The History and Proceedings of the House of Commons: Volume 9, 1734-1737. Originally published by Chandler, London, 1742.
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Sir John Barnard.
I shall not now oppose our agreeing to the Resolution of the Committee; but the only Argument made use of in the Committee in favour of the Motion, which to me seemed to have any Weight, was, That at the End of the Term last granted to the Bank, and which expires in August 1743, it would be easy for the Government to raise Money at 4 per Cent. sufficient to pay them off, in case it should be thought fit to abolish the Company, or put an End to their exclusive Privilege; or in case the present Company should refuse the Terms offered for renewing their exclusive Privilege. I confess, Sir, this Argument had very little Weight with me; because, in my Opinion, it will be impossible for the Government to raise 10,000,000l. Sterling at once, at 4 per Cent. or any other Interest, especially when we have such a powerful and rich Company to oppose it, as the present Bank is, who, by the Indulgence that has been of late Years shewed them, are in some Measure become Masters of the public Credit' of the Nation, and who will certainly oppose, with all their Might, a Scheme concerted for the Ruin of their Company, and for making every particular Man in it lose at least 50l. per Cent. of what he may then call himself worth: This, I say, appears to me impossible; and if we judge from the Experience of past Times, I am sure we must conclude it will be impossible; but such seems to be the Fatality of some Gentlemen, that when the Experience of what's past ought to persuade us to take any particular Measure for the public Good, they then judge from very improbable Conjectures of what may happen in Time to come, and when probable Conjecture of what may happen ought to prevail with us to take any particular Measure for the public Good, they then determine themselves by the Experience of past Times, tho' the Circumstances are very far from being the same.
This, Sir, is the very Case, with respect to their Method of judging about the future Price of Bank Stock. 'Tis true, while a Spirit of Stock-jobbing prevailed in this Kingdom, while that Spirit was encouraged by those who ought to have behaved in a quite different Manner, the Price of Stock very much depended upon what was called the Whim or Humour of Change-Alley, which was never governed by Reason, but by Art and fraudulent Practices; but since that Spirit has subsided, and the chief Method of keeping it up has been abolished by Act of Parliament, People now begin to judge reasonably, and, 'therefore, the Price of Stock now depends very much upon the Dividend made, and the Probability that the same Dividend will be continued, or perhaps increased. For this very Reason Bank Stock does now sell, and ought to sell, at a lower Price in Proportion than South-Sea Annuities; because People know that the Bank's Term is near expiring, that a large Sum of Money must soon be paid for a Renewal, and that that Sum must be taken from the Capitals they have or may have in Bank Stock, or from the future Dividends they may expect from such Capitals. This I was aware of when I made my Calculation; and, therefore, I founded it upon the present low Price of Bank Stock, and not upon that Price it ought to bear in Proportion to South-Sea Annuities; and by our doing Justice to the other public Creditors, no Man can be induced to believe we will do Injustice to the Bank, by paying them off sooner than any of the other public Creditors; for if the Bank be willing to pay a just Price for the Continuance of their Company, and if that Continuance be no Detriment to the Public, it would be unjust to make any more than proportional Payments to them; so that by our resolving that the next Payment should be made to the Bank, the Proprietors could take no Alarm, unless they either think that the Continuance of their Privilege would be a Detriment to the Public, or are resolved not to pay a proper Consideration for it; in either of which Cases it would be a just Alarm, an Alarm we ought not to prevent; because it would be better the Loss should fall upon them by Degrees, than that it should fall all at once, as in either of these Cases it must do at the End of their present Term. As to the Profits the Bank makes, or may make by its Trade, I shall only take Notice, that the Quantity of ready Specie they are obliged to keep by them, depends but very little on the Value of Notes they have out, but upon the Extent of their Credit, and the Circumstances of public Affairs at the Time: A Bank newly set up, or of a very small Capital, must keep a greater Quantity of Specie by them in Proportion to the Notes they have out, than a Bank of established Credit, or of a larger Capital than their Trade can possibly require, which is the Case of our present Bank; and when public Affairs are in a variable and unsettled Condition, every Bank ought to keep a greater Quantity of Specie by them in Proportion to the Notes they have in Circulation, than when the Sky is clear and every Thing appears serene: Therefore the paying them off a Million, I am convinced, would neither diminish their Circulation, nor oblige them to keep a greater Quantity of Specie by them, than they do at present, and consequently could no way diminish their Trade.
Thus, Sir, I could shew there is no Weight in any one Argument that has been made use of for preventing our making the next Payment to the Bank; but this I did not rise up for, nor should I have taken any Notice of the chief Argument made use of, but that I think, if there be any Thing at all in the Argument, it must be of great Weight with respect to what I am to propose; and, therefore, I hope I shall have the Concurrence of all those who thought it a good Argument, and particularly of the Hon. Gentleman who made use of it. Sir, if we are now in such Circumstances as that we may any way expect in 6 Years Time to be able to raise 10,000,000l. at once, and that in Spite of the most opulent Company in England, I am sure we may now begin to think of reducing the Interest payable to the public Creditors, and may begin to take some Measures for that Purpose. I wish some such Proposition had come from the other Side of the House; for some Gentlemen seem to be resolved not to approve of any Proposition or Scheme but what comes from themselves, and, to return the Compliment, their Reasons are so weighty, that they generally prevail. As for my own Part, if my Reasons have any Weight with those that hear me, I am sure I have but seldom been heard by the Majority of this House, ever since I had the Honour to fit in Parliament, and yet I have always raised my Voice as much as I could. This has always made me shy of making any Proposition to the House, or of offering any Scheme, which I thought might tend to the Good of my Country; but the pleasing Prospect the Hon. Gentlemen have given us of the flourishing and happy State of our Country 6 Years hence, emboldens me now to make you a Proposition, because from what they have said, I cannot but expect their Concurrence, and from thence I have good Reason to expect Success.
Tho' my Hopes are not quite so sanguine, tho' I am of Opinion we can never be in such Circumstances as to be able to raise 10,000,000l. at once, in Spite of the Bank, yet, Sir, I am convinced, it is now high Time for us to think of reducing the Interest payable to our public Creditors; and my Reason for thinking so is neither founded upon past Experience, nor upon future Conjecture, but upon our present Circumstances: I mean, Sir, the present high Price of all our public Funds, and in particular the high Price of our public Securities, which bear an Interest only of three per Cent. When such Securities are at five or six per Cent. above Par, it is a certain Proof that the natural Interest of Money, upon public Securities at least, is below 4 per Cent, that many of the public Creditors would be glad to accept of an Interest of 3 per Cent. rather than be paid off, and that the Government might borrow some Money, I shall not pretend now to ascertain the Sum, at 3 per Cent. in order to pay off a Part of those public Creditors, who should not appear willing to accept of so low an Interest.
I say, Sir, I shall not now pretend to determine what Sum we might be able to borrow at 3 per Cent. I believe it would be but small, because, I believe, the Bank would refuse to concur with the Government in any such Undertaking, and will always refuse as long as the Interest payable to them is at 4 per Cent. For this Reason, among others, I was for our resolving that the next Payment should be made to the Bank; because such a Resolution would have enabled us to bring the Interest payable upon the whole Bank Capital down to 3 per Cent. in two or three Years. If we had ordered a Million to be paid to them at Michaelmas next, we might, without doing an Injustice, have ordered that no Part of that Payment should have been applied towards such of the Proprietors of the Bank as were willing to accept of an Interest of 3 per Cent. upon that Part of the Capital which belonged to them; but that the whole should have been applied towards diminishing the Capital of those who were not willing to accept of such an Interest; and for this Purpose the Government might have been impowered to open Books of Subscription for the Bank Proprietors to come in and subscribe for that Part of the Capital which belonged to each of them: And further, as an Encouragement for the Proprietors of the Bank to come in and subscribe, it might have been ordered that no future Payment should have been applied towards paying off any Part of the Capital so subscribed, as long as there had been any Part of the Bank Capital unsubscribed. By this Means, I do not know but we might, even at Michaelmas next, have brought the whole Capital of the Bank, at least all that Part of it which can be paid off before the End of their Term, down to 3 per Cent. In which Case, as no Money could then have been issued from the Sinking Fund at Michaelmas next, we would have had above two Millions to have disposed of next Session of Parliament; and with above two Millions in ready Money, and what we might then have borrowed, with the Assistance of the Bank, at 3 per Cent. I do not know but it would have been in our Power, to have brought the whole public Debt to 3 per Cent. at the very next Michaelmas following; for if the Interest payable to the Bank should once be reduced to 3 per Cent. it is certain they would then assist us as much as they could, to bring all our other Debts down to the same Rate of Interest; and tho' I am far from thinking we shall in five or six Years be able to borrow 10,000,000l. at once, even at 4 per Cent. in Spite of the Bank, yet I am convinced that at present, with their Assistance, we might be able to borrow eight or ten Millions at once at 3 per Cent. especially if the Proprietors of our Funds were enabled to subscribe their respective Capitals, with an Assurance that no Part of the Capital so subscribed should be paid off for a certain Term of Years.
This Proposition, Sir, would certainly have had the greatest and the most useful Effect, if upon these Terms the next Payment had been ordered to be made to the Bank; but even suppose we should agree with our Committee, suppose we should resolve that a Million be granted to his Majesty, towards redeeming the like Sum of the increased Capital of the South-Sea Company, as is now commonly called Old South Sea Annuities, the same Proposition may, I think, be applied to them, and may have a very good Effect, at least I am sure it can be attended with no bad Consequence; for as the delaying to pay off any Part of our public Debts is now a Favour, it is both just and reasonable that Favour should be bestowed upon those who are willing to accept of an Interest of 3 per Cent. instead of 4. Therefore my Proposition now is, that in order to see which or how many of the Old South Sea Annuitants are willing to accept of 3 per Cent. for a certain Term of Years, rather than be paid off any Part of their present Capital, the Government, or the Commissioners of the Treasury, should be impowered to open Books of Subscription for such of the Old South-Sea Annuitants as are willing to accept of an Interest of 3 per Cent. for 14 Years certain, rather than be paid off any Part of their present Capital at Michaelmas next, or at any other Time during that Term; and that it should be ordered, that no Part of the Million to be paid at Michaelmas next shall be applied towards paying off any Part of the Capital so subscribed, but that the whole shall be divided and applied pro rata towards diminishing the Capital of such of the Old South-Sea Annuitants as shall not subscribe before Michaelmas next. If all the Old South-Sea Annuitants should subscribe, the Consequence will be, that no Part of the Million can then be issued from the Sinking-Fund at Michaelmas next; in which Case we shall have two Millions to dispose of in next Session of Parliament, and with these two Millions, we may, I am confident, be able to reduce the Capital of the Bank likewise to 3 per Cent. at the very next Michaelmas following; after which we shall have no Difficulty to reduce the New South-Sea Annuities and all our other public Funds to the same Rate of Interest.
As a Resolution seems now to be formed, that none of our other Creditors shall have a Shilling paid to them, till all the South-Sea Annuities be paid off, I shall shew that it is no very unreasonable Supposition to suppose, that all the Old South-Sea Annuitants would subscribe before Michaelmas next; for which Purpose I shall suppose Old and New SouthSea Annuities to amount to 25,000,000 l. and that neither of them will ever sell for any Price above or under 113 l. per Cent. In this Case, if a Million should be paid to them yearly, it will amount to 4 per Cent. the first Year; so that every one of the Proprietors will have 4 per Cent. of his Capital annihilated, which, at 113 l. per Cent. is worth about 4 l. 10 s. 5 d. and therefore, as he receives only 4 l. in Money, he must lose, the very first Year, 10 s. 5 d. which Loss, by the yearly Diminution of the Capital, and the yearly Increase of the Sinking-Fund, will increase every Year so fast, that in five or six Years, I reckon, every Proprietor will lose 1 per Cent. upon the Capital he is possessed of, by every Payment made by the Public; for which Reason every Proprietor of South-Sea Annuities, if he understands his own Interest, would certainly chuse to accept of 3 per Cent. for 14 Years certain, rather than remain subject to the Annihilation of so much of his Capital yearly, and the Trouble of receiving such partial Payments, and of replacing those Payments some way at Interest, or investing them in some Sort of Trade or Business.
I have made the Calculation, Sir, upon Old and New South-Sea Annuities taken together, for the sake of Ease and Perspicuity; but it will come out the same, if we make the Calculation upon the two, separately; and, therefore, I think there is a great Probability in supposing that all the Old South-Sea Annuitants will become Subscribers for accepting 3 per Cent. upon their Capital, for 14 Years certain, before Michaelmas next, if we give them an Opportunity of so doing; because, if any Number of them should subscribe, the Loss will fall extremely heavy upon those who do not, which will of course be a prevailing Argument with the most obstinate. But suppose no one of them does come in to subscribe, it can be attended with no bad Consequence; the Government will then have nothing to do but to issue the Million at Michaelmas next, and it will be distributed pre rata among the Old South-Sea Annuities, according to the Direction of Parliament.
Before I conclude, Sir, I must take Notice, that we ought to endeavour, as much as possible, to reduce the Rate of Interest, especially upon the Debt due to the Bank, before we come to any Agreement about granting them a new Term; for if we do not, the Reduction of their Interest to 3 per Cent. will be looked on, perhaps, as a full Consideration for that new Term; whereas if it should be reduced before that time, the Consideration must be paid wholly in ready Money, which will enable us to pay off any Debts that may be still standing out at 4 per Cent.
Thus, Sir, I have laid before you a Proposition, which, I am sure, may tend greatly to the Benefit of the Public, and can be attended with no bad Consequence, nor with the least Danger of any bad Consequence; yet, nevertheless; I should not, I believe, have had the Courage to offer it, if the great Hopes given us by some Honourable Gentlemen in the Committee, of our being able to do Wonders 5 or 6 Years hence, had not made me imagine, that I should certainly have their Concurrence. Whether we can now properly take this Affair into Consideration, I do not know; but if it should be thought we cannot, I think we ought to resolve ourselves into a Committee of the whole House, to consider of the National Debt, or into some such Committee, in order to take this or any other Proposition of the same Nature that may then be offered into our Consideration; for surely we ought not to sit here and see 3 per Cent. Securities selling at a Premium, without endeavouring to take some Advantage of that favourable Conjuncture, for lowering the Interest of these National Debts which now bear an Interest of 4 per Cent.
Sir Robert Walpole.
Upon this it was said by Sir Robert Walpole, and some others, That public Credit was a Thing of such a ticklish Nature, it was dangerous to meddle with it at any Rate, but much more, to make any Step which might affect it, without the most mature Consideration. That in a very few Years we might, perhaps, be able to reduce the whole, or the greatest Part of the public Debts to an Interest of 3 per Cent. but they were afraid it was not yet Time to make any such Attempt. That to make any such Attempt without Success, would certainly be attended with bad Consequences; for as public Credit depended intirely upon the Opinion of the Generality of Mankind, a vain and unsuccessful Attempt to reduce the Interest payable upon any of our public Funds, would be attended at least with this bad Consequence, that it would give many People a mean Opinion of the Wisdom and Prudence of the Government; and no Man would trust, or continue to trust his Fortune in the Hands of those whose Wisdom and Prudence he had no good Opinion of; so that the attempting to reduce the Interest might give a much greater Check to public Credit than some Gentlemen seemed to be aware of, and might put it out of their Power to reduce the Interest payable upon any of the public Funds, for a much longer Time than it would have been, if no such unseasonable Attempt had been made.
However, they said, they were not against going into such a Committee as had been proposed; because Gentlemen would then have Time to consider of what they were about; and if any feasable Scheme should be there proposed for reducing the Interest now payable upon any of the public Funds, they should most readily agree to it. Whereupon, the Resolution of the Committee of Supply was agreed to without a Division; and then 'was resolved, That the House would, upon that Day Se'nnight, resolve itself into a Committee of the whole House to consider of the National Debt; after which 'twas ordered. that a State of the National Debt, as it was the first of February last, should be laid before the House.