MOTION FOR A COMMITTEE ON THE AGRICULTURAL DISTRESS
18 February 1822
On 15 February the Marquis of Londonderry announced the policy of the Government on the ‘Agricultural distress and the financial measures for its relief;’ he then gave notice that he would move for the revival of the agricultural committee and that the Chancellor of the Exchequer would bring forward a measure for enabling the Bank to issue 4,000,000l. on 3 per cent. Exchequer Bills in loans to different parishes on the security of the poor rates, to be used for the relief of the agriculturists. Accordingly, on 18 February, the Marquis of Londonderry moved that the report of the committee on the agricultural distress, presented in 1821, be referred to a select committee. Mr. J. Benett, Mr. Stuart Wortley and several other members having spoken on the motion,
Mr. Ricardo began by observing, that the hon. member had stated, that the operation of the sinking fund in the purchase of stock, would have the effect of reducing the interest of money, thus benefiting mortgagers and other borrowers, and in that way relieving the landed interest. But he begged to say, that the interest of money depended upon other causes. The rate of interest depended upon the profit that could be made upon the employment of capital; and that again depended upon the wages of labour, which were regulated, in a great measure, by the price of food. While a sinking fund was fairly applied, it might and would raise the price of stock; but it by no means followed, because the price of stock rose, that, therefore, the rate of interest would generally fall. He would not be understood to be adverse to the principle of the sinking fund, if he could be assured that it would be really applied to the liquidation of the public debt: but he found from experience, that, while the people were called upon to pay a large proportion of taxes for the maintenance of this fund, in the hope that it would be applied to the discharge of their debt, they experienced nothing but disappointment, through the manner in which that fund had been appropriated by the ministers. The existence of this fund would serve only to encourage ministers to engage in new wars, by facilitating the contraction of new loans. Such, indeed, had been the destination of every sinking fund which the country had known, from the plan of Walpole to those of the ministers who followed him. Mr. Pitt, notwithstanding the experience he had derived of the fate of all sinking funds, established by his predecessors in office, had been unable to secure his own. What a variety of expedients had been resorted to in order to keep up that system, and to secure the application of it to the purpose for which it was professedly designed at the outset. But they had all been ineffectual against the attacks of the present chancellor of the exchequer; a sinking fund which ought to be now above 20,000,000l. was so reduced that with the addition of 3,000,000l. of new taxes it only amounted to 5,000,000l.; and he had no doubt, whatever, that within a few years this grant would be found quite as inefficient as any that had preceded it. The hon. member for Wiltshire, had pronounced great praise upon the speech of his hon. and learned friend (Mr. Brougham); which was the more extraordinary, as the hon. member differed from all the main positions laid down by his hon. and learned friend; for, in opposition to the views of the hon. member, his hon. and learned friend had maintained, that it was impossible to raise the price of agricultural produce: that the producer could not transfer the taxes imposed upon him to the consumer, in the same manner as manufacturers could; while the hon. member for Wiltshire had maintained, that taxation did tend to increase the price of raw produce, his doubt only being as to the time that would be requisite for such purpose. His hon. and learned friend had observed, that if a man embarked any large proportion of capital in manufactures, he might, by the use of improved machinery, and other means, contrive, not only to overcome any discouraging prospect which might appear at the outset to damp his speculations, but even to advance his profits beyond any thing upon which he could originally calculate. But the agriculturist, upon investing his capital, had no other remedy for any discouraging prospect, excepting time alone, while he was oppressed with certain taxes; for he would never make the consumer pay them. The hon. member for Wiltshire’s observation, as to the time required to transfer taxes on raw produce to the consumer, was not applicable to the matter under discussion, because no new taxes had been laid on agricultural produce. If his observation had been applied to any taxes now for the first time proposed to be adopted, it would no doubt be entitled to attention. But it was to be recollected, that the taxes to which the hon. member had alluded, were, it might almost be said, interwoven with our general system of taxation, having existed for several years; yet that which had so long existed, was now by many persons set down as the cause of the low price of agricultural produce; and hence it was argued, that taxation was the cause of the public distress. But to the agriculturists he would say, that the only effectual remedy for their case was, to regulate their supply by the public demand: and, if they did not take special care of that, all other efforts must be unavailing. He had been represented by the hon. member for Wiltshire as to having said, that the land was mortgaged for the whole of the public debt. But he declared that he should have been quite ashamed to have made any such observation, as he only meant to say that which was his opinion, namely, that the land-owners were, as well as the other classes of the people, responsible to the fund-holders for the payment of their share of the debt [hear, hear!.] From the responsibility the fund-holder himself was not wholly exempted: towards the payment of his own debt he must himself be a large contributor. He did say, that it was for those who contended that the fund-holder received more than his fair share, to show the House how this had happened; and that if such were really the case, a proportionate abatement ought to be conceded. His hon. and learned friend (Mr. Brougham) in his last speech had remarked, that to raise the price of corn was impossible; and that, therefore, the remedy for the present depression must be by reducing taxes: but that, if this reduced taxation should not have the effect of placing the gentlemen of landed property in affluence—[cries of “No.”]
Mr. Brougham observed, that the case he put on a former evening was that of the distress of the landed interest becoming intolerable.
Mr. Ricardo said, he might in some degree have misunderstood his hon. and learned friend, but he would offer a word or two on the subject of this distress. It was not very long ago since they were all in a state of the greatest alarm, on account of the distressed manufacturers. It was conceived that our manufacturers were declining and the most gloomy apprehensions were indulged on their behalf. But he then took the liberty of intimating his opinion, that those distresses were not permanent; and, happily, his predictions had been fulfilled. He was disposed to hope equally well of the agricultural interests; but not while such a system of corn laws as the present existed. He thought it was most desirable to fix some system by which the prices of corn might be rendered less variable, and by which a proper and adequate compensation might be secured to the grower. One of the measures of relief proposed was, an advance of four millions by the Bank at three per cent interest. This was an hazardous experiment, unless the Bank had issued four millions more than was necessary for the circulation of the country. The House would do him the favour to recollect, that, in the session of 1819, he expressed an opinion on the Bank question, for which he received a reproof at the time from an hon. director, that the Bank should not then buy gold, but rather sell it. His fears, he would confess, were now the other way. Vast quantities of gold had been obtained by them to supply the circulation of this country; and he now begged the directors to consider whether they had more than was sufficient for that purpose; for if they had not, he was quite sure that the measure which they were about to adopt could not be expedient, for four millions could not be absorbed in our circulation. It was quite impossible that four millions could be added to the circulation, without affording a great inducement to export the gold. If the Bank had no greater quantity of gold than sufficed to carry on the circulation of the country, no measure could be more injudicious than this, as it respected them. If, on the other hand, having large quantities of gold in their possession, they issued four millions of additional currency, the effect would be, to promote the exportation of gold, to lower its value all over the world, and to turn the foreign exchanges against us. He gave the directors of the Bank full credit for their good intentions; he believed that men of higher honour or integrity could not exist; but he thought they had not a sufficient degree of talent for the management of so vast a machine as that with which they were intrusted. Once more he would intreat them to consider the matter well, in all its probable consequences, before they increased the present currency, by so large a sum as four millions. And here he would beg the House also to reflect what might have been the effect of the bill brought in by the right hon. gentleman (Mr. Peel), had it been fully acted on. He (Mr. Ricardo) had ventured to say, that its effect upon prices would be about five per cent. To that opinion he still adhered; and he thought he could demonstrate the fact. The state of our money system at that time was this:—gold was five per cent higher in value than paper; that was, a man having an ounce of bullion could per chase the same quantity of any commodity as another man could do with 4l. 2s. in Bank notes. The question was, how to make these two denominations of money coincide in value? It was quite clear, that if nothing was done to alter the value of gold, it was only necessary to raise the value of paper to the same level, and that then the sum of 3l. 17s. 10½d. in paper would purchase as much as the ounce of gold. After the right hon. gentleman’s bill was brought in and had passed, he (Mr. Ricardo) regretted that it was not carried into effect in the method at first proposed; he referred to the intended payments in bars of gold bullion. If that plan had been acted upon, the Bank would have been competent to have answered all demands upon it with the gold then in their possession, how small soever that sum might have been. As they therefore, in that case, would not have affected the general value of gold in Europe, by making large purchases in other countries, the change could not possibly be greater than the difference between gold and paper, at the time of the passing of the bill. The bill of the right hon. member (Mr. Peel), he did not conceive to be materially different from the plan proposed by himself, for it established an intermediate system of payments in bullion, and did not make the payments in cash imperative till the 1st May, 1823. He could not imagine the reasons which had induced the Bank to commence cash payments at so early a period. He had always blamed them for being too hasty in their preparations; for if they had contented themselves with bullion payments, and the country had seen the advantage of that system, it might have been continued—as undoubtedly it would have been wise to continue it—and payments in cash might have been deferred some years longer. If the affairs of the Bank had been conducted with skill, the directors, instead of forcing so great an importation of gold, should have kept the exchange as nearly as possible at par. He repeated then, that the consequence of the law, if skilfully acted upon, was only to cause a rise of 5 per cent. But the Bank had acted very differently, and had imported a great quantity of gold; as much perhaps as twenty millions. This, of course, had created a change in the price of commodities, in addition to the apparent difference between paper and gold. The buying up of this quantity of gold must have affected a change in the value of it (as compared with other commodities) throughout Europe. What the amount of this change was, it was impossible to say—it was mere matter of conjecture. But when they took the quantity of gold in circulation in Europe into the calculation, and all the paper also, for that too must be reckoned, he did not conceive that it could be great, and he should imagine that 5 per cent would be an ample allowance for the effect. [Hear, hear!].—With respect to the 4 millions of Exchequer bills, and the mode of their application which the noble lord had made a part of his plan, he was really astonished to find the right hon. member for Chichester (Mr. Huskisson), in a speech which contained many sound observations, supporting a system for lending the public money on the security of corn and poor-rates. Such a system was decidedly contrary to every established principle of political economy and common sense.—As to the effect and operation of taxes, he wished to make one or two observations. There were two descriptions of persons, producers and consumers, likely to complain to that House of the pressure of taxation. Against the producers he was prepared to say, he would shut the doors of that House. He would tell them they had the remedy in their own hands; that they must regulate their own price, by making the supply square with the demand. But to the consumers on whom the taxes really pressed, he would say, the doors of the House should be always thrown open. When they said that their income was unequal to their expenditure, and that taxes prevented them from procuring the comforts and enjoyments to which they were accustomed, he would say, that their prayers were entitled to the utmost attention, and that the taxes should as far as possible, be removed. Now, he would ask gentlemen, to whom they supposed the repeal of the malt tax would be a benefit—to the farmer who produced it, or to the general consumer? He should say to the consumer. And so on of the salt, the soap, and other taxes, which affected articles of general consumption. That would be his reason for calling for the repeal of these taxes; but not at all from the impression that those taxes were duplicated or triplicated by dealers or sellers. His hon. and learned friend seemed to think, that if a commodity changed hands two or three times, each dealer would charge 10 per cent on the amount of the tax; so that, after various changes, it might be increased to an almost indefinite amount to the consumer; but, if these two or three changes took place in the course of one year, 10 per cent, supposing that was the ordinary rate of profit per annum, would satisfy all the persons through whose hands it passed. He had been represented, very erroneously, to have stated that reduction of taxes was not a benefit. But the contrary was the fact. He always thought that taxes were injurious, but they affected all classes of consumers, and the repeal of any one of them would not be particularly serviceable to the agricultural class. His hon. and learned friend observed, that if the quantity of capital were increased, it was an axiom in political economy, that profits would be diminished. Far from that being the fact, he denied the position altogether. If the capital of the country were doubled and the price of provisions lowered, he would have no doubt that the rate of profits would not be reduced. But with the continually increasing population of England, they could not have low prices of corn, if they did not import foreign corn. He would not at this moment propose an importation free of all restraints, but he would agree to a protecting duty (the amount he was hardly capable of fixing), gradually declining till the duty was equal to the peculiar burthens to which the farmer was liable. The hon. member after a recapitulation of his remarks, and characterising in strong terms of reprobation the impolicy of the system of lending the public money upon the security of corn or poor’s-rate, concluded with observing, in reference to what had fallen from the hon. member for Wiltshire as to the increased amount of taxation which the landowners and farmers had now to pay in consequence of the depreciation of the currency, that the fundholders were subjected to the same advance upon the taxes, although that class of proprietors had not derived any additional advantage from the war or its consequences, as Mr. Mushett had most satisfactorily demonstrated. —[The hon. member sat down amidst loud and general cheering.]
A committee was appointed, consisting mostly of the same members as the committee of 1821 [see above, p. 86–7] including Ricardo: among the new members were W. W. Whitmore and Sir J. Newport.