The Sun.
London, England, 1859-03-11 00:00:00

EXCHEQUER BILLS.

Mr. HANKEY called the attention of the house to the
late funding of Exchequer-bills, and moved, " That in
future no funding of Exchequer-bills held by the Commis-
sioners of Savings-banks be made without the special autho-
rity of an Act of Parliament." The resolution was identical
with the recommendation of the report of the Committee on
Savings-banks. He had brought it forward without any
intention of making an attack on the Chancellor of the Ex-
chequer. He would not lay much stress on the difference
of the charge for interest on Exchequer-bills as compared
with the charge on £3 per cent. stock, but he thought it was
a matter of very grave importance that the house should
well consider any question which involved an increase of
the permanent debt of the country. He believed that the way
in which deposits in savings-banks were dealt with was this :
—All deposits in savings-banks were presumed to be in-
vested as soon as possible in Government securities. That
was necessary in order to prevent any money lying idle at the
Bank of England in the name of the Commissioners of
Savings-banks. But when these deposits were invested in
that manner there was not necessarily any increase in the
total amount of the funded debt. Suppose these deposits
were required to be repaid to the depositors, stock to provide
for their repayment would be sold, and the funded debt would
then stand precisely as it did before the Government trans-
action. But if, instead of plirchasing stock in the open
market, the deposits of savings-banks were invested in Ex-
chequer-bills, as they might be in accordance with the Act
of Parliament, and in the course of time these Exchequer-
bills were converted into stock, these Exchequer-bills were
cancelled, but the stock remained as a permanent charge.
He was quite aware that the indebtedness of the country
was not altered by that operation ; but it did appear
to him to make a great difference if, whenever repayment.
*of these deposits was required, the money should be
obtained by mcreasing the permanent charge upon the
country, instead of by merely re-selling Exchequer-bills
in the open market. He 'believed it was during the
late war that this mode of funding was resorted to.
Most probably the late Chancellor of the Exchequer saw
a necessity for providing money in that way, as being the
most free from difficulty. About £4,000,000 of Exchequer-
bills were, he believed, funded in 1853 or 1854. The effect
of that operation was to take a certain amount of Exchequer-
bills out of the market, whereby the price of Exchequer-
bills was enhanced, they being, perhaps, at the moment at
a discount. Now, that operation was in effect neither more
nor less than a war loan. He was afraid that the present
Chancellor of the Exchequer regarded that operation as a
very convenient one, and would have resorted to it if he
had been in office durinc, the late war. About £16,000,000
of stock had been added' to the funded debt within the last
20 years by means of the existing arrangements between the
Government and savings-banks. That involved a perma-
nent charge of nearly £500,000 a-year. The house ought to
watch these operations very jealously. He believed it had
never been contemplated that the Savings-bank Act should
be a means of permanently increasing the funded debt. He
hoped to bear from the Government that they had no in-
tention to make use of this power. At the same time it was
desirable that the Chancellors of the Exchequer should have
no authority to fund except by making special application
to Parliament for that purpose ; and if such an understand-
ing were come to the Government would very seldom put
this power into execution. The hon. member concluded by
moving his resolution.

Sir S. NORTHCOTE complained that the hon. gentle-
, man had employed terms in speaking of this qiieetion which
• were calculated to mislead hon. members not very familiar
with it. He had described this operation as if it were one for
increasing the national debt. The real state of the case,
tracing it from its commencement, was this :—The savings-
banks were institutions in which individual depositors
placed their money, which they received from the ma-
nagers a certain rate of interest. The managers of these
banks held a part of this money to meet current demands,
and invested the remainder with the Commissioners for the
Reduction of the Debt, from whom they received
a larger interest than they paid to their depositors. There-
fore the managers of the savings-banks derived enough
in the shape of interest from these commissioners to pay
interest to their depositors, to defray the expenses of ma-
nagement, and to enable them to keep a balance out of which
to meet current accounts. The Commissioners for the Re-
duction of the National Debt, having these moneys in their
charge, must do in their turn for the savings-banks pre-
cisely what the savings-banks did for their depositors. That
was to say, they must hold a balance in hand to meet cur-
rent demands from individual savings-banks, and also con-
trive to provide the interest for them. A priori they must
make the best use they could of the balance they had in
hand ; but the law stepped in and prevented them from
doing so by compelling them to invest this balance in cer-
curities—viz., the public funds, which ordinarily
yielded an interest rather below that which the Commis-
sioners of the National Debt' were bound to give to the
savings-banks.
one occasioning The transaction must naturally have been
the commissioners instead of producing a profit to
guaranteed by the public,
the security of these funds was
fall upon the co; and any deficiency would conse-
quentlyl7. It should also be borne in
mind that the Commissionersunt
'or the Reduction of the Na-
tions) Debt were liable to another source of loss. If demands
came upon them in excess of the
Those money paid in, they must
sell stock to meet them.
demands,ort usually came when
the price of stock was low, ead
the other hand, the
money in when the price of stock e
money usually
Therefore the money received Was invested was
funds.
when they were high, and the commissioners had to ll
out when the funds were low. Under these circumstanse
it was clear that upon the whole transaction the Go ces
ve
meat of the country subjected itself to the risk, andtorn;
moderate extent to the certainty, of loss ; and, that being
so, it was hardly fair to prevent its making such um of this
money as was possible without diminishing in any degree
the security of depositors or the profits of the managers
of savings-banks. The hon. gentleman had_ said that ac-
cording to this system, if the Chancel lor of the Exchequ
thought it desirable to buy Exchequer-bills,
.he might
to -morrow sell £8,000,000 of Consols and invest the
proceeds in such bills; and that after holding these securi-
ties for some time he might fund them, and
so add
£8,000,000 to the permanent funded debt. That was hardly
so, because, according to his understanding of the matter,
the sale of Consols would reduce the funded debt, and the
subsequent funding of Exchequer-bills would only amount
to a replacement. The hon. gentleman had brought this
subject forward in the terms of one of the recommendations
of the select committee which sat last session upon the
Savings' Banks Act ; but it was not fair to forget that that
committee made other recommendations, the adoption of
some of which would tend to mitigate the loss which the
Government at present sustained. For instance, one of
those recommendations was that the Government should be
allowed to invest these deposits in securities other than the
'gads, which would give a better rate of interest. It was
hardly fair to select a single recommendation of the com-
wittee and place it alone. This matter ought to be consi.