The Sun.
London, England, 1860-07-28 00:00:00

nable annuities. He should deal with the question as briefly

as possible, but he must put before the house the means by
which loans were raised in this country. Ha would first say
a few words on loans raised in the shape of Consolidated 3

per cents. No less a sum than £16,000,000 h thus been
raised in 1855. The price of that loan was 88 per cent., and
the difference to the contractor was 2 per cent. The cowl-
__

try, therefore, had the opportunity of raising money at £3
Bs. per cent. The next instance was that of the following
year, when a loan of £5,000,000 was contracted for at 90;
the interest to the contractor was 6s. 6d., making the price
of stock to him £B9 13s. 6d. The market price was £9l,
therefore the contractor had an advantage over the public
of £l6s. 6d. That loan was contracted in February. On

May 19, in the same year, a second loan of £5,000,000. was

contracted for at the price of 93, the interest to the contrac

tor being 13s. 3d. ; the price to him, therefore was £92 6s.
9d., and his advantage over the public £ll3s. 3d., the inte-
rest to the country being £3 4s. There were thus three in-
stances in which over £25,000,000 were borrowed on Con-
sols at an average diminution from the market price of 2 per
cent., and an average interest of £3 7s. 6d., which was so

moderate a rate of interest that no one could suppose any
other stock could be raised at so small a charge. He knew

very well it was said of Consols, "If you borrow on Con-
sols you add to the national debt," but that depended
very much upon whether they were repaid or not, and the
debt so paid between the 6th of April, 1845 and 1846,
amounted to no less than £4,600,000, and between April,
•

1846, and April 1847, to £2,700,000, and that had been done
by the usual machinery in such a way as not in the smallest
degree to affect the stock market, as would be seen by look-
ing at the share list, and showing the price of stocks on the
day after the Government broker bought in, which was at
regular specified quarters. It thus appeared that money
could be raised on Consols and repaid without disturbing the
market, and that the money could be obtained by Govern-
ment at about 2 percent. only above the regular market price,
and although it was true that the funds were generally high
when the Government broker sold out, and low when he
bought in, that was not peculiar to the case of raisingmoney
by means of stock, but applied to all descriptions of loan.
Allowing 2 per cent. to be lost in the first instance in the
turn of the market, and assuming that 2 per cent. more
would be lost before they could replace it through the me-
dium of the Commissioners for the Reduction of the Na-
tional Debt, that would be 4 per cent. spread over 30 years,
or about per cent. There .were these Exchequer bills,
which could not be thrown on the market without dimi-
nishing the value of the amount already there. There were
also the Exchequer Bonds; and with respect to them he re-
gretted.that the feeling of the house bad been unfavourable
to the continuance of that sort of Government stock. He
thought Exchequer Bonds only required to have a large
circulation, in order that they might attain permanent and
easy standard circulation throughout the country. Leaving
these securities, he next came to the question of raising
money by terminable annuities, and he would allude to the
one mentioned the other day by the First Lord of the Trea-
bury, which he termed the dead-weight annuity. The sum
of £585,745 was taken by the Bank in 1823, at a time when
the funds were exceedingly disturbed, so that they could only
make an approximation to the value. In 1842, when the
income tax was imposed through the medium of an old act
of Parliament, a grievous mistake *was made, inasmuch
as it taxed both capital and interest, and instead of
receiving £4 2s. ld., the Bank was obliged to recast
the whole schedule of their affairs, and reduce the interest
to £3 18s. 2d. In April, 1847, there was another change
in the income tax which forced them again to recast their
schedule, and the interest was reduced to £3 15s. 6d. In
1851 it was again reduced to £3 ls. 9d., so that they might
well imagine how uncertain a security this was, and how
little capitalists could look forward to it with confidence as
a valid security. The next annuity was in 1834, which was
left in the hands of the Bank of England, and the story of
this transaction was a remarkable one. The Bank of Eng-
land had to receive back in that year from the Government
one-fourth of the capital it had lent to them. The Govern-
ment had to repay £4,080,000, and it was agreed to put it
into Reduced 3 per Cents., the amount of capital invested
being £3,671,000, and from some cause or other the Bank,
instead of receiving these Reduced 3 per Cents., received
ultimately an annuity for 26 years, calculated on precisely
the same rate of interest which the 3 per Cent. Annuities
bore; and the large amount of £64,000 was absolutely con-
fiscated for 61 years by the operation of the income tax from
the capital of the Bank of England for the payment of the
debt. £4,000 was lost owing to the operation of the income
tax, and £60,000 had never been paid to the Bank at all.
The next annuity was that which was known by the name
of the Long Annuities, which had been created at different
periods from 1780 to 1860, in which latter year they were
to expire. Those Long Annuities paid habitually 10s. in-
terest, but when the holders and investors became fright-
ened at this additional income tax, the prices fell, and the
holders protected themselves not only against that diminu-
tion which had taken place, but from what they appre-
hended further. He had been obliged to state some parti-
culars at variance with the calculation of the Chancellor of
the Exchequer ; but he agreed with him as to the reduction
which might be taken for the risk. The contract was made
for the last loan on the 10th of April, and in May, when
Consols were at 90k, the cranium representing the new loan
was granted at 2 per cent. premium ; therefore there re-
mained 88} as the value to be given by the contractor
iu arranging the taking up of the loan ; but that sum was
not given by the contractor immediately, but there was an
allowance for interest of £1 25., which, if deducted from the
£lOO, left £9B 18s., whereas Consols being at 88, no less
than £lO 12s. was actually given for taking up that annuity;
so that when the Chancellor of the Exchequer told them
that the interest per cent. on the annuity was £3 155., he
must have been mistaken, for a deeper and more accurate
scrutiny would convince him that the rate of interest in
reality was no less than £5 4s. 2d. per cent. (Hear.) The
last bargain entered into by the Government in reference
to annuities was a most unsatisfactory one. Whatever the
reason might be, the fact was: patent that the Government
had sold annuities at a most extravagant rate for the finances
of the country. The present price of annuities had nothing
to do with the question. The great bulk of holders were
holders of exceedingly small portions, and if any person
took the price at which they were quoted as the real price
he would find himself woefully deceived. It was said that
the House of Commons, unless they were bound down by
obligations of this kind, would never consent to raise a suffi-
cient sum for the service of the country, but he protested
against the whole system, believing that a less complicated
and more simple financial system would be productive of
far higher advantages. The advantages of borrowing in
terminable annuities were that two things which were in
their nature totally distinct were confounded, namely,
•apital and interest, and that the property of the nation
itself was diminished in a manner that left a stigma upon
the intelligence and character of the house itself. A much
more simple method would be to raise money by loan, and
make the loan repayable by equal instalments over a period
of years.

• Sir B. BRIDGES wished the Chancellor of the Exche-
quer to state, before he replied to the speech of the hon.
member for Buckingham, when the excise duty on hops
would be brought on for discussion.
The CHANCELLOR of the EXCHEQUER said the
question to whieh the hon. member for Kent referred had
already undergone discussion, and must take its chance.
'With regard to the speech of his hon. friend the member
for Buckingham, he admitted that it was a most lucid and
able statement, yet he could not avoid expressing great
regret at the opportunity which his honourable friend had
selected for bringing it forward. In point of fact his hon.
friend with a little concealment had made a speech which
had reference entirely to the financial part of the scheme
for providing for the erection of fortifications. He would
not attempt to follow his hon. friend into all the details
which had been laid before the house, but he must say that
he thought the hon. gentleman had understated the cost to
the public of borrowing in consols, if they were to include in
their estimate of that operation the full charge which was in-
curred by the public before the debt was repaid. His hon.
friend had made an allowance of a quarter or ss. per cent.
only which was to cover the profit of the contractor and the
average difference between the rate at which the public
borrowed and that at which they repaid. His hon. friend
after all overlooked the sole argument which induced the
government to recommend borrowing in terminable annuities,
namely, the spontaneous action of the machinery. He was
sure the house were obliged to the hon. gentleman for the
details he had laid before them, but it would have been
much more convenient if he had availed himself of the re-
gular legitimate opportunity of raising the question.
Mr. CAYLEY inquired what the legitimate opportunity
was ?

The CHANCELLOR of the EXCHEQUER—Upon the
resolutions of my noble friend in all their stages.
THE BUSINESS OF THE HOUSE.

Mr. HORSMAN, in rising to call the attention of the
house to the state of public business, said he thought, un-
less the house was prefared to look the condition in which
the public business was placed in the face, they were likely
to incur great embarrassment and a serious amount of re-
sponsibility. Parliament met in the month of January, and
they were now arrived at the 27th of July, and yet the
business, and especially the financial business, was in a
most backward state. After the last vote in supply was
taken, ten days must elapse before Parliament could be pro-
rogued, and yet the Government were indefinitely post-
poning the committee of supply upon which the termina-
tion of the session depended. They had already passed
the navy estimates, but a considerable portion of the army
estimates remained, They had still to dispose of the ef-
fective service votes, the educational vote, a vote for for-
tifications irrespective of the loa-a, and the whole vote of
two millions for the non-effective service; then, as re-
garded the civil service estimates, they had almost the ,
whole to go through. The entire amount of those esti-
mates was £7,492,000, and they had yet a,159,000 to vote.
In point of fact no less than 191 votes had still to be taken, I
and many of them would give rise to considerable discus-
sion. On Monday next they were to go into the question 1
of fortifications, and it was generally intimated that this
discussion was not likely to terminate in one evening. He
did not know whether the Government was likely to have
the Tuesday, and if so next week would be mostly taken up
with the discussion of the question of fortifications. The
followingweek they would have the pantw duties and a dis-
eArsion which would be likely to occupy more than one
night. They would also have the question of the spirit
duties, the question of the hop duties which had just been