HL Deb 13 March 1855 vol 137 cc460-83

Order of the Day for the Third Reading read.


, in moving that this Bill be read a third time, begged permission to repeat an explanation which he had already given to his noble Friend (Lord Monteagle) in answer to two questions which his noble Friend had put to him with regard to the change in the issue of deficiency bills last year. What he stated in reply to his noble Friend, and which he wished now to repeat in reference to the first question, was, that the law officers of the Crown had been consulted on the subject, and had given an opinion favourable to the course which his right hon. Friend the late Chancellor of the Exchequer adopted. With regard to the second question, he had stated that the correspondence which had passed between the authorities of the Bank of England and Mr. Gladstone was of a private nature. He had since, however, ascertained, that though that was in the main correct, and that the correspondence in question was generally of a private nature, there was one paper which bore something of a public character.

Moved, That the Bill be now read 3a.


I have to thank the noble Earl (Earl Granville) for the explanation which he has been so obliging as to give, on the subject of the correspondence between the Bank of England and the Chancellor of the Exchequer respecting the issue of deficiency bills, and the legal obligation of making provision for the payment of the dividends due to the public creditor. Now by that explanation it appears that at least one part of the correspondence is in all respects liable to be called for in Parliament. In relation to the entire, I must, however, be permitted to repeat, what I stated on a past occasion, when I formally referred to the subject in this House. Whilst I am not disposed to deny that letters may occasionally pass between the Bank and the Finance Minister which are essentially private, and which cannot, with propriety, be produced, yet on general grounds, where the question brought into discussion is a proposed alteration in the mode of providing for the interest of the debt, or in the mode of dealing with the public revenue, and where the parties to the correspondence are the First Lord of the Treasury and the Chancellor of the Exchequer, on the one hand, and the Governor and Deputy Governor of the Bank, on the other, I can hardly imagine any class of letters more distinctly public and official. Neither can I well imagine any practice more dangerous, or more subversive of that responsibility which a Minister owes to Parliament, than an alteration in the mode of carrying on the public service, which shall attempt to convert what is strictly public into a private communication, by a mere change of the form in which that communication is carried on. With respect to these particular papers, if my noble Friend shall, on reconsideration, assure me that the letters cannot be given without prejudice to the public interests, I must bow to his authority, and rest contented. But if, as I am inclined to believe, it should be found that neither the Bank of England nor the Chancellor of the Exchequer can raise, or persevere in an objection to the production of these papers, I respectfully suggest that the Government itself should lay the whole, or at least some extracts, before this House.

I shall now proceed to a subject of far greater importance, the Bill on the table authorising the issue of 17,183,000l. in Exchequer bills. I do so, however, with an apprehension, or, indeed, I might say a conviction, that such subjects rarely excite, or receive, attention in your Lordships' House. Of this an example somewhat striking and memorable has this evening been given, proving but too clearly that financial measures, though affecting large public interests, are at times permitted to slip through this House without notice or observation. Within the last three minutes a Bill which practically imposes 400,000l. or 500,000l. duties on what is now a necessary of life—I allude to tea—has passed through without either notice or explanation. I allude to the Tea Duties Decline Suspension Bill, on which not one word has been spoken, thought both our traders and all consumers must feel its effect. This Bill not only increases our taxation to the extent of nearly 500,000l. sterling, by suspending the reduction of the tea duties, but indicates likewise an important deviation from our established free commercial policy. Yet this Bill has never been opened or explained by the mover, nor has it been commented on by one single Member of this House.

I shall not, however, dwell further upon this instance of our carelessness, or indifference, but shall proceed to observe on the Bill which we are now asked to read a third time. This measure has been treated with equal unconcern, though the millions to which it relates might have been expected to excite some degree of attention. From what cause does this proceed? I shall be told very possibly, and not unnaturally either, that what is before us is nothing more than the ordinary Bill for giving authority to exchange the Supply Exchequer bills, of last year, for an equal sum to be now issued in the usual course. Such, I confess, was my own first impression. But, on considering the Bill, with more attention, I soon discovered that such was very far from being the case. The proposed law is very different from the ordinary annual Act. It involves other and much more important, principles; it affects the past and present, and casts light upon the future. It negatives a principle which we were last year urged by the Government to recognise and to adopt. It affirms the very opposite principle which we were then authoritatively commanded to reject. So far from quarrelling with this result, I most willingly accede to it, as being entirely consistent with the argument I last year ventured to urge on your Lordships. But, though I rejoice to find my principle laid down, and acted on, in this Bill, I think it would have been but fair and right that our attention, and that of the other House of Parliament, should have been called to so distinct a change of policy. Such a measure should not have been carried through Parliament without some explanation from the Government to inform the public to which of two opposite systems it was their intention in future to adhere.

The ordinary unfunded debt, as your Lordships can hardly fail to be aware, consists of the Supply Exchequer bills, annually voted, which are renewable twelve months after date, subject to a specified rate of interest occasionally raised or lowered according to such conditions as the Government think it right to impose. So long as the amount of the bills is unchanged, and the rate of interest is not varied, the annual Act of Parliament excites no attention. But the case is different when it is proposed to alter the amount of the capital, or the rate of interest. This is still more true where any proposed change involves a matter of principle. This is done in the Bill now before the House, as I shall undertake to prove. It has been done silently. The fact has hitherto escaped observation.

In order to make my argument intelligible, it becomes necessary that I should refer to the Parliamentary proceedings of the last Session. On the 6th of March, when the first attempt was made to provide funds to meet the expenditure of the war—an attempt which subsequent experience has proved to have been wholly inadequate to the magnitude of the exigency—Parliament agreed to increase the income tax by an addition of one-half of its then existing amount, becoming due in the next six months. This increased income tax was estimated at 3,250,000l. But, inasmuch as it was shown that this sum would not come into the Exchequer till towards the close of the year, it was necessary to provide Ways and Means to meet the immediate wants of the State. The proposition made was as follows— I propose that you should agree to double the first half-yearly payment of the income tax, and that you should make provision for the interval which must elapse before the tax can be actually levied, by the issue of Exchequer bills, which issue of Exchequer bills is to be within the amount of 1,750,000l., and which bills, if issued, will be paid off out of the growing produce of the revenue. It was thus that a temporary advance was to be obtained for the purpose of discounting the future produce of the increased income tax. At the same time a great and most important principle was laid down, in terms the most unqualified. Comparing the principle of raising money by loans, or by increased taxation, it was held that the difference between right and wrong was hardly more clear and distinct than the difference of principle between meeting the exigencies of war by new taxes, or by resorting to our public credit. Parliament was asked, "Is it right that we should ourselves make a resolute endeavour to defray the charges of this coming war, or would it be just, would it be manly, would it be worthy of the wealth and power of England that we should charge these burdens on posterity? There is, both in Parliament, and throughout the country, a strong opinion that, to resort to the money market would be a course not required by our necessities, and therefore not worthy of our adoption." It was also added, "the system of raising the funds necessary for war by loan, is to practise a systematic deception on the people." Yet it was under the circumstances so described, that it was found necessary to raise the sum of 1,750,000l. by Exchequer bills, to meet the immediate expenses of the war. But, as I have already shown, this was intended solely as a security for a temporary advance, and was made repayable out of the increased income already voted; the distinction between this temporary accommodation and a more permanent borrowing was laid down in the most distinct terms, and by a statement refuting, by anticipation, any possible charge of inconsistency, in the issue of these bills. The Bills which the Government will be authorised to raise (1,750,000l.)," observed the Finance Minister, "are in reality what other Exchequer bills falsely purport to be: they are Supply Exchequer bills. The mass of unfunded debt still passes by the name of Supply bills, though it has ceased to have any reference to Supply at all, and in fact constitutes a debt which is permanent in itself, but the obligation of which is renewable from year to year. When you confer, under the regular sessional Act, authority to raise so many millions by Exchequer bills, you do it with a view of replacing them, when due, by other Exchequer bills. But these are Exchequer bills quite of a different class. These are to be raised simply in anticipation of supplies, for which you will have given authority, and when the supplies come in, these Exchequer bills will be paid off out of these supplies, and no more will be heard of them. It is thus seen that a line of distinction was carefully drawn between the use of credit for a short period, provided for by securities chargeable on the current income of the country, and payable within a few months, and what was described as the permanent debt, created by Exchequer hills, renewable from year to year. The 1,750,000l. was designated as coming within the first definition; the ordinary Supply bills, as belonging specifically to the second class. The engagement made was that the 1,750,000l. were to be paid off out of the growing produce of the revenue, and no more heard of them. It was not till after a careful comparison between the amount of ordinary Supply bills outstanding, and the amount of 17,183,000l. provided to be renewed under the Bill now before us, that T found, that without notice or explanation the 1,750,000l. had been slipped into what was described as the permanent debt, and in place of being paid off, were proposed to be renewed. This was an undeniable departure from the principle laid down in the last Session. It was an abandonment of the engagement of meeting the expenditure by supplies raised within the year. It was the adoption of the opposite principle so unequivocally condemned. Parliament had been appealed to, as I have shown in stringent terms, to adopt the principle of providing our Ways and Means by the year's taxation, yet without one word in justification of the altered resolve, this Bill has added the 1,750,000l. to the permanent debt, and totally altered the nature of the short securities which originally had been issued, and the engagement under which they were authorised.

I have already stated that these proceedings will tell on the future, as well as on the past, and the present. Permit me to explain my meaning. This sum of 1,750,000l. is not the only debt we have contracted, under circumstances somewhat similar. We must remember the power granted of issuing 6,000,000l. of Exchequer bonds, in three series of 2,000,000l. each, and which it was expressly stated were to be paid off in the successive years 1857, 1858, and 1859. We have obtained a sum of 5,375,000l. by the issue of these bills, and this sum has been applied to the public service. When it is now seen how the sum of 1,750,000l. is dealt with, can any very confident expectation be entertained that the Exchequer bonds will not, in like manner, be added to the permanent debt hereafter? If so, what becomes of our boast of meeting the war expenditure out of our current income? Parliament had been assured, most positively, that these bonds were not to form part of the national debt; indeed, doubts were expressed whether they represented a loan at all. At the time this assertion was made, I took the liberty of warning your Lordships against it, as a sophism and a fallacy. I ventured to state, that in adopting the principle of obtaining money by the issue of 6,000,000l. of these securities, and at the same time disclaiming the notion that we were contracting a debt, or dealing in a loan, we were taking a course which could not be justified on the principles of common sense. To protest against all borrowing, whilst we were driven to bring in aid of our income above seven millions of borrowed money, was indeed an endeavour to enjoy the pleasures of vice and the honours of virtue. We were either deluded ourselves, or were endeavouring to delude others. But have we succeeded? I anticipated then what has since occurred, that these novel securities would not be absorbed in the ordinary open stock market. I anticipated that they were likely to be taken up by moneys belonging to the sinking fund or the savings banks. I considered that it was hardly justifiable to use those extraordinary resources, in order to give an artificial circulation to securities rejected by the Stock Exchange. I have never stated that those proceedings were contrary to law. Where the circumstances were so exceptional as to justify the step, the course was defensible. But it became so only when the real interests of the public were at stake, and not when taken for the maintenance of an injudicious financial experiment. To what was all this likely to lead? When these Exchequer bonds came to maturity, if not before that time, they would probably be found in the hands of the Commissioners for the National Debt, or for the Savings Banks. Of both these bodies the House is aware that the Chancellor of the Exchequer is the directing member. He will have to decide between going to the House of Commons and recommending a continuance of the income tax, to the repeal of which Parliament is pledged; recommending other new, and, perhaps, unpopular taxes, or funding these very securities and thus converting them into permanent debt. If these alternatives were presented to Parliament, and Parliament were driven to provide for the expenditure of the Russian war by taxation, or by a funding of securities issued many years before, there would be little doubt that a funding of these bonds would be resorted to, and justified by the precedent of the Bill now before us. I beg to remind your Lordships that I am not so much condemning these possible arrangements as being, in themselves, wrong, as from their being utterly irreconcilable with the declaration that our annual expenditure either had been, or could have been, met by our annual income.

I must further call your Lordships' attention to the peculiar impolicy of disclaiming the use of credit on behalf of a State like England. We are invited to cast aside the weapon in which we are strongest, and to abandon what constitutes our greatest financial superiority. Ours is, as I believe, the wealthiest country in the world. Our commercial spirit, our increasing powers of production, the amount of our capital, and the rapidity of our annual accumulations, place us at the head of all civilised nations, in these respects. But great as is our national wealth, our public credit is immeasurably higher. The fidelity with which we have performed our engagements, our scrupulous maintenance of public faith, give us a much greater relative strength in Europe, than all our capital, and all our trade, and I may even add, than all our industry. Our force may therefore be expressed by our realised wealth, multiplied into our power of credit. Yet it is the latter advantage which we were called upon to condemn, or to cast aside. Far is it from being my meaning, that on all occasions, where our means prove deficient, or our expenditure is excessive, we should be justified in resorting to loans. It would have been absurd, if we had resorted to credit for the erection of this splendid palace in which we meet. I only wish to protest against the doctrine, that in a real national exigency, when the wants of a country greatly exceed its resources, we can afford to undervalue credit. It behoves our Government and the Legislature, at such periods, to consider most carefully the course which it is right to take, free from prejudgment or dogmatism. Where the amount of additional revenue required, demands the imposition of new and oppressive burthens, I respectfully submit, that it may be infinitely wiser, even in relation to the interests of remote posterity, that the money required by the State, or a competent part of it, should be raised by a permanent, or, perhaps, what might be still better, a temporary annuity, rather than to crush the resources of industry by over taxation. If it could be shown that we might succeed in raising, by taxes levied within the year, all that we required, but that in so doing we should press destructively on the springs of industry, and destroy their force and elasticity for a period of ten, fifteen, or twenty years, is it not obviously better, that at least a portion of the money required should be borrowed on loan, and the pressure be lessened and diffused over a longer period, instead of meeting the whole exigency by concentrated and ruinous taxation? Permit me to take an illustration from private life. We are continually, and I believe very justly, congratulated on the rapid progress in our agriculture now developing itself throughout the United Kingdom. Parliament has a right to claim credit for the encouragement it has given to these improvements, by liberal grants, and by provident legislation. But, let me ask, on what principle have we proceeded? We have encouraged the tenant for life to improve his estate, by borrowing money, for the repayment of which the reversioner is also pledged. If the new doctrine were admitted, and the life tenant were never to improve, except out of the current income of the estate, if credit were made to him as a sealed book, the result would be that the most material agricultural improvements would be checked, would be brought to a standstill, or would be very imperfectly executed. Of all the parties interested, the reversioner would be the greatest sufferer by this misapplication of a principle, sound only when confined within reasonable limits. What is true of an individual, is true of the State. If it is just to tax the reversioner of a landed estate for banking out, or diverting a flood that would destroy its fertility, it is also just to cast on our posterity a portion of a national burthen, to be expended in checking the overflow of barbarism, the bursting torrents of an invading army, or any casualty which endangers our liberties and national security.

Will your Lordships indulge me if, on this subject, I refer to the authority of a late eminent statesman and sound philosopher (Leon Faucher), unfortunately lost to his country, and, I may say, to Europe. That eminent man has enriched the literature of France, by three very remarkable Essays published in the Redes deux Mondes, a short time before his decease. They form a valuable practical treatise, on what he describes as Les Finances de la Guerre. The first of these Essays is devoted to the Finances of England and of France, the second to the resources of our present formidable enemy. Russia; and the third is a rejoinder by Léon Faucher to a reply published on behalf of the Government of St. Petersburg. The first of these Essays contrasts the opposite principles adopted by England and France in 1854; the French Government having successfully resorted to a loan, whilst our Chancellor of the Exchequer had unequivocally condemned, and declared his solemn resolve to eschew, the practice of borrowing money. I regret to have to substitute for the clear and accurate diction of M. Faucher a loose and improvised paraphrase of my own— The reasoning of Mr. Gladstone," he observes, "supported, as it is, by the double authority of Mr. Mill and of Mr. M'Culloch, is very far from being unanswerable. The British Government undertakes a moral and courageous enterprise in endeavouring to support the war by the means of sacrifices which taxpayers impose upon themselves, avoiding the tempting downward path of loans: it is the duty of Governments to preserve the resources of futurity intact, when they can do so; but we must not exaggerate the consequences of this doctrine, nor exalt it, without having regard to circumstances, into an unbending principle. It is here that a just estimate of facts and of experience casts a light upon political reasoning. At times war has for its object a present advantage, and at times it proposes to secure the greatness or the repose of future generations. In this last case, a loan is just; there would neither be equity nor prudence in meeting the expenditure of the struggle by taxation. This I consider to be the common-sense view of the case, but it is irreconcilable with the official declarations made in the House of Commons last year. We are also told that the authority of Mr. Pitt is against us; and that, after having adopted the principle of borrowing in the earlier part of his Administration, that Minister had condemned his former conduct on the authority of his later experience. I cannot help thinking that the name of Mr. Pitt is here somewhat inconsiderately and rashly used, and his financial system dealt with and condemned imprudently and unwisely. It is not for me, with my Whig opinions, to defend Mr. Pitt's general policy; but as a finance Minister, more especially in relation to his commercial views, I cannot but recognise in him a mighty genius. His system of loans does not, however, appear to me to be rightly understood, either by Sir Henry Parnell, Mr. M'Culloch, or by those who now condemn it. I confess I differ altogether from the conclusions at which they have arrived, in censuring loans made in a lowpriced stock. Where Mr. Pitt's policy was more questionable was, in the preference too generally given by him to permanent, rather than to terminable annuities. He did not see that borrowing on a terminable annuity is the safest, if it be not the only sinking fund, that can be relied on. I doubt whether any one familiar with the history of those times, and who carefully considers the budgets of Mr. Pitt, can justly charge him with an indisposition to propose adequate taxation. But let us turn to the opinions expressed by Mr. Pitt in 1797, on proposing the property tax, at the very period designated as that of his financial penitence and reformation. His declaration was as follows— Whatever objections might have been fairly urged against the funding system in its origin, no man can suppose that after the form and shape which it has given to our financial affairs, after the heavy burthens which it has left behind it, we can now recur to the notion of raising in one year the whole of the supplies which a scale of expense so extensive as ours must require. If such a plan be evidently impracticable, some medium, however, may be found to draw as much advantage from the funding system as it is fit, consistently with a due regard for posterity, to employ, and at the same time to obviate the evils with which its excess would be attended. To guard against the accumulation of the funded debt, and to contribute that share to the support of the struggle in which we are engaged which our ability will permit, without inconvenience to those who are called upon to contribute, appears to me essentially necessary; and the great object of such a practical scheme must be to allot fairly and equally to every class that portion which each ought to bear. Giving due weight to this authoritative declaration, it is somewhat strange to find Mr. Pitt appealed to, at any period of his life in support of the unqualified condemnation of the loan system, so rashly ventured upon in the last Session.

An equal liberty seems to me to have been taken with the name of John Stuart Mill, and his judgment has been carried far beyond its just meaning. Mr. Mill I consider not only a man of the highest authority, but almost a purist on these points; yet, from the language he has used, it appears that he does not consider the question between loans and taxation to be quite so clear, or so easily disposed of, as was suggested last year. He observes— When Government loans are limited to the overflowing of the national capital, or to those accumulations which would not take place at all, unless suffered to overflow, they occasion no privation to any one at the time, except by the payment of the interest, and may even be beneficial to the labouring class during the time of their expenditure by employing in the direct purchase of labour, as of soldiers, sailors, &c., funds which might otherwise have quitted the country altogether. I entreat my noble Friends to consider carefully the words of Mr. Pitt and Mr. Mill, before they again claim them as auxiliaries on their side of the question.

What is now to be considered is, however, not so much the abstract question of science, as the practical resolve required under existing circumstances. The time is approaching when a provision must be made for the present year. We are now engaged in one of the greatest struggles in which this Empire has ever been involved. We are bound carefully to consider, first, the probable amount of our war expenditure—the excess of that expenditure above our existing ways and means. We have next to decide in what manner that deficiency is to be provided for. However inconsistent the present Bill may be with the declarations of the Government in 1854, I hail it as an important indication of an altered policy. I gladly accept it, instead of complaining of the change. I thank those who have sufficient courage to announce the abandonment of a former erroneous decision, and I augur well for the results of an improved policy.

Had there been any disposition to revert to the doctrines laid down last year, and to apply them to the present, I should have trembled for the consequences of so rash an experiment. The necessary Ways and Means could not have been provided by taxation, without inflicting a grievous wrong and injustice on the industrious population of this country. It would also have cramped our resources and lessened the popularity of the war; and in conducting a war its popularity, or in other words a confidence in its justice and its necessity, is an important element towards its success.

It is necessary to ascertain what will be the amount of the provision required for the services of the year. This for the present cannot be stated by a private Member of Parliament like myself who has no means of judging beyond the Estimates already presented. But even those incomplete Estimates lead to formidable results. In 1817 the Finance Com- mittee laid before the House of Commons a model Estimate of the Supply Votes required for a peace establishment. That Estimate scarcely exceeded 17,000,000l. The Supply Estimates for 1854 reached 39,000,000l. By adding to the Votes already passed for 1855, the further sums which may be required for the disembodied militia, the packet service, the miscellaneous and extraordinary expenditure, I am inclined to assume that the Supply Votes of the present year will amount to upwards of 50,000,000l. In this calculation it should be remembered that no provision is included for the interest of the funded and unfunded debt, the civil list, the judicial or diplomatic services, and several other charges on the Consolidated Fund. Therefore, without knowing more than the probable amount of the charge of the year, and knowing only the existing income, it is of the utmost importance that all uncertainty should be removed without delay, and the public speedily informed on what principles it is meant that the Ways and Means should be provided for. The Bill before us is important in this respect, as it must be considered an indication of a policy differing from the principles laid down by the late Chancellor of the Exchequer.

Whatever course may be adopted for the present year, there is one principle which I earnestly hope may be steadily adhered to. Whether we are called on to raise money by increased taxation or by loan, I sincerely hope that we may not be induced to repeal or abandon any part of our existing revenue. That course would be still more unpardonable where no adequate reason can be stated to justify the sacrifice. What I specially allude to is a suggested repeal of the stamp duty on newspapers. I earnestly deprecate such a measure as unwise and uncalled for, even in more favourable times, but without excuse or justification at a moment when we are compelled to submit to increased taxes, or, to a loan. I myself reduced the duty on newspapers from 4d. to ld. But the circumstances are very different at the present moment, from what they were in 1836–37. At that time the heavy amount of this duty produced, as all inordinate taxation does, an organised system of smuggling, and the laws were openly set at defiance. The duty was then nearly four times its present rate; and, therefore, the reduction of duty which I then made was politic, and has been most successful. Increased production has gone on from year to year. The number of stamps issued in 1834 was but 32,400,000; in 1851, it reached 104,212,000; and in 1854, 121,621,000. The duty likewise is augmenting annually, amounting in 1854 to 486,665. Now, I confess I feel some curiosity to hear what sufficient reason can be assigned for the abandonment of an improving revenue, which the parties primarily concerned, namely, the proprietors of newspapers, men who bring into their business not only a capital of wealth, but a greater capital of knowledge and intelligence, so far from condemning, or even complaining of, ask Parliament to continue and maintain. We cannot afford to place at risk 400,000l. or 500,000l. a year of the national income, especially at a moment like the present, when we are compelled to suspend, for a time at least, the reduction of the tea duties, a boon promised to the people of England, and one which the whole body of consumers would have understood and appreciated. If the exigency of the present time is to be successfully met, sacrifices of revenue like this should not be countenanced. I venture to exhort your Lordships to hold by the existing revenue; the present is not the time to lessen our resources. If called upon to do so, let it be from some worthier motive than a desire to acquire a mistaken and ill-merited popularity. If you should entertain any proposal for reducing taxation, let it be in some instances where increased consumption, consequent upon a reduced impost, may make good the first loss.

Above all, I take the liberty of entreating the Government, whatever their line of policy may be, to avow it fearlessly and to abide by it manfully. It will not do any longer to proclaim one principle, and then to act on another. Let them not follow the example of last year's finance. It is not politic to pursue a tortuous policy in what concerns our public credit. If they think it better to raise the money required for the war by annual taxation, let it be recommended by them. Let the measures be proposed to Parliament and fairly argued. If, on the contrary, as I expect, they require a loan, let them go into the money market boldly and openly, and make the best bargain they can. Let them do so simply and on a principle intelligible and avowed, and not be led away by some ingenious but delusive novelty. I need not add that I am ready to support the present Bill, though I could much have wished that the departure from the policy of last year had been more frankly and unhesitatingly avowed in justification of the change.

I have to apologise for the length of time which I have occupied your Lordships. My excuse must be, a deep sense of the importance of the principle which I trace in the present Bill on the conduct of our finances, on the success of the war, as well as on the general interests of the Empire.


said, he thought it was quite unnecessary for the noble Lord to make any apology for bringing forward a question which was of such great importance, and in respect to which he was from previous experience so competent to instruct the House, but he (Earl Granville) had hardly thought that when he had to ask their Lordships to give their consent to a Bill to enable Government to raise Exchequer Bills to an amount not greater than that which had been issued for the last forty years, it would have been necessary for him to have come prepared to answer these objections on the part of the noble Lord. He was confirmed in this opinion by the noble Lord's having, in his eloquent speech of an hour's length, in reality brought forward no argument against anything contained in the Bill, but had simply confined himself to one of his efforts in that long and continued discussion between himself and a right hon. Gentleman in another place—the late Chancellor of the Exchequer—in which the only fault was, that the interested spectators had to wait so long a time for each reply. He (Earl Granville) had had no idea that it would be necessary for him to come down to the House ready prepared on these points, and, therefore, he had had no opportunity of consulting Hansard on the subject. He collected, however, that his noble Friend assumed that the right hon. Gentleman the late Chancellor of the Exchequer had laid it down as an inflexible rule never to have recourse to a loan, and that there was the same difference between taxation and a loan as between right and wrong. Now he (Earl Granville) believed that the principle laid down by his right hon. Friend was sound, and that he saw this evil in having recourse to a loan—an evil which had been forcibly pointed out by a noble Earl (Earl Grey) last night—that it had a tendency to make Government and Parliament more lavish than they other- wise would be in the public expenditure. It was calling upon posterity to pay that which was required for the necessities of the present generation, and it was relieving the people from the moral pressure which should exist to induce them—not to give up just war—but to consider how far they were justified by principles of justice in carrying on war. He believed that all political economists agreed in the general maxim that by these loans trade and labour were injured by the diminished capital available for the accommodation of trade and manufactures; and he could not help thinking that the illustration of the noble Lord was a very strange one, for it appeared to him that there was very little analogy existing between the case of a landowner borrowing money at 3, 4, or 5 per cent for the improvement of his estate, which improvement he hoped would increase at the rate of 9, 10, or 11 per cent, with the country spending money in the most unproductive manner in which it was possible, in a pecuniary point of view, to disburse large sums of money. He believed that these principles were likewise laid down by his right hon. Friend (Mr. Gladstone), and, if his recollection did not fail, he had listened by the side of the noble Lord to one of the speeches of his right hon. Friend, in which he distinctly guarded himself against the supposition that he would never have recourse to loans or to borrowing money. The question was rather one of time and of degree; and he could not admit the authority of M. Leon Faucher, able as the documents were which the noble Lord had quoted, or that the condition of France was perfectly similar. At the end of the late war France had comparatively no debt, whilst the debt of England was enormous; and, if he was not mistaken, the debt of France had been much increased in time of peace before there was a question about war at all. The noble Lord had stated to the House a practical application of his economical doctrine; but it was impossible for him (Earl Granville) to anticipate what the present Chancellor of the Exchequer might propose to his colleagues, or to say what those colleagues might support, or might think fit to propose to Parliament; and he must decline giving any information with regard to the Newspaper Stamp Bill, to which the noble Lord had referred. All that he would say was this—when the noble Lord talked of disasters for the future with respect to financial difficulties, although he (Earl Granville) did not undervalue in the slightest degree the pecuniary losses which would be entailed by the war, yet, looking at the general state of the country, notwithanding the pressure which he owned did exist at the moment, looking at the present price of the funds, and having confidence in the present Chancellor of the Exchequer, he believed it would be found that the measures which he would propose would not be likely to lead to the disastrous consequences pictured out by the noble Lord. He had nothing further to say, for he certainly was not aware that any objections would be offered to the Bill, since last year or the year before last an amount of Exchequer bills had been granted which was certainly equal to the amount for which Government were now asking.


said, he must be permitted to observe that the noble Earl who had just sat down had not given the slightest answer to what had fallen from the noble Lord (Lord Monteagle). His noble Friend had made no attack upon Her Majesty's Government for having now departed from the system which had been laid down last year, neither had he imputed to the late Chancellor of the Exchequer that he had laid down, without qualification or reserve, certain doctrines that, under all circumstances and at all times, the exigencies of the year must be provided for out of the taxation of that year. The charge, if it could be called a charge, was not with respect to the future, but with respect to the past and present, that without any intimation having been given, either in the House of Lords or in the House of Commons, that such a change was contemplated; a change of policy was contemplated or involved in the Bill which was now passing through the House, whereby the declaration of the late Chancellor of the Exchequer was distinctly and positively falsified, inasmuch as that at the time when he professed to be providing for the service of the year out of the revenue of the year, he was at that very time practically adding to the permanent debt of the country. This was the objection of his noble Friend; and all the answer which the noble Earl professed to give was, that he was not prepared at the present time to state what would be the Budget of the present Chancellor of the Exchequer, or in what manner Her Majesty's Government proposed to deal with this part of the question. The noble Earl said, that the amount of Exchequer bills which it was proposed to renew did not very considerably exceed the amount which had been renewed in former years. That, however, had nothing to do with the question. The question was, whether in this Bill they were not confounding two descriptions of Exchequer bills; and, by so confounding them, practically falsifying the declaration of the late Chancellor of the Exchequer made in the course of last year. The ordinary amount of Exchequer bills annually renewed being somewhat about 16,000,000l., the present measure proposed to renew 17,000,000l., whereas it was expressly stated by the Chancellor of the Exchequer, that the excess was required only in anticipation of the revenue, and that when the ordinary Exchequer bills came to be renewed these would not be renewed, but that they would be paid off when the revenue came in and would never be heard of any more. But by the present Bill these bills were now confounded with the ordinary Exchequer bills, and an increase in the whole amount of those Exchequer bills was created without any explanation being given, and without the attention of Parliament being called to it. They were practically negativing the principle of the late Chancellor of the Exchequer. He said, "I propose to raise money, and I intend to provide for the service of this year out of the revenue." But what did he do? He anticipated the revenue, and when the time came to pay off those bills, issued in anticipation of the revenue, they were now asked to renew those bills again, and the consequence was that the permanent debt of the country was increased. With regard to Exchequer bonds, also, it was said no debt would be created. It might just as well be said, that when a young gentleman who had just come of age, and was spending double his income, and raising money by bills, and renewing them as they fell due, he had as much right to put himself forward as a model of prudence and frugality, declare that he did not owe a shilling, but lived within his income. The late Chancellor of the Exchequer did nothing more nor less—he issued bills at a certain number of years' date, and when the time arrived for paying or renewing them, in either case they constituted a practical addition to the debt of the country. The noble Lord, therefore, had justly complained that the Government were increasing the debt, while concealing the fact from the country, and that they were confound- ing two classes of Exchequer bills, which ought to be kept entirely distinct, for the purpose of making that permanent debt which the late Chancellor of the Exchequer declared to be no debt at all. His noble Friend and the country had a right to ask, whether it was intended to adhere to the principle which had been announced in another place, of defraying the expenses of the war by the taxation of the year, or whether the Government were in this very year to depart from that principle, to incur what they must incur, and revert to that principle to which they must ultimately have recourse; namely, that where there were great national exigencies and enormous expenditure to be incurred for a permanent national object, it was right to take that course which all former Governments had taken, of throwing a portion (he would not say the whole) of that burden upon posterity, instead of taking impracticable measures to provide for that expenditure within the year—dealing with national loans, in the shape of permanent renewals, or something of that description —spreading it over a great number of years, twenty, thirty, or forty years—and thereby not adding to the permanent debt of the country, and over whelming England with a mass of taxation it would be impossible to pay. The complaint of his noble Friend was, that the Government were departing from the principle they had laid down in Parliament last year, and endeavouring, at the same time, to conceal it; and he called upon them to state openly and broadly, whether they intended to abide by that principle, or frankly and honestly to avow the intention of departing for the future from that which he had himself always considered, under circumstances like the present, to be an absolutely impracticable principle.


My Lords, the noble Earl prefaced his remarks by stating that he felt himself very incompetent to deal with this question. If that be the position of the noble Earl, much more so is it mine on this occasion; for I entered the House without having had any previous knowledge that I should be called upon to address your Lordships, or any previous information on the subject now under consideration. I have only a recollection—a pretty distinct recollection to be sure—of certain discussions which took place last year on this matter, and a recollection of certain speeches made by the late Chancellor of the Exchequer, to which I have referred since this debate began. The noble Earl opposite (the Earl of Derby) says that my noble Friend (Earl Granville) has answered none of the arguments or complaints of the noble Lord behind me. I have listened carefully to the speech of that noble Lord, and I am sure that no other answer is required to those arguments and complaints than a corrected statement of the facts on which the noble Baron founded his arguments. I understand the noble Earl (the Earl of Derby) to say that the Chancellor of the Exchequer had laid down an absolute principle on the subject of providing for the expenses of the war; that he had stated that under no circumstances would he have recourse to a loan; and that he considered the distinction between providing for the war by loan and providing for it by taxation, to be a distinction almost of the nature of that between right and wrong. That must have referred to the general question of supporting this war by loan, as compared with supporting it by taxation. As far as regards the principle of the right hon. Gentleman he was prepared to say that the Government to which he belonged had strictly adhered to it as regarded the financial Budget of last year. They proposed a very large increase of taxation, which was readily accorded by Parliament, and on that taxation we have hitherto been proceeding in meeting the expenses of the war. But, then, as to the question of the Exchequer bills which the right hon. Gentleman asked for in March last, the answer I make to the complaint of the noble Baron is, that he has totally misrepresented—I have no doubt perfectly unconsciously and quite unwittingly—but he has totally misrepresented the language held by my right hon. Friend the Chancellor of the Exchequer on that occasion. The noble Earl opposite says that the mere amount of the Exchequer bills has nothing to do with the question. My noble Friend behind me had informed the House that those bills in 1854 were less by 1,000,000l. than they were this year. The noble Baron found in that fact evidence of the tortuous policy pursued by the Government. That was the language used by the noble Baron in speaking of the arrangements of the Government. He said he had found out the evidence of the tortuous policy of the Government, inasmuch as he had discovered that in the previous year there were only 16,000,000l. of Exchequer bills, and that this year there was an addition of upwards of 1,000,000l. in the sum now asked for. Then, what right had the noble Earl opposite (the Earl of Derby) to say that the mere amount of the Exchequer bills has nothing to do with the question? I think that my noble Friend, if he will refer to the terms in which the Chancellor of the Exchequer proposed this issue of Exchequer bills, will see that he had totally misrepresented Mr. Gladstone's view of the case. This is put in the very speech in which he objects most strongly to the principle of defraying the expenditure of the war by a system of loan. He says— I am therefore perfectly desirous that the Committee should understand, when the authority has been given to raise 1,750,000l. by Exchequer bills, that I now ask that as an authority that will only be exercised to such an extent as may be found convenient for the public service. I do not expect that it will be found necessary to exercise that power to the full extent, but probably it may be found necessary to exercise it in part; but, if it should be exercised to the full extent, and if every farthing I ask for authority to issue should be issued in consequence, I wish the Committee to understand that the unfunded debt, after the full exercise of that power will only stand at the point it stood at twelve months ago. At that period the unfunded debt amounted in round numbers to 17,750,000l.; at the present moment the unfunded debt amounts in round numbers to 16,000,000l., large purchases of Exchequer bills having been effected from various sources, chiefly by the National Debt Commissioners, during the last year, and 400,000l. having been exchanged for permanent Exchequer bonds."—3 Hansard, cxxxi. 384–5.] Mr. Gladstone therefore contemplated as a possible event the issue of the full sum he asked for, whereas it seems to me that the amount of Exchequer Bills Mr. Gladstone asked for has not been issued. The amount now before your your Lordships' House is 17,183,0001., whereas, if the full amount asked for had been issued it would have been 17,750,000l., so that the sum is less by upwards of 500,000l. than that which the Chancellor of the Exchequer considered might be the possible issue. But that is really not the question. There was a verbal dispute, carried on in speeches, as to whether comparatively small sums, raised in the meantime under temporary emergency, were of the nature of a loan or not. I always thought that the arguments used on this point were of a somewhat technical nature, and that the country did not attach to the dispute any importance whatever; but it was a dispute carried on between the noble Baron and the Chancellor of the Exchequer in several speeches: I hope, however, that the dispute will now be brought to an end. The great question is this—did the Government lay down last year any great principle with regard to the expenditure of the war—any principle from which they have departed? I deny that they did so. What Mr. Gladstone said was that it would be wrong to rush into a system of loans at the outset of the war, that it would be unworthy of the dignity of this country and of our great resources, at the outset of the war to resort to a "system of loans;" and he asked Parliament to assent to a very large amount of additional taxation. That taxation was granted, and it seems to me a most trifling dispute whether 1,000,000l. or 1,500,000l., which Mr. Gladstone temporarily borrowed, hoping he might afterwards be able to repay it, has since, in consequence of unforeseen events, acquired the character of a loan or not. Even if you proved that it has acquired the character of a loan, and even if you have added to the funded or unfunded debt, there is no ground for charging my right hon. Friend with departing from his principle—which was to raise the expenses of the war in the outset by taxation and not by loan. But I am in no difficulty as to divining the real object of the speeches that have been made in your Lordships' House to-night. These speeches are of an anticipatory character, and have been made with a view to extracting from the Government some declaration of their intentions as to the Budget of the present year. The noble Earl opposite (the Earl of Derby) wished to know whether we are to adhere to, or depart from, the principle laid down lust year for the future conduct of the war. My answer is, that there was no abstract principle laid down last year with regard to the future conduct of the war, which was expected to be of invariable application. My right hon. Friend said the contingencies of war might prevent Her Majesty's Government from adhering to any principle in the conduct of it; but even if the noble Earl could establish that that which Mr. Gladstone did not believe would prove to be a loan has nevertheless really proved to be so, that in no respect supports the accusation he has made, that we have covertly departed from any principle we had originally laid down, or have been guilty of any "tortuous policy."


My Lords, I cannot agree with the noble Duke who has just sat down, that this is a trifling dispute. It seems to me to be one of a very dif- ferent character. It is a discussion as to whether, in the matter of taxation at the commencement of a war, Her Majesty's Government have dealt with Parliament in a fair and candid manner, and have shown the foresight we have a right to expect from Gentlemen occupying their positions. I am bound to say that I think the explanation just given by the noble Duke, the Lord Privy Seal, fails altogether as a reply to the arguments employed by the noble Baron. The noble Duke states, that Mr. Gladstone in his speech last year expressed a hope that he should not be forced to issue those Exchequer bills at all. No doubt he did; but that is perfectly consistent with another part of the same speech, quoted by my noble Friend, in which he distinctly assured Parliament, that if he did issue them, they would he paid out of growing supplies. My noble Friend has quoted the passage, in which it appears to me that that was distinctly promised. That statement having been made, and power to issue these Exchequer bills having been granted last year on the understanding that they would be paid off out of growing supplies, and that we should hear no more of them, I do not think it was a fair and candid course for Government, without saying one word to Parliament on the subject, to confound them with the ordinary Exchequer bills. I cannot say that, in my opinion, that was a candid course to pursue towards Parliament. But further than that—upon this whole subject of paying the expenses of the war within the year, I think the conduct of Government towards Parliament has not been of a fair and honest character. My noble Friend near me never accused Her Majesty's Government of having adopted the principle of paying all the expenses of the war within the year. No man ever said so; but what ire were told was this—and I must say I was under that impression until lately—that the taxes imposed had been sufficient to pay the expenses of the war, and that the sums the Government then saw they were entitled to would be amply sufficient to defray the expenses they were then incurring. But the fact turns out to be this—that so far from that being the case, what with Exchequer bills which were to have been paid off but which have been renewed, and the Exchequer bonds which have been issued, and which was said were neither more nor less than bills at four years date, while the Government were professing to incur no debt at all they were virtually, and to all intents and purposes, placing upon the country the burden of a debt of which I cannot state the actual amount, but which I am certain is not less than 6,000,000l., and which perhaps exceeds 7,000,000l. That is not what we were told, and in these matters I hold the opinion that fair and honest dealing with Parliament is of the utmost importance. Whatever Her Majesty's Government are doing, let it be stated clearly and distinctly. Do not let us have the statement that we are to have no debt, and then draw these bills which in a year or two are to be renewed; but let us be told clearly and distinctly what our circumstances are. I think there is this further objection to the course; that if we had been plainly told what our situation was, and if that situation had been dealt with, it is very probable, in my opinion, that the difficulties of the country might have been provided for upon better terms than they actually will be. As in the instance of that young gentleman coming of age of whom the noble Earl opposite spoke, if he had looked his difficulties in the face and raised a mortgage upon his estate at once, he would have made a better bargain than by drawing bills at four months, which he was constantly obliged to renew, and upon which he was paying a large interest. So it is with the country. If you had looked your situation fairly in the face, and had provided money openly either by loan or by taxation, I think you would have obtained the amount you required upon better terms than you can hope for under the new expedient, which I think has been most unfortunately adopted. Though I do not profess to understand these subjects very much, still I think the statement of my noble Friend near me (Lord Monteagle) so clear that I cannot resist the conclusion that he has made out his case. There is one point, however, on which I do not altogether agree with my noble Friend. I quite agree with the noble Lord that it is sometimes quite impossible to avoid incurring debts in time of war; but I certainly more nearly coincide with the idea of the late Chancellor of the Exchequer, that a very large proportion of the funds should be raised out of the revenue while the war is in progress, and that as much of the burden as possible should be borne by the present generation.

Motion agreed to: Bill read 3a accordingly, and passed.

House adjourned to Thursday next.