Econlib

The Library

Other Sites

 Front Page arrow Titles (by Subject) arrow THE BUDGET 1 July 1822 - The Works and Correspondence of David Ricardo, Vol. 5 Speeches and Evidence

Return to Title Page for The Works and Correspondence of David Ricardo, Vol. 5 Speeches and Evidence

Search this Title:

THE BUDGET 1 July 1822 - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 5 Speeches and Evidence [1819]

Edition used:

The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 5 Speeches and Evidence 1815-1823.

Part of: The Works and Correspondence of David Ricardo, 11 vols (Sraffa ed.)

About Liberty Fund:

Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.


THE BUDGET
1 July 1822

The Chancellor of the Exchequer having brought forward the Budget,

Mr. Ricardo said, that the chancellor of the exchequer had held out great hopes of what was to be expected from the sinking fund, and had stated, that a mere accident only had prevented all those hopes from being realized this year, but that next year we should receive its full and effective benefits. He (Mr. R.) feared, however, that we should go on as we had done, and that some accident or other would continue to prevent us from enjoying those benefits which the chancellor of the exchequer had so flatteringly held out. If the committee took the account in the way in which the chancellor of the exchequer wished them to view it, there would appear a surplus of 5,000,000l. this year, and, that in 1824 there would be a surplus of 6,000,000l. The right hon. member had, however, come at last to that point from which he (Mr. R.) wished to start, namely, that without a surplus of revenue over expenditure there could be no real or effective sinking fund. Now let the committee observe the manner in which the chancellor of the exchequer had made out the existence of such a surplus in the present year. He said that we had a surplus of 4,961,000l. But, how stood the fact? Taking the total exchequer deficiency at 14,144,000l. and deducting it from 15,481,000l., the sum to meet it, there would remain only 1,400,000l. as a real and effective sinking fund this year. “Oh!” said the chancellor of the exchequer, “We have by accident to pay the Bank 530,000l. this year, but next year we shall have no such incumbrance, and therefore our surplus will be complete.” He wished to know by what process of calculation the chancellor of the exchequer could make out his 5,000,000l. this year? The revenue of the country was 53,087,000l., the expenditure was 51,119,000l. making a surplus of 1,968,000l.; this appeared to be the entire surplus of the year; but “No,” said the chancellor of the exchequer, “we have 700,000l. saved by the alteration of the five per cents.; we have also to make allowance for 2,600,000l. received.” How this could be brought in under the head of surplus revenue he could not perceive. A sum of five millions might be easily made out; but would the committee call it a surplus of revenue? Then, again, the right hon. gentleman stated, that in 1824 there would be a surplus of 6,000,000l. But how was it to be obtained? It was to be obtained by taking credit for 4,875,000l. which was to be received from the trustees of half-pay and pensions. Now he would ask, whether there were no payments to be made on the other side of the account? The chancellor of the exchequer must know, that money so obtained could not be looked upon in the light of receipts at all. The receipts in 1824 were calculated at 52,400,000l. and the expenditure at 50,600,000l. so that the real surplus on the 5th Jan. 1824, would be 1,800,000l. He agreed, with his hon. friend (Mr. Ellice) respecting the im-policy of diminishing our funded, while we increased our unfunded debt. He should recommend a diametrically opposite course of proceeding. Adverting to what had been said relative to the Bank having reduced its rate of interest,1 he expressed his satisfaction at having heard the chancellor of the exchequer say, that the usury laws were unfair.2 There was no period at which an alteration in those absurd laws could be so properly and effectively introduced as the present, when they were, in fact, a dead letter, the market price of the loan of money being lower than the legal price. But he could not believe, that the reduction of interest made by the Bank had any general effect upon the value of money in the market, or upon the price of land, or of any commodity. If the Bank had doubled its circulation, it still would have no permanent effect upon the value of money. If such a thing had taken place, the general level of interest would be restored in less than six months. The country only required, and could only bear, a certain circulation; and when that amount of circulation was afloat, the rate of interest would find its wholesome and natural level. Undoubtedly he was very glad to hear that the Bank had at length begun to discount at 4 per cent.; and he thought they should have done so long before. Had they persisted in demanding 5 per cent, they would have been without a single note to cash.1

[1 ]The Bank rate had been reduced from 5 to 4 per cent. as from 21 June.

[2 ]The Chancellor of the Exchequer had described himself as ‘fully concurring in the principle that the regulation of a particular rate of interest by law was quite contrary to the principles of political economy’.

[1 ]In place of the last two sentences, the Morning Chronicle reports: ‘He was glad that the Bank had determined to reduce its rate of interest to four per cent.; indeed, they would have done wrong in declining to do so, as by that means only could they bring their notes into circulation. If the Bank had not reduced its interest to four per cent. the country must necessarily resort to a metallic currency, or else notes must be issued from some other quarter, as it would be impossible for the Bank of England to put a single pound note into circulation. In conclusion, he could not help observing, that he felt much commiseration for the unfortunate Gentleman who was induced to give 5000l. more for an estate in consequence of the Bank having lowered its interest to four per cent. [a laugh].’