reply of the noble Duke (the Duke of Argyll) to the observations of his noble Friend (the Earl of Malmesbury) had satisfactorily proved to the House that in the transactions of last year the Government had acted not simply without forethought, but in absolute defiance of the information in their hands and of the facts before them. The noble Duke's argument was, that after having been warned by Her Majesty's Minister at St. Petersburg, the Ambassador at Constantinople, and the Consuls at Odessa and Galatz, Her Majesty's Government preferred to believe the word of the Emperor of Russia in the document which was received on the 15th of April, to the testimony of their own servants. The occupation of the Principalities by the Russian troops took place on the 1st of July, and on the 7th of that month, when, although the fact of the occupation might not have reached the Government, such an event must have been known to be imminent, a noble Earl (the Earl of Ellenborough), who was not connected with any particular party in the House, appealed to the Government, on the third reading of the Bill for repealing the soap duties, not to recklessly throw away a tax which was not particularly complained of by those who paid it, did not press with undue severity on the people, and produced a million and a quarter of revenue, at a moment when, if war were not imminent, at least our foreign relations were in serious danger of being disturbed. He (the Earl of Donoughmore) recollected the indignant manner in which the noble Earl at the head of the Government refused to adopt the suggestion of his noble Friend, but deliberately persisted in the surrender of a million and a quarter of the national revenue. But what good had followed from that measure? He was informed that since the repeal of the tax the price of soap had scarcely at all diminished. Thus the effect of the repeal of the tax had been, not to relieve the consumer, but to put a million and a quarter per annum into the pockets of the manufacturers of soap. He trusted that the extension of direct taxation had now reached its limits. It was, he believed, a favourite principle with some of the noble Lords opposite; but he believed that nothing could be more disastrous to the country than the undue extension of that principle. Direct taxation, in a certain degree, was good and useful, because it struck at the miser and hoarder of wealth, and forced men with large property and incomes to pay their fair share of the expenses of the country. But from its very nature, it could not be extended to the poorer classes; and there was no doubt of the proposition that every man in the country, whatever his rank or his means, was bound, in proportion to those means, to pay towards the expenses of the State, and assist in the prosecution of the war. Indirect taxation, on the other hand, struck at everybody, and was, therefore, the fairest tax that could be levied. He trusted, therefore, the Government would see the absolute necessity of resorting to other measures besides the income tax for enabling them to carry on the contest in which the country was now engaged. He made this observation because the country which he represented in that House had been saddled with the income tax through the liberality of noble Lords opposite; and he did hope that, as far as Ireland was concerned, if the income tax were to be doubled, another description of tax would be applied to that country, where the harshness and inequality on the tax pressed with double severity on the people.

EARL GRANVILLE

said, that so far from conceiving that it was desirable to have the people kept at all in the dark as to the operations of Government, he regarded it as highly important to have all these and similar questions fully discussed; and, so far from conceiving that the duties of their Lordships' House in respect of matters of finance were purely Ministerial, he thought the credit of the House was very much augmented when persons so eminently qualified to express their opinions on such subjects as the noble Earl and the noble Baron applied their criticisms to what they conscientiously believed to be errors in the conduct of the Government, whether as related to finance or to any other matter. He considered such discussion as augmenting the credit of Parliament, and wholesome for the community. At the same time he must dissent from the conclusions which they had drawn. He had, he thought, some right to complain of the perfectly unusual course taken by the noble Earl and the noble Lord, in adverting, no less than three times, to the subject of the Exchequer bonds. Those noble Lords, of course, acted upon their own sense of what was right; but it appeared to him, pending the time when the Chancellor of the Exchequer was in the market, premature for the Ministers of the Crown to discuss the subject. They were, therefore, placed in this position: that they must either keep silence altogether, or commit an act of indiscretion, by entering into premature explanations, and the noble Earl, therefore, must not misinterpret the silence which, on the present occasion, he should preserve on that head. He would mention, however, in respect to the tenders to be sent in to-morrow, that the Government had no knowledge of the result. Before proceeding further he would observe, that the noble Earl had, no doubt unintentionally, been rather unjust towards his noble Friend the noble Duke. The noble Duke had only spoken generally, not pretending to go into the details such as those with which the noble Lord (Lord Monteagle) had supplied the House. But it must be remembered that, compared with the noble Lord, they were all at a disadvantage, for they had no practical experience in finance, whilst the noble Lord combined, in his own person, the experience he had acquired in the several offices of Secretary of the Treasury, Chancellor of the Exchequer, and Comptroller of the Exchequer; but this superiority in the knowledge of technical details did not at all render it a consequence that the noble Lord's view must necessarily be adopted as unquestionable. Some observations had been made by the noble Earl upon the Budget, and comments had been particularly added upon the abolition of the soap duty, and the Government had been charged with imprudence in not retaining these duties in the face of an impending war. But he thought their Lordships needed only to be reminded of the circumstances under which that appeal was made. The House of Commons had agreed to the retention of two very large taxes, operating in some respects grievously upon many persons, in consideration of a large reduction of other taxes which weighed heavily upon the country at large. There was at that time, as he should contend, no ground to apprehend imminent war; and, at such a moment for the Government to have retained the soap duties, the abolition of which had been loudly called for by the country, would have been a course entirely unjustifiable. As to the observation, that the repeal of the soap duties, by which the revenue benefited to the extent of 1,500,000l., had been useless to the country, because the reduction had gone into the pockets of the manufacturers, he thought that would not be regarded as a very conclusive argument against it; for it was quite clear that if the tax had not been repealed the price of soap at the present moment would have been very much higher, in common with the increased price of most other commodities in daily use. The noble Earl who made this observation had also expressed a hope that, with regard to Ireland, the income tax would not be further increased. He could only reply to this, that he was sure Ireland would not shrink from bearing her own share of taxation. The Irish income tax was one of the points upon which the policy of the Budget had been most disputed, and many dismal prophecies had been made as to its effect. All these prophecies had been falsified by the event; and the result had fully exposed the futility of the attacks that had been made on this part of the Budget, and had fully justified the policy of the Government. In relation, also, to the succession tax, it was clear that the Chancellor of the Exchequer, and not its opponents, had been right as to the amount to be produced by it. The increased duty on spirits in Scotland and Ireland had been satisfactory in its results. The noble Baron (Lord Monteagle) had, in the commencement of his speech, taken infinite credit to himself for candour in his review of the Government policy; but he had eminently departed from that candour when he left entirely out of view those markedly changed circumstances which had operated, in a corresponding degree, to defeat the anticipations upon which the Chancellor of the Exchequer had proceeded. The want of candour was especially notable in the criticisms which the noble Baron had passed upon the operation of reducing the interest on Exchequer bills. It was extremely easy to make an effective ex post facto speech against any measure that had happened to be frustrated by particular events, if you carefully omitted from your criticism any reference to the events which had caused its failure. The first point of which complaint was made was the reduc- tion of interest upon Exchequer bills. It was said that notice was given in February that the interest would be reduced from 1¼d. to 1d., and that the reduction was made under circumstances which rendered it unjustifiable. But the bills at that moment were at a premium of 60s.; and for two months afterwards not one person applied to exchange them for money. But later, 3,000,000l. in bills were exchanged for money; and what had been the result? Why, that in the next quarter not only was the whole 1¼d.saved upon the 3,000,000l., but the ¼d. upon all the remaining bills. But, said the noble Lord, "You were obliged in the following October both to increase the rate of interest and to reissue the 3,000,000l." Was the noble Lord sure that, if it had not been for the change of circumstances it would have been necessary to increase the rate of interest? The noble Earl (Earl Grey) had referred to the failure in the conversion of the smaller stocks, and the noble Earl considered that that failure was owing to the want of foresight in those who had brought it forward; but herein the noble Earl exhibited as little candour, and in the same way, as the noble Baron. There was, indeed, a popular phrase that "the proof of the pudding is in the eating," but that the noble Earl should apply this proposition to financial operations was scarcely worthy of the noble Earl. The noble Earl himself, he recollected, had been amazingly twitted by noble Lords opposite, for his own want of foresight, when, after having prophesied that the repeal of the Corn Laws would increase rents 10 per cent, he was himself letting farms at an enormous reduction. He (Earl Granville) hoped the noble Earl was now receiving 10 per cent more; and that at the time he was receiving less there were circumstances in operation which he could not have calculated upon when he foretold the probable effect of the repeal of the Corn Laws. It was said, too, that when the Budget was framed the manifest signs of a bad harvest should have induced the Government to take another course. Whatever might have been the signs of the weather, they appeared to have as little effect upon the corn dealers as upon his right hon. Friend, for the corn dealers, who yet were generally considered tolerably good judges of probabilities as to supplies of corn, had not, at that time, at all raised the price of that commodity. It was another argument, that the possession of the "secret despatches," of which so much mention had been made, should have operated upon the Chancellor of the Exchequer, and induced him to change his course. Now, it should be recollected that there was hardly a time when they did not experience anxiety as to the state of affairs in some part of the world, which they did not think it necessary to publish to the country. Such transactions went on, although the public was ignorant of them; and it had never yet been made a reproach that they did not allow them to affect their general policy. But as to the "secret correspondence," he took rather a different view of its nature to the noble Earl. The Government had no reason to quarrel with it. Their ground of quarrel with the Emperor of Russia was that he subsequently departed from his own engagements in it. For instance, he made a proposition, based upon the impression that the Turkish empire was falling to pieces, that a prospective arrangement should be entered into for its disposition. The Government denied the allegation, and thought it would hasten the dissolution if such an arrangement were made; and, in reply, the Emperor said he was completely of their opinion, and appeared to withdraw from the views which he had propounded. The vigorous resistance which Turkey had proved able to make, and the feebleness which Russia had since manifested in the Principalities, might afford some ground, indeed, for admitting that those who did not accede to the accuracy of all the Emperor's views and declarations, were not so wholly without foresight. They were asked—Do you mean this as a war Budget or a peace Budget? Why, it had never been represented as a peace Budget; the probability of war had throughout been contemplated, and by the House of Commons—with whom he trusted their Lordships would concur—thus far provided for. Some allusion had been made to the amount of deficiency bills. He was not there to argue that a large amount of deficiency bills was a legitimate way of conducting business. The simple point was, that that which had been anticipated as a measure of success had, from circumstances which had arisen since, become a failure; but, after all, the failure had produced results not so much worse than those which had been exhibited during the Administration of the noble Baron (Lord Monteagle), for while, undoubtedly, the deficiency bills were larger now than then, while the balances at the Bank were double then what they were now, on the other hand the interest paid to the Bank now was twenty times less than it was then. Nor let it be forgotten that the effect of the increase of deficiency bills had, at all events, been to bring so much money into circulation, an effect very different from that of deficiency bills created to meet the necessities of a falling revenue. As to the conversion of the smaller stocks, when the scheme was proposed in the House of Commons, it was said to offer extravagant terms to the public. The noble Lord (Lord Monteagle) made an able speech against the measure, and he alluded to the possibility of failure; but the gist of his argument was, the mischievous nature of the measure if it were successful. But it had failed utterly; and what was the state in which it left us? Why, after having paid 8,000,000l. for that purpose, and 1,000,000l. for another, the balances had been reduced by 5,000,000l. He contended that this was a state of things which would not bear unfavourable comparison with the noble Lord's own administration when he was Chancellor of the Exchequer. He (Earl Granville) did not think any answer was required from him to the observations that had been made by the noble Lord with regard to the money invested by the trustees of savings banks in Exchequer bills. The noble Lord admitted that such a proceeding was strictly legal, just, and convenient, and that it had been frequently adopted before; but he (Earl Granville) thought the noble Lord had failed to show the peculiar circumstances which made a proceeding that was right at other times wrong now. He thought the eloquent description which had been given by the noble Lord of the soundness of the national finances would be of some value to the country; and, with respect to the denunciation of the present and future policy of the Government, in which a noble Earl had indulged, he (Earl Granville) did not think anything had yet been done, and he was sure nothing would be done, that could lead to the ruinous consequences described by the noble Earl. He must say he feared there was too great a tendency on the opposite side of the House to encourage the people not to make the sacrifices necessary in order to carry on the war. When the doctrine had been so absolutely laid down by a noble Lord that the proper policy of the Chancellor of the Exchequer was to abstain from meddling with the financial arrangements of the country, he (Earl Granville) could not help observing that it had been the habit of the Government from time to time to meddle in a somewhat similar manner with the greatest possible advantage. Indeed, the mischievous results of war, which produced so frightful a disorganisation of our finances, had been remedied solely by such meddling. He would only add that he thought the criticisms of the noble Earl (Earl Grey) were most useful. It was an advantage to the country that one possessing the great abilities of the noble Earl should have such a tendency to criticism: and should state his opinions so frankly and so distinctly. At the same time he (Earl Granville) must always feel it a matter of regret when the noble Earl thought it his duty to criticise—and when he did not find it possible to support—the conduct of Her Majesty's Government.

On Question, agreed to; House in Committee accordingly.

Bill reported, without Amendment, and to be read 3ª To-morrow.