The Sun.
London, England, 1853-04-23 00:00:00

honourable and learned friend has said there is a great con-
stitutional principle involved in our not increasing the
capital of the debt ; that it is a great constitutional prin-
ciple not to increase the capital of the debt by borrow-
ing at a rate of interest lower than the current
rate of interest. Where did the honourable and learned
gentleman find this great constitutional principle? I
must confess myself astonished at the facility with which
honourable gentlemen on convenient occasions (it did not
require the ingenuity of the honourable gentleman to do it)
manufacture particular opinions, and declare their main-
tenance involved great constitutional principles. (Hear,
hear, hear.) I think the question of increasing the
capital of the national debt is one which involves the
exercise of prudence and discretion, but to say it involves
a great constitutional principle is, in my opinion, putting
it on very novel and much too high grounds. What have
you been doing for the last 20 years, and what has the hon.
and learned gentleman been doing ? for during a portion of
that time he has sat in the house, has heard questions in-
volving this great constitutional principle decided, and large
financial operations performed; without once raising his
voice against them, though they caused an increase in
the capital of the debt. Here is a list of operations
since the peace, in every one of which there was a
systematic and habitual increase of the capital of the
debt. In April, 1826, they funded 8,000,0031. of Ex-
chequer bills, four per cent., at 1001., adding 500,0001.
to the capital of the debt. In 1829 they funded
3,000,0001. of Exchequer bills, at 101/. 10s., adding
45,0001. to the capital of the debt. In August, 1839, they
funded 4,900,0001. Exchequer bills, at 109!. andla, fraction,
and added 490,0001. to the capital of the debt. In 1841,
they funded 5,000,0001. Exchequer bills, adding 603,0001.
to the capital of the debt. In 1822-23 they converted no
less than 150,000,0001. of Five per Cent. Stock, adding a
capital to the debt of 7,500,0001. So late as 1847, in the
presence of nearly every man now in the house, 8,000,0001.
of money were borrowed, and 720 0001. was added to the
capital of the debt. In 1848, 2,000,0001. of stock was
created, adding 140,0001. more to the debt. So that, on
the whole there has been within the last five years no less
than 10,500,0001. added to the capital of the debt, and this
addition, too, be it remembered, was not to secure a great
object of policy, but simply with a view to the reduction
of annual charges. For my own part, no alternative has been
shown to me which would gain the object of establishing a
Two-and-a-Half per Cent. Stock except the creation of a
Two-and-a-Half per Cent. Stock at a premium. Suppose,
instead of my coming down to the house with the scheme
I have developed, I had asked the house to authorise me
to go into the market and offer Two-and-a-Half per Cent.
Stock for what it would fetch, it would in that case have
been quite open to the house to object to a plan which
would have had the effect of increasing the capital of the
debt.
Sir F. KELLY said—Not if there was a guarantee.
The CHANCELLOR of the EXCHEQUER-If I had
asked the house to authorise me to go into the market and
sell 1001. Two-and-a-Half per Cent. Stock for what it would
bring, my opinion was that such a step would increase the
capital of the debt a great deal more than would this pro-
position, for I should not be able to get 1001. for it, and
must have sold it for its market value. The value in the
market would not come so near 1001. as 1001. was near to
1101., so that that would increase it, not merely by ten
cent., but by considerably more. In point of fact, we
must take it either in meal or in. malt. If you think it an
object of policy to establish a Two-and-a-half per Cent.
Stock you must be prepared to pay the price for it—an
equivalent price. There is no way to create a Two-and-a-
Half per Cent. Stock but that which I propose, namely,
stating plainly, " We give you an amount of stock over
and above 1001.—we give you a premium on the stock
over and above 1001." Either we must do that, or else
take the Two-and-a-Half per Cent. Stock into the market
and sell it for what it will bring—a plan which, as I have
already said, would increase the nominal capital of the
debt more than he proposed. This is the plan, and
that the alternative. Proceeding on the assumption—an
assumption borne out by those who are conversant in these
matters—that Two-and-a-Half per Cent. Stock brought
into the market would not sell for ten-eleventh parts of
1001., it is quite clear that if it sold for any less, it would
add, in so far to the capital of the debt. I know but one
way in which both these objects can be obtained, first,
the creation of a Two-and a-Half per Cent. Stock ; and,
secondly, the prevention of any increase in the capital of
the debt. I might say that, inasmuch as South Sea and
other minor stocks might be converted into Two-and-a-
Half per Cent. Stocks, if it were only the question of
amount, I had no objection to reduce the whole sum of
Two-and-a-Half per Cents. to 20,000,0001., instead of
30,000,0001. The main question, as I have stated, is
whether the committee will, on any consideration, agree
to the augmentation of this nominal capital of the debt.
In my opinion there is only one way to deal with it. We
must elect between abandoning altogether the Two-and-a-
Half per Cent. Stock, and the adoption of this mode of
proceeding, to devote to the purpose of the reduction of
the debt the annual saving made by the establishment of a
Two-and-a-Half per Cent. Stock. If the house chooses to
determine that the annual saving shall be so devoted, it
will be in its power entirely to prevent any increase, real
or nominal, to the capital of the debt. Under the pro-
posed plan the Two-and-a-half per Cent. Stock will be
dealt with in the market according to the dividend paid
upon it, the holder of the stock will have nothing to do with
its redemption, it will stand there as Two-and-a-Half per
Cent. Stock. You will provide that in respect of every 31.
now payable by the Bank to the holders of Consols, that
sum shall be commuted to 21. 15s. ; the othei ss. will be
payable to the Commissioners for the Reduction of the
National Debt, and these ss. will be applied to the pur-
chase and cancelling of stock, thus completely, but gradu-
ally extinguishing the nominal capital you now propose to
add. Another plan has been proposed, namely, that
instead of offering Two-and-a-Half per Cent. Stock at once,
we shall offer stock which for ten years shall be three per
cent. ; for ten years more two-and-three-quarters, and for
ten years more two-and-a-half ; but this operation extended
over a period of thirty years will not attain the object I
have in view in the establishment of a Two-and-a-half per
Cent. Stock. If I adcfpt that plan I must surrender my
policy. Now, if the house create a Two-and-a-Half
per Cent. Stock, at the rate of 1101. for every 1001.
Consols, to an extent of 30,000,0001., and 5,000,0001.
more of minor stocks aro converted, that will give
us a total of 35,000,0001. of Three per Cent Stock
commuted to two-and-a-half. The addition to the capital
of the debt as it stands on paper would be 3,500,000/. ;
the saving in the annual charge would be 87,5001. ; the
annual . application of 87,5001. to the purchase of
Consols throughout the whole period of forty-one years,
supposing you take one year with another, good and bad
times, as they came, and Three per Cents. always at par,
would cancel each year 87,5001. of Consols. The interest of
the Consols so cancelled would be 2,625/. In the first year
then you would save on the new stock created 87,5001;
you would buy Consols with it, and the cancelling of the
Consols would effect a saving of 2,6251. ,The same amount
would be saved the next year and the next, the succession
rising gradually by 41 equal steps to the full annual saving
of 87,5001., which it will be seen amounts to 3,587,0001.,
the sum wanted. In other words, stock to the amount of
3,587,5001. would be cancelled. By this plan, though the
saving at first will be insignificant, yet it would grow
rapidly with the amount of stock cancelled, until it reached
the full amount ; and at the end of the term there will not
be a farthing of nominal capital added to the debt. In
this way you will get the Two-and-a-Half per Cent. Stock
out in the market, and by making a comparatively slight
and judicious sacrifice at present will prevent the least in-
crease of the capital of the debt, real or nominal. If a
plan more free from objection can be suggested which will
attain the object we have in view, I shall be happy to
adopt it, but no such plan has been suggested so far—no
plan which, together with the end I propose to achieve,
will accomplish the establishment of a Two-and-a-Half per
Cent. Stock. Thus, by making a sacrifice of the full bene-
fit of the annual saving, and postponing it for this purpose
you will prevent the slightest increase at the expiration of
the prescribed period to the nominal capital of the debt.
If any plan could be suggested which would carry out the
policy wehave in view in a manner more entirely free from
exception than this, I should be most happy : but no such
plan has been suggested. All the plans which have been
suggested to me are liable to one fatal objection or other.
Either they are plans which nobody could act upon, or they plans which would not secure the creation of the Two-
and-a-Half per Cent. Stock which I aim at, orpl ans that would
postpone the creation of that stock. If the committee con-
cur with me in thinking that it is important to create a Two-
and-a- Half per Cent. Stock, I venture respectfully to submit
this mode of proceeding, by which you will ensure the crea-
tion of that stock. You will by that mode ensure its creation
immediately. The operation of the reductions you provide
for will not complicate that stock, but will be entirely a
separate matter. Your substantial objects will all be gained
if the enjoyment of the annual saving shall be postponed.
But the policy will be established, and the capital of the
debt will not be increased by one farthing. (Hear, hear.)
That is a plan which I hope will remove the objections of
the hen. and learned gentleman. If -there is any further
explanation which I can give, and if I have not succeeded
In explaining the matter fully, I shall be happy to do so.
My desire is, that the committee should act in the matter
with its eyes open. I can only say that it will be a great
satisfaction to me—not a reluctant concession wrung from
me—but it will be a great satisfaction to me if the House
of Commons is prepared for the future to lay down the
principle that it will not consent to any augmentation of
the public debt. (Hear, hear.) No one will adopt that
principle with greater eagerness than myself. You will
never find on my part a disposition to flinch from it. And
I now give a test of my sincerity, by tendering a plan
which, although its first effect will be to put on paper, cer-
tainly, a nominal increase of the debt, will entirely remove
that increase at the expiration of the period already men-
tioned. (Cheers.)
Mr. T. BARING did not consider that the circumstances
of the country justified the present scheme of the Chan-
sollor of the Exchequer. Unless there was a strong ground
for the increase of the debt, it ought not to be permitted.
The right hon. gentleman had referred to several instances
of an increase taking place in the debt, but the periods
when those operations took place were not analagous to
the present. The country was not now in such distress
that it need be relieved from a portion of its annual bur-
dens at the expense of those who were to come after for
the hon. gentlemen opposite were in the habit of telling
the house that the country was never in such a state of
prosperity. (Hear, hear.) The right hon. gentleman said
he was ready to apply the saving of interest to the purpose
of a sinking fund, but if he did, he would find that as
soon as a moment of distress arrived, the sinking fund
would be put aside, while the increased debt would rest
on the public. (Hear, hear.) But in calculating this
application of the saved interest the right hon. gentle-
man had forgotten that in his budget he had already
reckoned upon 100,0001. a-year from the effect of his ope-
rations on the debt. (Hear, hear.) The right hon. gen-
tleman's scheme seemed to be a combination of different
plans ; it was like an ingenious puzzle, and what with
them and with other plans which had been suggested
to the right. hon. gentleman, the committee would hardly
know what they were going to divide upon. With respect
to the third alternative of transferable bonds, he had not
the slightest objection to that proposition ; but, if the right
hon. gentleman left the option of a 2 per cent, stock, he
certainly would not get so much from the bonds as he anti-
cipated. Tho right hon. gentleman's calculation that 1101.
of one stock was only worth 911. 135., and that 821. 10s. of
another stock was worth 961. 55., it puzzled him very much
to comprehend. (Hear, hear.) The right hon, gentleman
had calculated that thebonds would bear an extraordinary•

value on account of their being transferable without any
formality from hand to hand ; but the hon. member for
Suffolk had shown that a similar security existed in France
and Holland, and bore not more than the same value of

he inscribed stock. Ho did not believe that a man would

be able to borrow more easily on these bonds than on the
Three per Cents. ; and as to the difficulty of transferring
stock for temporary loans, everybody knew that that was a
matter of no importance. Ho regarded the right hon.
gentleman's plan as rather too complicated and too con-
fused; but the great objection to it was, that it necessarily
involved an increase of the national debt, and he should be
sorry to see the British Parliament declare to the world
that, in a time of prosperity, it was disposed, under the
pressure of no emergency, and-for the purpose of obtaining
no very great result, to sanction a principle so objection-
able, and he -had eaaost said so disastrous, = (Hear hear,)