The Sun.
London, England, 1866-05-25 00:00:00

never been fully argued by hi-m, because he had as-
sumed it as an elementry proposition, fieed and
be
em-
bedded for a long time in their w • financial
policy. If people said that that policy sl ould re-
cast from its first elements, he granted th y were entitled
to do so. The policy of terminable a . es being a fixed
portion of the financial system of the I ntry, the imme-
diate justification of the present measure was to be found
in this that it was not, as the hon. and learned member
for Suffolk seemed to suppose, a great extension of that
which they had uniformly done ; it was not a marked step
in advance as compared with the ordinary scale of pro-
ceeding ; but a very partial attempt to recur to the scale of
operations with reference to the payment of the national
debt by terminable annuities—a scale which was uniformly
maintained until about five years ago. At the close of the
great war in 1815 the charge of terminable and life annui-
ties was £1,900,000. By the year 1840 this charge had
been brought up to £4,300,000. From 1835 to 1859, a
period of a quarter of a century, the annual charge in re-
spect of terminable annuities—a large part of which repre-
sented interest on debt, but a large part of which also re-
presented capital of debt—was about £4,000,000. In 1860,
by the lapse of terminable annuities, the charge fell to
£2,094,000; so that there was then a considerable reduc-
tion in our efforts for the reduction of debt by terminable
annuities. Since that time we had done something, but
not much, to increase the charge of terminable annuities.
That charge was now £2,400,000; and this would be still
further increased by an Act passed during the present year.
We were, however, now about £1,600,000 within the sum
that was paid for a quarter of a century before 1860; and
the Act to which he had already referred, together with
the bill under
discussion, would not bring the annual
charge in respect of terminable annuities up to that sum.
He now came to the question whether we ought, as a mat-
ter of
Policy, to make an effort to reduce our debt. It was
said by those who argued in the negative that the debt
was held by the public at a rate of interest, say of 3i;
while the sum taken to pay off
.that debt was taken from
an industrial community who were making 5, 10, or 20 per
cent. on it. But that argument was fallacious, because it
implied that when debt was paid off there was an end of the
transaction, and the money thus expended was lost. But
that was not so, because the money employed in paying
off debt went into the money market of London, and thus
became available for cheapening capital and stimulating
industry. It was, however, said again we must not only
look to the fact that our debt had during the last 50 years
been brought down from 900 to 800 millions; that we must
also look to the fact that the country was now better able
to bear the latter sum than our forefathers were to bear a
much smaller sum. Well, it might be we were now better
able, if need were, to enter upon and maintain a long and
sanguinary struggle than our forefathers were when Mr.
Pitt entered into war with a debt of some 350 millions.
But that did not seem to him a satisfactory argument. He
should be sorry to see the financial process of that war re-
peated, for he believed it might be truly said we were only
now beginning to extricate ourselves from the mischievous
results which that war had in one way or another entailed
upon this country. It must also be recollected that while
that war entailed great burthens upon the country, it also
opened to us great sources of wealth, by giving us the ab-
solute mastery, indeed the monopoly, of the sea. That was
a thing that could never happen again. There was there-
fore no safe parallel to be drawn between the two periods.
Coming to the bill before the house, the propositionsitcon-
tained were twofold. First, by operation A the Govern-
ment proposed to convert a book debt of 24 millions due to
the Commissioners of Savings Banks into an annuity of
£1,725,000 for 151 years, terminating in 1885, which would
entail an annual additional charge of about one million.
This £1,725,000, when paid, would pass into the hands of
the commissioners for the national debt, who would hold it,
liable to the demands of the trustees of the savings banks.
The commissioners would annually invest whatever could
be spared from the balances in their hands, either in pub-
lic securities or in funds guaranteed by Parliament, as
might be most expedient. No change in the mode of in-
vestment as it existed now would be made, but supposing
that a considerable proportion of the investment of these
spare balances should go into the funds, these would be-
come the subject of operation being converted into annui-
ties terminable in 1895. The result of the two operations
would be this : during the present year only half a million
additional charge would become payable. Next year it is
true that the whole of the million due under operation A
would come to charge, but then the additional half million
would be more than met by the falling-in of the Bank dead
weight of £585,000 per annum. The maximum effect of
operation A would, therefore, be to increase the annual
charge by £420,000. He then came to operation B. Sup-
posing the whole of the annuity of £1,725,000 to be in-
vested, which would not be the case on account of the
demands of the savings banks trustees, the figures would
stand thus : There would bo outstanding in 1885 a public
charge of £420,000 as the result of operation A. If the
whole of the annuity of £1,725,000 down to that time had
been regularly invested in Three per Cent. stock, there
would then have been created an annuity of £3,170,000
terminable in 1895. But stock would have been cancelled
bearing interest to the amount of £1,875,000, so that the
additional charge under B would be £1,295,000, which,
added to £420,000 under A, would make £1,715,000. Then
in 1885, the annuity of £1,725,000 payable under operation
A would cease, and annuities created by Sir George Lewis
to the amount of £680,000 would also fall in. Therefore
there would be a diminished charge of £2,405,000 against
the increase of £1,715,000 which had been already men-
tioned ; shrwing a net decrease of £690,000 per annum
compared with the starting point. An objection had been
raised to the bill on the ground that it involved the prin-
ciple of the sinking fund. Now, he would undertake to
endure any penalty that might be inflicted upon him if he
were found knowingly proposing again the institution
of the sinking fund. He did not believe that any part
of the sinking fund was involved in the proposal
which he now made to the house. He had on
all occasions been opposed to the sinking fund, and
during the present session he had obtained powers for the
abolition of two sinking funds pure and proper which had
existed down to the year' 1866—one under the name of a
fund for donations and bequests, and another under the
title of the Audit. Roll Fund. Let themconsider what were
the real objections to a sinking fund. The first objection
was that they did not pay off debt but only pretended to
pay it off, and it was a fiction to borrow money for which
they were to pay. The next objection was that the sum
which they paid was infallibly sure to be less than the
sum which they borrowed in order to pay. There was
therefore a positive waste in the operation. In order to
pay for a given amount they borrowed more than that
amount, because in order to go into the market to make the
loan they must pay the contractor his profit, and in order
to redeem the stock they must give the jobber his profit.
Considered, therefore, in an economical point of view, the
proposition would not hold water for a single moment.
Such being the objections to a sinking fund, and these
being, in his opinion, conclusive, the next point that arose
was how far they were applicable to the terminable an-
nuities ; because on the answer to that question would de-
pend the merits of the bill. Terminable annuities had this
advantage, that they placed a certain payment of debt be-
yond the vicissitudes of the finance of a particular year.
For his own part, he confessed he was disposed to side
with those who established our system of terminable an-
nuities. How far were these annuities open to the disad-
vantages of a sinking fund ? In a year of surplus there was
no objection whatever to terminable annuities because they
had a surplus available for the payment of debt. But how
did it operate in a year of deficit ? In such a year un-
doubtedly nothing was gained, to say the least of it. They
were not under the disadvantage which they would have been
under Mr. Pitt's plan of going into the market to purchase
and redeem stock, but still while they were borrowing in
the market they were likewise paying for debt. That
prima facie was a disadvantage. It was one, however,
which really had no application to the proposal now before
the house. Another objection to terminable annuities was
that they were only saleable upon very bad terms in the
open market ; that they did not suit the object of the great
body of those who had money to invest ; and that they
the
open to an unfavourable influence in consequence of
amount. tiPonorotfhtehsee irnecaosonest.tlxeywwhiecrhe aseoutnlycemrtaetinhoind its
f
efraortiteheeepoufbblil
borrowing
Lmaenowdniers,‘eianwt
al3sBpbse6r,
borrowingt h the two op
combinedncent. and
of creating terminable annuitiegs, no means
prepared to say that the scheme was not advantageous
the public. But the objections to terminable annugitieussditdo not apply to the present bill, because-under its
operation
not one shillings's worth would be saleable in
the thopen
market. The vital and fundamental consideration
the
whole matter was this, that the public were not only to be
regarded as borrowers, but as bankers ; and further that,
whereas they were only occasional borrowers, they were
always bankers. As borrowers they conducted losing ope-
rations, and as bankers they conducted profitable opera-
tions. The house should bear in mind that, independent
of their revenue and expenditure account, they had a
banking account which run continually, and on which
stood the deposits they received from various sources,
such as the Friendly Societies' funds and the Post-office
Savings Banks funds, both of which he put cut of view
because the present bill did not propose to deal with them.
the funds of the old savings banks, but
There were also
• w in the general argument,
these he put out of vie
important bearing upon the
though they had an
question of conversion. As regarded the Post-office
Savings Banks it was very unlikely that, as
they bad been
during the
able to maintain a largo banking account
last year of high rates, the public would be anxious to
convert the balances, which during the four years' ope-
rations stood at £7,000,000 over and above all payments
out ; and during the last year, under the adverse circum-
stances of the money market, the balances stood at one
ee. ir
dt three quarter millions over and above all payments
The tendency, therefore, was towards accumula-
tion, and he g accordin 1
y assumed that from that source a
surplus Would
be
certain, and therefore their banking
establishment ha •
n?g that surplus, Government sold to the
Post-office v
Commissionersthe and to no other customer.
Let them consider
affect of operation A under this
bill in years of different creln
toudi
svtiadn ce s It would be most convenient to his purpose
classes. First, the years of surplus these years into three
casual and unanticipatad defici • ; second, the years of
ewes • and third,
the years