The Stourbridge Observer, Cradley Heath, Halesowen & District Chronicle.
Stourbridge, West Midlands, England, 1875-04-24 00:00:00

I#il E

REDUCTION OF THE NATIONAL
DEBT.

The Times, in a leader, thus comments on the proposi
of the chancellor of the Exchequer to reduce the National
Debt:—
A celebrated wit once said of his debts that it was
neither his interest to pay the principal nor his prin-
ciple to pay the interest; and though, in reference to
our public liabilities, the second doctrine of this serene
philosophy has never been tolerated by the British
nation, there have, perhaps, been seasons for an apathy
too nearly approaching to a virtual recognition of
the first. The reduction of the National Debt is a
practical object which we ought to keep steadily in
view, and its ultimate extinction is at least an
ideal towards which we shall be all the better for
aspiring. We welcome, therefore, the proposal
for a fixed Sinking Fund made by the Chancellor
of the Exchequer on Thursday, both because it draws
the attention of the country to a subject too likely to be
be neglected, and because it proposes to treat our
Public Debt by a sounder and more secure method
than any which has hitherto prevailed. At the close
of the American War, in 1786, the principal funded,
and unfunded, of the National Debt was 245 millions;
after the French War, when the English and Irish Ex-
chequers were consolidated, in 1817, it was 839 millions;
on March 31, 1875, it was 775 millions. The establish-
ment of the Terminable Annuities represents the
-considerable effort at reduction which has been
made during the last half-century, and the action
of this remedy is apt to be spasmodic. What we
want is a machinery more regular, more constant, and
more stable; and this is what Sir Stafford Northcote
undertakes to set in motion. Since 1829 we have
acted upon the Debt by two instruments of reduction
—the application of casual surpluses through the Sink-
ing Fund as at present constituted; and the system of
Terminable Annuities, developed by the creation of
new annuities. Sir Stafford Northcote now. pro-
poses, instead of merely applying such casual surplus
as each year's Revenue may afford, to ,charge a
fixed annual sum of £28,000,000, on account of the
National Debt, in the estimates of expenditure. Three
years will suffice to bring this plan into complete ope-
•ration. For 1875-6, the charge will be £27,40Q,000;
for 1876-7 it will be £27,700,000 for 1877-8 it will be(
"R28,0U0,000. The balance of this annual allowances.
above what is required for the actual payment of inteal
rest, will in each }tar b,::0 made over to the Cornmis-
-I,i lon exts fer the Reduction of -tkte: National Debt, wrio.
fluiploy that balance" inl he redemption. -
;+Btoclre *Meamhile the 46plicat1ield'of casual surpl.,
ancillat ttlotessa tka3An4liable Annuities will be eon-"
„iq4i,WhAt be.the-operatian of this scheme?
;TikUg 1117 e pride of Plinds, §t -,,the average otthedast
• tliirty iea' ted kirisrorthco-te compUteist. that in
I.BBs4vsosttall=444~6lled £6,800,000 of :stock, ands,
'AgGfiallioSAooo,oo-Otlitobtkriik means of the, annual:
,aaannaing,, further, an average:iota.' 1
plus Avenue df k 500,090, while the Terminable An-
nuities are ilio'ithtintitined in'action, we shall by 1885-,
have redepmed.2lnaillions, and by 1905 213 millions.
The ,npweil, tity‘cf,paying.old debts could scarcvly
promise ramlts sabre encouragkn..g than those whiCh
.tbAs' ;lot :sinaple- means of applOn:
steadily and-regularly a principle which the Ter-
minable A.nnuities already embody in what is oiAt.
!a' slightlydifferent form—namely, the Priiicti)lp';
of ' Exity7:o4. ;Stafford Northcote quoted' 'l2l3til,
Grenville'e 'remark -that such method la tilwitya
poisible ,for a State poisessing "an effective
and permanent surplus.'; Such epithets 'Were_
applicable, unfoitunately, to the surplus or those''
days, but they may, with a reasonable confidence,
be applied to the surplus of ours; and we will venture.
to add to 'Mr Stagord'a another brief quotation from
the kame writer—Lord Grenville's definition, in
gimp on a Sinking Fund, of the National Debt--
because it well illustrates the natural appropriateness
of the method Sir Stafford ,Northcote advocate in
'reference to the liquidation of such a debt. "The
Public Debt," says Lord Grenville, "consists, not in
, capital, but in annuities; and all reductions of it are,'
therefore, reductions, not of capital, but of annuities.
That Debt is continually spoken of as if it were
composed of the nominal amount of our public secu-
rities, but it is really composed only of the annual
payments guaranteed by those securities. . . . The
annual income which the stockholder . derives from
them is all which, in any sense, is his right • but
that right is inviolable. The State has not borrowed his
money at interest under any obligation of repayment,
but has sold him an annuity"—an annuity which
it is optional for the State to redeem by paying off
at par that stock of which the annuity is really the in-
terest. The creation of the Terminable Annuities was, in
fact, the first true advance towards a satisfactory treat-
ment of the National Debt; but the special form in
which they express a correct principle is liable to two
objections, of which one, however, is much graver than
the other. The first objection is that, supposing the
Savings Banks Commissioners to be left in possession
of Terminable Annuities as securities to a large
amount, a time might arrive when the Government
wanted the money, and when these securities might
not prove readily convertible; but much weight is due,
we think, to the observation of Mr. Childers that,
under the Terminable Annuity system, the Savings
Banks Commissioners receive annually from the
Revenue a much larger sum than they require, that a
constant purchase of Consols and other stock goes on
out of the difference between what would have been
the proceeds of three per cent, on their capital and the
actual proceeds of the Terminable Annuities and that
this process brings annually into the hands of the
Government a large amount of precisely the same se-
curities which, in case of pressure, would have had to
be sold or converted. The ether drawback is more
certain and more serious—it is that Terminable An-
nuities, when they fall in, exercise an irregular and
disturbing action on the Exchequer. In 1860 some
Long Annuities fell in; Mr. Gladstone suddenly found
himself with abort two millions a year additional, the
interest on the Debt being reduced from 28 millions to
little more than 26; and large remissions of taxation
were made accordingly. The same thing will happen
on a greater scale in 1885, and will give a similar access
of wealth to the Chancellor of the Exchequer who may
preside over what Mr. Neville-Grenville called "that
happy xra.'
A most important feature of Sir Stafford North-
cote 's plan is the provision of safeguards against the
.proposed Sinking Fund being charged with items not
properly relevant to the reduction of the National
Debt. He would explude from the benefit of the Fund
two other classes of public liabilities,—first, Tem-
porary Loans—that is, loans contracted for a short
period on annuities, such, for example, as the loan re-
cently raised on account of Fortifications and Local
Barracks; secondly, Local Loans—that is, loans
contracted by the Government for the purpose
of lending again to the various local authorities.
Thus, if the interest on a Temporary Loan
for a given year was £50,000, the charge for
interest on Public Debt (generally) for that year would
be £28,050,000. Our local debts amount altogether to
about £Bo,ooo,ooo—a sum which shows the necessity of
averting such a burden from the Sinking Fund if our
hopes of reduction are to be substantially realized;
and we are glad to see that Sir Stafford Northcote
Proposes that local debts shall in future take the shape
of Debentures, subject to a strict audit and registra-
tion. Those who wish to estimate the full significance
of such precautions have only to look back on the
history of Sinking Funds. The first systematic
measure for the discharge of the National Debt was
the Sinking Fund of 1716, planned by Lord Stanhope
_ and adopted by the Administration of Sir Robert
Walpole; but its history, after the first few years, was
the story of successive inroads made upon it—thus in
17q2, it was actually charged with an annuity of
£lOO,OOO granted in addition to the Civil List--until, in
1786, it came to an end, and Mr. Pitt's Sinking
Fund took its place. Pitt's words in that year ar
worth remembering :—" With regard to preserving the
fund to be invariably applied to the diminution of
the Debt inalienable, it is the essence of my plan
to keep that sacred, and most effectually so in time
of war. I must contend that to suffer the fund at
any time, or on any pretence, to be diverted from its
proper object would be to ruin, defeat, and overturn
my plan." In 1802 Mr. Addington consolidated the
fund of 1786—which had been increased in 1792—and
the fund arising from 1 per cent, on the capital of every
loan contracted since 1792; but soon there began a
period during which Pitt's forebodings were
more than realized. Three successive Chancellors
of the Exchequer Lord Henry Petty in 1807,
Mr. Perceval in 1809, and Mr. Vansittart in 1813
—drew on 'the Sinking Fund for purposes other
than those contemplated at its establishment—that
is, made it help to pay either for special loans or for
remissions of taxation., The Sinking Fund proposed
by Sir Stafford Northcote differs essentially in prin-
ciple from the Sinking Funds which were once the ob-
jects of such reasonable prejudice; it is, in short, the
idea of the Terminable Annuities embodied in a per-
manent and regular form emancipated from the incon-
veniences attendant on the Terminable Annuities them-
selves, and protected from encroachment or abuse as
well by a clearer definition of the general object as by
special safeguards against the intrusion of inappropriate
burdens.

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