NATIONAL DEBT REDUCTION BILL
6 March 1823
On 3 March the Chancellor of the Exchequer moved a series of resolutions recommending the repeal of the old sinking fund acts and the establishment of a new sinking fund of 5,000,000l.
On 6 March, on the report of the committee upon the bill to give effect to these resolutions, Mr. Monck observed that the operation of the sinking fund, though it reduced the capital of the debt, raised the price of stocks, and therefore increased ‘the real amount of the debt.’ ‘The more that was paid, the more we had to pay.’ It would be better to apply the surplus revenue to the reduction of taxes. ‘In this way, the Americans at the close of the war, having an expenditure of four millions of dollars beyond their revenue, raised small loans, till, in the last year, their revenue had increased so as to enable them to reduce their debt.’
Mr. Ricardo said, it was true that the government of America had borrowed 4,000,000 dollars, and that, by bringing capital from other countries, it had, in fact, improved its resources. It was also true, that the effect of the sinking fund was at present to raise prices against ourselves. But this was true of every sinking fund. The question was, had not the sinking fund reduced the annual charge? It certainly would do so if correctly applied. A real sinking fund, if properly appropriated, was a great good. To a fictitious sinking fund he had many objections. But there was a great difference between the two. A real sinking fund applied to pay off the debt, would raise the price of stocks, and enable us to borrow on better terms. Many members had no hopes that a real sinking fund would be preserved. They, therefore, objected to grant a sum for a purpose, the beneficial effects of which they were never likely to see. His hon. friend, the member for Taunton, had facetiously observed, that because he (Mr. R.) thought ministers were going to rob the sinking fund, he would willingly take it away himself. It was, he thought, good policy, when his purse was in danger, rather to spend the money himself than allow it to be taken from him. He did not, he confessed, think the national purse safe in the hands of ministers. It was too great a temptation to entrust them with. What he wanted was a real sinking fund, and therefore he supported the present as far as it was real. But there was every reason to believe it would become fictitious; for every sinking fund had, in its origin, been real, but had all been turned into fictitious funds. As to the Annuity bill of last year, he hoped the whole of it would be repealed, and the amount be transferred to the sinking fund. It had been estimated that 2,000,000l. of those annuities would die off annually. Let this sum be applied to the purposes of the sinking fund. The hon. member for Taunton had, on a former evening, been severe on him, giving him credit for the ability of his calculations, but denying that he looked sufficiently at their political and moral consequences. Now, he claimed the merit of extent in the scope of his views beyond the hon. member. He felt deep alarm at the heavy amount of the debt, and at the want of proper means to lighten it. His hon. friend, with his enlarged views, wished for a sinking fund, not to pay off the debt, but to furnish ministers with the means of going to war, in cases of extremity. But, if this fund were to be so appropriated, how was the debt to be paid off? He would tell his hon. friend, if no means were taken to pay it off, that he was sleeping on a volcano. He thought a national debt of 800 millions a very serious evil; and he thought so from the heart-burnings which were occasioned by the taxes levied to pay it, which in one year affected one interest, and the next year another interest. Taxation pressed on every interest; and did he not propose to benefit mankind when he said we ought to endeavour to get rid of the debt? By doing this, should we not get rid of the expense of collecting taxes? Should we not get rid of the immorality of smuggling, and of the excise laws? By getting rid of smuggling, should we not benefit trade? For all the profit of the smuggler was a tax on the whole community. Neither would it be a trifling benefit, in a constitutional point of view, that it would deprive ministers of a great deal of patronage. It would also confer great benefits on our commerce, by putting it in a natural state. At present, from the duties and restrictions of customs and excise, it was in a most unnatural state. Was this legislating for men, or for stocks and stones? He had before stated, that he thought a great effort should be made to get rid of the debt; and he had mentioned a plan which he thought should be adopted. The hon. and learned member for Winchelsea had opposed his plan; and had said, that it would throw the whole land of the country into the hands of pettifogging attorneys; but of this there was no danger. Parliament might interfere, and give secure titles to the land which was disposed of, without the interference of pettifogging attorneys. Let it not be said, that he was not aware of the difficult situation in which the country stood. Nothing else could have induced him to recommend the measure. He could be quite easy in recommending the measure of a sinking fund, if they had a different kind of parliament—one that moved in more direct sympathy with the people. He confessed his fear of the present parliament, and its disposition to ministerial compliance. His hon. friend asked, in case of applying the sinking fund, what they were to do should a new war break out? If that was the real view, they should not call it a sinking fund. They might call it a fund for ministers to divert to particular purposes, but not a sinking fund. But, suppose a new war to break out, no such thing as a sinking fund ever having been heard of—was his hon. friend ready to vote a fund prospectively to be at the disposal of ministers, in that event? Let him say yes, and they would understand each other.
Mr. Baring said, ‘that, with every respect which he might have for his hon. friend’s talents and the ingenuity which marked the speech which he had just made, he must be allowed to say he had never listened to one which led to such—(not to say absurd— that term would savour of want of courtesy), but so singular a conclusion. To begin with the plan of paying off a part of the debt, by a new disposition of the property of the country, he must be allowed to say, that it was the plan of a man who might calculate well and read deeply, but who had not studied mankind. It was ingenious in theory, and obvious enough; but not very sound for practice. He did not pretend to any thing like the reach of intellect possessed by his hon. friend, but he thought his hon. friend sometimes over-reached himself, and lost sight of man, and of all practical conclusions.’
11 March 1823
On the report stage, Mr. Grenfell said that ‘many plans had been devised to pay off, by one great effort, the national debt, and the crotchet of his hon. friend (Mr. Ricardo) for accomplishing that great object by a general contribution from all the property of the country, was the wildest of them all.’ Sir H. Parnell expounded his plan for applying the sinking fund so as to replace the perpetual annuities by long annuities determinable in a fixed number of years.
Mr. Ricardo highly approved of his hon. friend’s plan, which, by taking the sinking fund out of the hands of ministers, would do away his great objection to it; namely, its liability to be perverted from the purpose for which it was originally intended. His hon. friend’s proposition of converting what were at present permanent into determinable annuities, appeared to him to be deserving the serious attention of the House; and he must say, that he did not think his hon. friend did justice to his own plan, in stating, that it would liquidate the existing debt in 45 years; for the calculation on which he had proceeded was made when the 3 per cents were only at 80. The House might easily conceive how beneficially public credit would be affected, if a real sinking fund were thus continually operating over the whole extent of the debt. From the adoption of such a plan, ministers, in the event of any occurrence requiring an increased expenditure, would not, as heretofore, be enabled to despoil a fund, which ought to be sacredly appropriated to another purpose; but must come down to parliament, and otherwise provide for the public exigencies. While he was on his legs, he would say a few words on what an hon. friend had been pleased to call his “crotchet” for reducing the national debt by a general contribution of capital. His (Mr. R.’s) proposition would merely carry further the principle of the income tax. His hon. friend was quite deceived, if he supposed that he ever contemplated the possibility of effecting the object he had described at once. On the contrary, the operation might be extended by numerous instalments over a period of two, three, six or twelve months. And when the immense benefits which would result from its adoption were considered, he could not think it so Utopian a scheme as his hon. friend seemed to imagine it to be.
14 March 1823
On the second reading (13 March) the Chancellor of the Exchequer said that ‘there was only a surplus of 3,000,000l.’, but if the plan of spreading the war pensions over 45 years was carried out, there would remain a clear surplus of 5,000,000l. ‘That appeared to him a real bonaâ fide surplus, applicable to the reduction of the debt. It was that surplus which, by the bill, it was proposed so to apply. In so doing there was no increase whatever made of the unfunded debt. Nor was there any mystery—any of what was familiarly called hocus pocus.’
On the third reading (14 March) Mr. H. G. Bennet moved as an amendment that it be postponed six months. Mr. Baring intimated that if Mr. Bennet’s motion was negatived, he would move that the sinking fund be limited to three millions. With respect to the plan of Sir H. Parnell ‘he thought it would not have been a bad one, if it had been applied to the reduction of the 5 per cents last year; but it could not be applied to the 3 per cents without the consent of the holders of stock; which could not be well calculated upon, because there would be a difficulty of selling the new stock in the market.’
Mr. Ricardo said, that he felt great delight at the admissions which had at length been made, as to the real amount of the sinking fund now in the exchequer. That pleasure, however, was somewhat qualified, by finding that the House was now called upon to augment this real sum of three millions to the sum of five millions. The chancellor of the exchequer, a few evenings ago, had said, that he did not think there was any hocus pocus in his plan. The House, after that declaration, could scarcely expect to be called on to vote that there was at present a surplus of five millions. An act of parliament could not create a surplus where it was not. As to the objection which had been made against the plan of the hon. baronet, that it might not be agreed to by the holders of the 3 per cents, it had much weight. The plan of the hon. baronet did not presume any such consent. He only proposed, that a trial should be made whether or not the public would consent to it. He proposed to convert a certain sum, say 50,000,000l. from 3 per cents to 4 per cents. Why should not ministers try the experiment? The public opinion would thereby be ascertained. They did not want grounds for estimating the probable event of that plan. There were then long annuities in the market, of which 37 years remained unexpired. Taking them at 4 per cent at 19 years purchase, they would be worth 75 or 76. If ministers, therefore, could go to market to sell the 4 per cent annuities at 37 years for 76, they might buy 100l. three per cents at less than 76. It was said, that we had reduced 24 million of debt since 1816. Any one would imagine, in the way this was put, that the reduction was the effect of the sinking fund. It was no such thing. The reduction was occasioned by changing one kind of stock into another. We thus lessened the capital, but we did not diminish the charge; except to a very trifling amount. He would prefer being without any sinking fund, to one upon the plan now proposed; and he was sure, that if we were, public credit would not suffer. He would therefore support the amendment, and if that were negatived, then he would support the proposition of his hon. friend (Mr. Baring.)
The House divided on Mr. Bennet’s amendment: Ayes, 59; Noes, 109. The House again divided on Mr. Baring’s amendment: Ayes, 72; Noes, 100. The bill was then passed.