The Stourbridge Observer, Cradley Heath, Halesowen & District Chronicle.
Stourbridge, West Midlands, England, 1872-03-02 00:00:00

CHANCERY FUNDS BILL.

Of the possibility of an improvement in the manage-
ment of the Chancery suitors' money there can be no
doubt, and Mr. Lowe proposes the best of all improve- ,
ments (says the Economist). He proposes to take it
out of the hands of the Court of Chancery altogether;
he will not let the lawyers have anything to do with
it; the Executive Government is to take it, and to pay
a moderate rate of interest on it, just as it does with
the savings-bank money. That rate is to be 2 per cent.,
and this will be paid upon all the sums which are
in the custody of the Court, so that there will be
no suitor who does not gain something. There
will be no buying into the funds perhaps when they
are dear, and selling out at a loss perhaps when they
are cheap, by which the suitor loses, and there will be
no costly brokerages to be paid; so that the suitor
will be a great gainer. He will not be, as now, a
speculator in the value of the funds—and a speculator
of the most unlucky kind, for he cannot choose when
he will buy in or when he will sell out. The actual
dates are settled for him by judicial authority, and
therefore in comparison with all optional dealers he is
at a certain disadvantage. But hereafter he will be sure
of his principal, and will receive a fixed income on
which he can certainly rely. In old times it used to
be said by the lawyers that the Chancellor of the Ex-
chequer was not to be trusted; that he would specu-
late with the suitors' money; that he would play
"ducks and drakes" with it; but no one now supposes
that. The Chancellor 14 the Exchequer, in respect of
the savings' bank, is already the greatest banker in the
country, and if he is not to be trusted who in? No
one indeed will now venture to contend that the
English Government is not to be trusted; and if he
did, the House of Commons would not hear him. This
is the explanation of the first half of the bill—how
better to administer the Chancery funds?
But how does Mr. Lowe work round from this to
the diminution of the National Debt? He does so in
two ways. First, he invests the 4:00,000,000 on which
he pass 2 per cent., in the funds at 3}, and thus gains
an immunity of £725,000 annually, which he reinveets
at compound interest, and which in 20 years will come
is about I:20,000,000 and will reduce our debt by
that sum. It may be said that we should reckon
on the other side the lose by the fall in the funds; that
as certain suitors lost by that fall, so the State, which
is substited for those suitors, will lose also. But this
is a mistake. The State will never have to sell out of
the funds, and, therefore, will not lose. Though cer-
tain individuals among the suitors in court have to sell
at the decision of the cause, new suitors, on the other
hand, come in to replace them. The aggregate fund,
so far from diminishing, is augmenting as the business
of the Court of Chancery augments. The State,
therefore, will lose nothing on the principal of
its investments, and will get clear, and without
deduction, the difference between the interest
which it gives and the interest which it makes.
Secondly,— as the Chancellor of the Exchequer is him-
self the holder of this large sum in Consols, he can
turn it, or any part he likes of it, into terminable
annuities. This is an invention, we believe, of Mr.
Gladstone, in the case of the savings-banks. Gener-
ally it is impossible to borrow on terminable annuity,
because, except to a limited extent, terminable
annuities are not saleable in the market; they are for
a common person both a disagreeable and a troublesome
investment. They are disagreeable, because the mar-
ket price is daily diminishing, which the mass of man-
kind do not like, and it requires the investment of a part
of the annual income to replace the principal, which
requires the holder first to find how much has to be
invested, and then to invest it, which to most people
would be very irksome. But when the State is the
holder of its own funds, this difficulty is at an end.
The State is no longer subject to the caprice of the
market ; it can invest, therefore, in the sort of security
which suits it best because it is easiest to pay off ; and
this security is the terminable annuity.
In this manner, if Mr. Lowe is successful this year
in carrying his Bill, he will have conferred on the
country the two curiously connected benefits of helping
its suitors at law and of reducing its National Debt.