end to all such operations as he had now | of loss. If demands came upon them in described. MR. PULLER seconded the Motion. Motion made, and Question proposed "That in future no Funding of Exchequer Bills, held by the Commissioners of Savings Banks, be made without the special authority of an Act of Parliament." SIR STAFFORD NORTHCOTE said, he must complain that the hon. Gentleman had employed terms in speaking of this question 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 into which individual depositors placed their money, and received from the managers a certain rate of interest. The managers of the banks retained a part of that money to meet current demands, and placed the remainder in the hands of the Commissioners for the reduction of the National Debt, from whom they received a somewhat larger rate of interest than they themselves paid to the depositors. Thus they got enough interest to repay the whole of the interest due to the depositors, the expenses of management, and to assist in keeping up a balance out of which to meet the drawing accounts. Having these monies in their hands the Commissioners for the reduction of the National Debt in their turn did precisely for the savings' banks what the banks had done for their depositors; that was to say, they retained a certain amount of the monies placed in their hands by the managers ready to meet the demands of individual savings' banks they invested a portion, and to provide the interest for them. They must a priori therefore make the best use of the balance they had in hand. But here the law stepped in, and to a certain extent prevented this by compelling them to invest their balance in certain securities-the public funds, which ordinarily paid a rate of interest rather below that which the Commissioners were bound to allow to the savings' banks. The consequence was the Commissioners suffered loss rather than made a profit by the transaction; but inasmuch as the security of the fund was guaranteed by the public any deficiency which occured, as a matter of course, would fall upon the public. It should also be borne in mind that the Commissioners for the Reduction of the National Debt were liable to another source excess of the money paid in, they must sell stock to meet them. Those demands usually came when the price of stock was low, and, on the other hand, the money usually came in when the price of stock was high. Therefore the money received was invested in the funds when they were high, and the Commissioners had to sell out when the funds were low. It was clear, then, that upon the whole transaction, which was one conducted for the benefit of depositors, the Government subjected itself to risk, and even to a moderate extent, to the certainty of some loss; but it was willing to incur sacrifices in consideration of the desirableness of encouraging savings' banks. This being the case, if the Government found that they were holding the money in a way that occasioned loss to them, and that it was possible, without diminishing in one tittle the security of the depositors or the profits of the managers, to make use of it in a manner that would be for the advantage of the public, surely it would be unreasonable to debar them from doing so. The hon. Gentleman said, that the practice of holding Exchequer bills for a time and then funding them increased the debt; that it would be possible for the Chancellor of the Exchequer, if he thought it desirable to keep up the Exchequer bill market, to take £8,000,000 of these funds, invest it in Exchequer bills, and after holding them some time to fund them, and so add to the permanent funded debt of the country. But that seemed to him (Sir S. Northcote) to be an extraordinary proposition. Say that the funded debt amounted to a certain sum, whatever that might be, and it was proposed to sell out £8,000,000 of it, and buy Exchequer bills. By doing that they would diminish the funded debt by £8.000,000, and increase the unfunded debt. [Mr. HANKEY: No, no!] 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. to the Motion of the hon. Gentleman, he granted that was, as the hon. Gentleman had stated, one of the recommendations contained in the Report of the Committee on Savings' Banks which sat last year, but then it was not fair to omit that it was one only out of a considerable number, amongst which there were some that would mitigate to a certain extent the loss which the Go But, passing vernment at present sustained. stance, one recommendation was that it should be legal to use a portion of the funds so coming into the hands of the Go vernment, by investing them in other securities than the funds-placing them, for instance, in the hands of the Public works Loans Commissioners, where they would realize a larger amount of interest, and he thought it was not exactly fair to take one recommendation alone and press it, when the whole matter ought to be considered and the opinion of the House taken upon the subject of the arrangements connected with the savings' banks. The hon. Gentleman had alluded to a doctrine enunciated by his right hon. Friend the Member for the University of Oxford, that you ought to levy as much money as you could by taxation; but as a countervailing principle he should also say that when they had to borrow they ought to do so as well as they could. The case they were then discussing arose, he believed, out of a considerable emergency. It was the emergency created by the Crimean war, and the state of circumstances was certainly difficult and peculiar. The borrowing took place to meet the demands occasioned by the war, and it was done with the sanction of Parliament; that was to say, it was found necessary in consequence of the extraordinary demands of the war to make further provision for the service of the year, and it was impossible, without breaking faith with those who had contracted for the loan previously raised to get money by further loan. It became necessary, therefore, to proceed by way of Exchequer bills. Two millions of Exchequer bills were issued, and they had now been funded; but it was substantially the same thing as if money had been borrowed on loan. The power, therefore, was one which enabled the Chancellor of the Exchequer, if he thought it desirable to borrow, to do so in the best and most economical way from the public, at no risk to the savings' banks, and with no addition to the debt of the country. It could not be denied that the interest of the Chancellor of the Exchequer was the same as that of the public, and that he would be guided by such principles as were conducive to the public interest. He trusted, therefore, that this Motion would not receive the sanction of the House. In For in- House. Let the House observe how the SIR HENRY WILLOUGHBY said, he wished to express his thanks to the hon. Member for Peterborough (Mr. Hankey) for having brought this subject before the (Mr. Hankey) in his endeavours to put an end to this system, though he doubted whether the Resolutions which the hon. Gentleman proposed would be sufficient for the purpose, but that a short Act of Parliament, as he had suggested, would be found necessary. As matters stood, the Chancellor of the Exchequer could not only transfer the unfunded to the funded debt, but could actually create new debt without the intervention of Parliament, which had actually been done by former Chancellors of the Exchequer. He hoped the House would interfere to prevent snch proceedings for the future. SIR GEORGE LEWIS: Sir, the hon. Member for Peterborough has done good service to the House in calling its attention to the recent funding of Exchequer bills. I myself heard in the beginning of the Session that it was understood in the City that this operation had taken place. I therefore put a question to the Government on the subject, and found that the report was true. A return giving an outline of the facts was subsequently moved for, and is now in the possession of the House. The bon. Member has accompanied his statement with an abstract Resolution that in future no funding of Exchequer bills held by the Commissioners of Savings' Banks should take place without the special authority of an Act of Parliament. That Resolution he submits in consequence of the recommendation of the Committee on Savings Banks which sat last Session, and which suggested that no sales, purchases, or exchanges of stocks or securities held by the Commissioners should be made, except as required for the purposes of the Savings Banks themselves, and that no funding of Exchequer bills held by the Commissioners should in future take place without the special authority of an Act of Parliament. In consequence of successive issues of Exchequer bills, some of which took place during the late war, and all of which, let me observe, were made under the authority of an Act of Parliament, and therefore received the attention of this House at the time, the Exchequer bills on the 1st July last amounted to £20,889,000. The hon. Member for Peterborough (Mr. Hankey) in speaking of Exchequer bills, and their conversion into funded debt, talked of increasing the National Debt, and seemed to regard Exchequer bills as of a different nature in respect of public obligation from funded debt. It is quite true that, according to the theory of Exchequer bills, they are charged only upon votes in Supply, and they may be paid off at certain short periods; but we know that practically the Vote for the renewal of Exchequer bills is taken annually as a matter of course, that Exchequer bills are just as much a portion of the permanent debt as Consols, that precisely the same public obligation applies; and that, although there is a power of varying the interest, we should for all practical purposes regard Exchequer bills as being as much a portion of the National Debt as the Three per Cents. The amount of Exchequer bills on the 1st of July last was undoubtedly large, but it was not larger than the unfunded debt had been in previous times, even with the addition of £4,000,000 of Exchequer bonds. Let the House bear in mind, however, that a large portion of the Exchequer billsnamely, £7,600.000 were held by the Commissioners of Savings' Banks. Practically, therefore, they were withdrawn from the market-they were in the hands of the Government, and they did not influence the market rate of Exchequer bills. The Chancellor of the Exchequer, in the exercise of a discretion which he possesses under an Act of Parliament, and which had been often exercised in previous times, but not, I think, until last January since 1853, funded £7,600,000; and the point which I was desirous of hearing explained by the Secretary for the Treasury was what was the motive of funding that amount, because I am not aware that any advantage accrued either to the Government or to the Commissioners of Savings' Banks from that operation. The Commissioners held a large portion of stock; they also held a large amount of Exchequer bills; they could have sold either the one or the other according to the state of the market; and, therefore, although I do not dispute the legal power of the Chancellor of the Exchequer, and although that power had been exercised by many of his predecessors, including some of our best financiers, I do not clearly understand at present wherein the benefit to the Commissioners of Savings' Banks, or to the Government, consisted in the operation which took place. The Exchequer bills were at a premium of 37s. per cent., and therefore the Commissioners could, by going into the market, to a certain extent have realized their bills at a premium. If Exchequer bills had been at a great discount, there might have been a stronger prima facie case for the exercise of the power possessed by the Chancellor of the Exchequer, but, | The main object of that Committce was seeing that the Commissioners held a large to investigate the administration of the amount of stock-much more than suffi- savings banks, and incidentally the Comcient to meet any demand by depositors mittee considered the financial questions inwhich they could at any time realize, and volved in the management of the money seeing that Exchequer bills were at a high of the savings banks, and the powers with premium in the market, I cannot under- which Government is invested. Though I stand, without further explanation, what fully admit the value of the opinions of was the motive of the Chancellor of the this Committee on the general question of Exchequer in funding the entire amount of the management of savings banks, I must, the Exchequer bills held by the Commis- with great respect for the hon. Members sioners. The right hon. Gentleman, when who composed it, express some doubt as to addressing the House on the previous occa- the consideration they gave to the financial sion, seemed to think that he was follow-questions involved in their Report, and to ing out a policy which I had commenced show my reason for distinguishing between during the war. It is true that during the these two parts of the Report I would call war, when money was raised by the issue attention to one remark made by the Comof fresh Exchequer bills, it was found advis-mittee, which seems decisive as to the fact able that some of them should be taken that they had not carefully considered the by the Commissioners of Savings' Banks. financial part of the question. In page 6 That I believed at the time was an opera- the Report states that during the period tion advantageous to the Government, to from 1828 to 1844 there were large transthe public, and not less so to the Commis- actions in the purchase and sale of Exchesioners; but I did not, while I held the quer bills by the Commissioners of the office of Chancellor of the Exchequer, re- Savings' Banks, and then it goes on to sort to any funding of Exchequer bills in say that it appears that the money of the the hands of the Commissioners, and I am savings' banks was frequently employed not aware that anything occurred until in the purchase of Exchequer bills, when January last to render such an operation they were at a discount, and that such purexpedient. It is one thing that the power chases continued for a considerable period exists, and another that it should be exer- of time. I take it that the meaning of cised without any apparently sufficient rea- this part of the Report is that the Savings' son. With respect to the Motion of my Bank Commissioners abused their trust, hon. Friend, that is a general question, because they bought Exchequer bills when going beyond the particular operation un- they were at a discount. Now, it must be der our consideration. This power exists quite obvious that if the Savings' Banks at present by Act of Parliament, and I Commissioners bought Exchequer bills when apprehend that the fact of the House they were at a premium, they might have acceding to this Resolution would not re- made a bad bargain for the public; but peal the provision of the existing Act. It if they bought them at a discount, they would merely amount to the expression of bought them at a time when the purchase an opinion on the part of the House, and was most advantageous to the public. the Government would then find itself armed Therefore, that very circumstance, which with a legal power, which in point of law this Committee point out as proving the it was justified in exercising, but would disadvantageous nature of the transactions scarcely know whether its discretion was of the Commissioners and the abuse of fettered by the Resolution of the House. their trust, is the clearest proof that they On account of the form of the Resolution, made an advantageous bargain, and underI shall not be able to support the Motion. stood better than the Committee the nature If the question were to be brought under of their trust. I therefore think that the the consideration of the House with a prac- Committee did not very carefully consider tical view, the proper course would be to the financial bearings of the question, and bring in a Bill to repeal the provision I on that account am the less disposed to have alluded to, and deprive the Govern- place any very great value upon their rement of the power it now possesses by commendation in respect to this part of statutory enactment. But that raises the the subject. Just let us look at the two question as to the expediency of this power, branches of the recommendation of the and to decide that question we must look Committee. They recommend that no sale to the Report of the Committee of last or purchase of Exchequer bills, stock, or Session containing the recommendation. securities in the hands of the Commis MR. T. BARING said, he would not have troubled the House with any observations on this occasion had he not been a Member of that Committee, which was referred to in not very complimentary terms by the right hon. Member for Radnor (Sir George Lewis). The right hon. Gentleman thought that a Committee appointed to inquire into the application of the money of the savings' banks-to see whether that money was properly secured-had no business to inquire into the mode in which that money was invested. sioners, should be made except as required | and Means bills does undoubtedly amount for the purposes of the savings' banks. to a creation of funded debt without the Practically speaking, the Government is authority of Parliament; but the House the banker for the savings' banks. The must clearly understand that when Exche money paid over by the depositors in the quer bills are funded no debt is created saving's banks is employed by the Govern- without the authority of Parliament. Exment as an independent banker. The Go chequer bills are just as much debt as vernment is debtor to the savings' banks, Consols, and whether the form is transand acting as a banker for them it is rea- ferred or not from unfunded to funded, the sonable that it should have the power to debt is still national, and as binding on vary its securities and to sell stock and the nation. The doubt, which I confess I buy Exchequer bills, or sell Exchequer entertain, is whether any advantage acbills and buy stock, according as the state crues to the public or to the Savings' Banks of the market renders either operation ad- Commissioners from the power of funding vantageous. There is nothing out of the Exchequer bills. Possibly some advantage way of a banker in these two operations, may arise, and perhaps the Chancellor of and the recommendation of the Committee the Exchequer will be able to state an adewould deprive the Commissioners of the quate reason for the operation. Savings' Banks of that power. It is also proposed that with respect to the funding of Exchequer bills the hands of the Government should be tied up. I am not prepared to say that there is any very great value to the Government in the possession of that power. It is possible, however, that circumstances might arise in which the power of funding Exchequer bills may be of importance. I confess it does not appear to me that it is a power liable to be seriously abused. I cannot see any material difference between the funded debt and the unfunded debt. Some hon. Gentlemen seem to think that there is something more easy to discharge or light in pressure in the unfunded debt than in the funded debt. I apprehend that any belief of that kind is a complete delusion, and that the unfunded debt is just as much National Debt as the funded debt. Therefore this power, which sounds so alarming, of funding Exchequer bills does not very much frighten me in reference to its exercise; but whether that power is of any essential use to the Savings' Bank Commissioners or not, I think it most essential that they should have the power of varying their securities, and a satisfactory reason ought to be alleged why the Government, being the banker for the savings' banks, should not possess the ordinary powers of a banker to vary its securities, to sell stock and buy Exchequer bills, or sell Exchequer bills and buy stock. With respect to this ulterior power, I do not believe it is liable to any serious abuse. With regard to funding Ways and Means bills, no doubt that in that respect there would be a very serious abuse, and I quite agree that means ought to be taken for guarding against that misapplication of power. Practically the funding of Ways VOL. CLII. (THIRD SERIES.] SIR GEORGE LEWIS said, he must beg the hon. Gentleman's pardon. He had never questioned the power of the Committee. What he said was that, judging from the Report, it appeared to him that the Committee had not inquired so carefully into one branch of the subject as into another. MR. T. BARING said, he thought it was certainly within the power of the Committee to inquire into the way in which these funds were invested. Why, the Goverument was the banker of the savings' banks; and a very safe banker it had been. But the right hon. Gentleman forgot that one great question for that Committee to consider was, to what extent Government had tampered with the money, and whether successive Chancellors of the Exchequer had always placed the money entirely to the advantage of the savings' banks. He had not the official paragraph before him on which the right hon. Gentleman had commented, but the impression made upon his mind in Committee was this, that those changes in the securities which in themselves were legal, had not always been employed for the benefit of the savings' banks, but to aid a needy Chau 3 G |