The Sun.
London, England, 1853-04-09 00:00:00

at par by Parliament. Although lam by no means bold
enough to assert that under no circumstances would you be
able to effect this redemption, yet I am strongly of opinion
that in no very long time, having effected a reduction in I
the capital of the debt, with a smaller amount of revenue,
it i,
it would be practicable to effect still farther reductions
this portion of the debt. We also propose that
Exchequer
bonds, be
open to the parties, in lieu of the option to take Exchequer
bonds, or of the power to take the New Three-and-a-Half
per Cent. Stock at the rate of 821. 10s. against each 1001.
Three per Cent. Stock—that it shall be open to the holders
of such stock to take, for each 1001.,1101. of the New Two-
and-a-Half per Cent.
Some objections are, I know, en-
tertained to this particular feature of the plan, upon which
I venture to request the attention of the committee. I
will state, as impartially and as fairly as I can, the reasons
why it appears to me extremely desirable that this feature
should be retained in the plan. I may state that her Ma-
jesty's Government purpose effectively to limit the extent
to which this option can be acted upon. The objection
urged against this portion of the proposal is that, in order
to reduce the annual charge, we are going to increase the
capital
of the debt. Now let us carefully weigh this ob-
jection, for, in my opinion, it is an objection to which con-
siderable force attaches. But it is not true that we arc
going to increase the capital of the debt for posterity, in
order to reduce the present annual charge. The proposi-
tion submitted is not one to reduce the interest to 21 per
cent. for 40 years, in order that, at the end of that period,
the right to demand 3 per cent. might arise on the part of
the holders of the stock on the increased capital. It is
proposed to secure for ever, and absolutely to posterity,
a reduction of 1 per cent. upon the annual charge. This
will place posterity under no disadvantage whatever, rela-
tively to the circumstances tinder which we now place our-
selves. It is also objected that we are going to add to the
capital of the debt as much as we are going to save in the
interest during 40 years. If that were true, it would not
be conclusive against it, becaw e there would still be a per-
manent saving after the expiration of the 40 years upon
the annual charge of the debt. But it is not true that the
addition to the capital is equal to the saving in the reduc-
tion of the annual charge, for if any person will take the
slightest trouble to calculate, he will find that the present
value of 101. in 1894 is far below the present value of an
annuity of ss. a-year for 40 years. (Hear.) If, then, you
balance the alternatives properly, the one against the
other, the presumption is, that the increase of the debt by
10 per cent. by the creation of the Two-and-a-Half per
Cent. Stock will be more than redeemed by the immediate
diminution in the capital of the debt by the creation of the
New Three-and-a-Half per Cent Stock. If you are skilful
in the operation, you offer to the stockholder two alterna-
tives, as nearly as possible alike—as nearly alike, in fact,
as two peas. If you give the Two-and-a-Half per Cent.
Stock such a rate of interest as will enable • him to deter-
mine which' of the two stocks he will take—if you do that,
the presumption is you will have as much Two-and-a-Half
per Cent. Stock taken as the Three per Cent.
An HON. MEMBER—No, no.
The CHANCELLOR of the EXCHEQUER—Then the
hon. gentleman does not cast the balance rightly. (A
laugh.) Does the hon. gentleman mean to say that the
mere notion of a nominal increase in the capital of the debt
would give the capitalist a right to demand higher than
fair price, according It to the annual interest for his capital
this
The annual interest he has a right to demand.
is a balance between two alternatives. Ido not denyat that
the stockholder looks to the capital as well as to the annual
interest, but he also looks to the annual interest as well as
to the capital; and therefore I say it is your duty to balance
the two, one against the other, in such a way that there
shall be no great commercial advantage attending one as
compared
1 with the other.- If you do that, then, 1 say, the
presumption is that the stocks may not be unequally taken.
en HON. MEMBER here matte some observation which
was not audible in the gallery.
The CHANCELLOR of the EXCHEQUER—The hon-
ourable gentleman refers probably to a former operation,
when the Four per Cents. were converted into Three-and-
a-Half per Cents. The terms then offered included an
alternative somewhat of this kind. The persons holding
Four per Cent. annuities were offered two alternatives.
One was 701. stock at 5 per cent., which would have yielded
interest at the rate of 31. 10s. per cent. ; and the other, if
I mistake not, was stock at par, at 31. 10s. per cent. But
everybody chose the 31. 10s. stock at par to the Five per
Cent. Stock at 70/. ; that is, everybody chose 1001. at 31.
10s. per cent. rather than 701. at 5/ per cent., because
there was no difference in the rate of interest. If, while
the 51. per cent. yielded only 31. 10s., the other yielded
31. 155., of course they would have chosen the higher rate.
But that is not the:case here. The man who chooses the
Two-and-a-Half per Cent. Stock under our plan will choose
an annuity of 21. 15s. for a limited period, while the man
who chooses the Three per Cent. Stock will choose an an-
nuity of V. 17s. 9d. But I beg the house to recollect that
this operation is quite distinct from those of the loans made
during the war. I look back upon the period when those
loans were made with regret, and I have groaned inwardly
at their consequences, under which we are now suffering.
The practice of borrowing at 3 per cent. during the war,
when the natural rate of interest was Si. and 51. lOs , placed
the country in the predicament of securing the insignificant.
advantage of a lower rate of interest by a few shillings per
cent., but it entailed upon us a permanent debt, the amount
of which, I think it is clear, if a wiser system had been
pursued, we might have reduced before this time, in capi-
tal and in the annual charge, by something like from
100,000,0001. to 200,000,000/. (Hear, hear.) I do not
mean to blame those who conducted these operations. They
were placed in circumstances of difficulty that we cannot
now appreciate ; but certainly the system entailed an ex-
ceedingly heavy charge upon posterity, for it left to pos-
terity a debt almost irredeemable for the sake of a very
small temporary advantage. (Hear, hear.) But surely
those operations are not to be compared with a case of this
kind, the whole basis of which is an advantage to the
present period and to posterity also. (Hear,' hear.) lam
not going to sacrifice the interests of posterity; on the con-
trary, I am promoting the advantage of posterity by the
course lam proposing to the committee. It may, perhaps,
be said, " You might do that by taking another course."
Certainly, that is a question open to discussion and to ar-
gument. Still the fact is that by this proposal the house
will secure to posterity an absolute reduction upon the an-
nual charge of the debt. But I wish the committee to un-
derstand—and I urge this as a plea on behalf of my pro-
position—that I freely assent to the general doctrine that
is not desirable to increase the nominal capital of the
debt. (Hear.) All I ask you is this, that you will, Ido
not say indulgently, for it is not a matter of indulgence,
but that you will fairly and candidly look at the case as it
stands, and consider the great object of public policy that
we have in view. The Government may be right or it may
be wrong in any proposal of this kind—and I will state by
and by more distinctly how the proposal will be guarded—
but the proposal unquestionably rests upon a broad ground.
(Hear.) I have said that the great object which her Ma-
jesty's Government had in view was to establish, if it be
possible, an irredeemable public debt, which will bear a
respectable price in the market, and bearing an interest of
not more than 24 per cent. It is for that purpose we
propose to include these among the various forms of ,
the conversionable Three per Cent. Stock. Perhaps
you will tell me, " You may secure that by means of
Exchequer bonds." I should be delighted to do that. I I
trust we may ; but we may find that we cannot bring these
bonds into credit and character, unless we give a power of
redemption to the holders. That may be very well, but
any operation of that kind, involving redemption at a par-
ticular time, when you might be in difficulty or in
war, must necessarily be a limited operation, and it does
not lay the ground for that which we want to see—namely,
the creation of a Two-and-a-Half per Cent. irredeemable
public stock. (Hear.) Give us this public stock, and then
I say we shall have made solid ground where now is only
morass ; then may tread where we could not before ; then
we shall have a fixed point down to which we can work ;
and we shall have something by which to direct our opera-
tions in future with certainty, where all now is compara-
tively speculation and suspense. If, I will add, the com-
mittee think it is a great. public object to establish firmly
this Two-and-a- Half per Cent. Stock in such a manner as
shall make it an ordinary subject of commercial dealing,
then I do hope they will not exclude this part of the pro-
position. (Hear.) Now I come to a point to which lam
most anxious to call the attention of the committee. It
has been pointed out to us that as the resolutions stood as
first printed it would have been open to all the holders of
Three per Cent. Stock to effect their conversion into this
Two-and-a-Half per Cent. Stock. Though that was not a
probable, it was at least a supposable case that such would
be the effect. If 500,000,0001. of Three-and-a-Half per
Cent. Stock were to be reduced into Two-and-a-Half per
Cent. Stock, a reduction in the annual charge would be
effected which would be most gratifying to me. It would
relieve the finances of the country to a very great extent—
to the amount, I think, of about 1,500,0001. a-year. That
would be a most gratifying circumstance, but I certainly
was not sanguine enough to anticipate it. But it was also
pointed out that this resolution would entail an increase
upon the nominal capital of the debt to the extent of
50,000,0001. (Hear, hear.) Sir, lat once defer to that
objection. I do not think any such increase ought to be
allowed. (Hear.) It is not necessary for the purpose we
have in view, which is to lay the foundation of a two-and-
a-half per cent. stock. For great and essential purposes I
ask you to allow me to create this stock; but it is not ne-
cessary we should allow it to be created to such an extent
as it was felt it might be by the terms included in the re-
solutions. Here I must make an apology to the house.
The draft of this plan was framed with a somewhat diffe-
rent effect ; but in drawing out the resolutions—a most
difficult operation, even if done by the most skilful per-
sons, in order to conform to the rules of the house, and
cover the extent of the object—l must admit they took a
form which, though I did not perceive so clearly as I do
now, left them open to the just -objection that they might
go to the whole capital of the Three per Cent. debt, and
thus entail much difficulty. But it is understood, I admit
at once, that that ought not to be the case—(hear)—and I
propose to meet the difficulty by an alteration that has
been introduced into the reprint of thereeelutions. If the
committee will have the kindness to turn to the reprint of
the resolutions they will find that the amount to which
this Two-and-a-Half per Cent. Stock may be'created under
the authority of the act to be founded upon the resolutions
is limited to 30,000,0001. Some additions to that amount
may take place from the compulsory commutation of the
South Sea Company
to go into
that.how-
ever,t
b y the 10th of these
I am now concerned to say is,
that°
resolutions, standsesolations, as it now ,
the
utmost possible Creation of
Cont. Stock is 30,000,000/ this new Two-and-a-Half per
just apprehensions which i propose, then, to meet the
uponhwayheiebbeehnaveexpbreeesnsectlhns subject, by the limitations in
intro-
duced—
Mr. duced—
Mr. RICARDO—HowIs the stock to be apportioned
The CHANCELLOR of the EXCIIEQUER—By prio-
rity. It is all to be done by entrieseem. the books at the
made in the books
Bank. When entries shall have been
parties exer-
at the Bank, including the names OlfTwehe
cising an option in favour of the
be
Cent. Stock to the amount of 30,
power will cease. Thus the apportionmeathen tho
000,634,,1-a-Ilalf per
ill
by priority, and it will be effected, I think,
any difficulty. Tho effect of the change will 1e withoutthat
the utmost nominal addition that can take place to the
capital of the national debt under the powers which I ask
you thus to confer will be something more than 3,000,010/.
What, then, I would put to the committee is, that a nomi-
nal addition to the capital of the debt, compared with the
present annual saving, is a very small price to pay for the
attainment of such an object—for the object which the Go-
vernment have in view, namely, the laying of the foundation
of an irredeemable and permanent Two-and-a-Half per Cent.
Stock. (Hear.) I know no other way in which we can
with certainty attain the same object. If we could obtain it
by the issue of Exchequer bonds, certainly I should prefer
it; but, seeing we cannot make sure of it in that manner, I
venture to hope the proposal will have not only the candid,
but, I will venture to say, the favourable consideration of
the committee. (Hear.) I have thus, at a length very
much greater than I anticipated, gone through the details
of this proposition. I have endeavoured to keep close to
the subject. I thank the house for its kindness. I know
that upon a question of this nature the attempt to be con-
cise might have led me into obscurity, and have made that
which professed to be an explanation utterly unintelligible
But I have now come to the end of is.explanatiofne, and all
I have, to say more may be comprised an a very w. sem
tencee. With,regar4 to the discretion which I ask you to