British Finances^[137]

Although the bombardment of Odessa, which appears, after all, to have been a very indifferent affair, highly excites the public mind, there is another bombardment which, at this very moment, works upon it still more powerfully namely, the bombardment of the public purse. Before entering into an analysis of the financial statement made by Mr. Gladstone in yesterday's sitting of the Commons, we must cast a retrospective glance at his official transactions hitherto.

Mr. Disraeli, when in office, had reduced the interest of Exchequer Bills to 1¼d. a day, which was lower than it had ever been before; but Mr. Gladstone, anxious to improve upon his predecessor, went on further, reducing it to 1d., neglecting to notice the circumstance that when Mr. Disraeli reduced the interest of Exchequer Bills money was abundant and cheap, while it was scarce and dear when Mr. Gladstone undertook to surpass his rival. Consequently, the great man was called upon to pay three millions of money for Exchequer Bills, which, if left alone, would have floated at the rate of interest at which he found them. This was not all. Having hardly paid off the Exchequer Bills at great public inconvenience, they had to be reissued again at a higher rate of interest. This was the first proof of the transcendent genius of the Oxford casuist, who was supposed to unite, as it were, all the talents in his single person, the coalition of all the talents having ejected the Tory Government upon their financial scheme, and thus proclaimed finances the strong point of their policy.

Mr. Gladstone, not content with dealing with the floating debt, made a still more curious experiment upon the funded debt. In April, 1853, he went down to the House of Commons with a very complicated scheme for the conversion of the South Sea stock and other funds, with an arrangement which might compel him to pay off nine and a half millions at the end of six months and twelve months. It has been very justly remarked that when he did so he had before him the secret dispatches of Sir Hamilton Seymour, and the warnings of Col. Rose and Consul Cunningham, communications which could leave no doubt of the hostile intention of the Russian Government and the proximity of a European war. But your readers will recollect that at the very period when Mr. Gladstone proposed his scheme I foretold its failure[a], and the necessity in which it would place the Government of borrowing, at the end of the financial year, to the amount of five or six millions. I made this statement without any respect to the Eastern complication. Besides, the scholastic air of Mr. Gladstone's scheme not being likely to seduce the stock-jobbing mob of the Exchange, there was wanted no great sagacity to foretell that the harvest must prove a failure, because the extent sowed was far below the average on account of the very wet season; that a bad harvest would cause a drain .of bullion; that a drain of bullion could certainly not counteract the already existing tendency to a rise of interest in the money market, and that, with the general money market rising, it was absurd to suppose that the public creditor would allow the interest of his stock to be reduced or not eagerly grasp at the opportunity afforded him by Mr. Gladstone's experiment to insist on the repayment of his stock at par in order to invest it the following day at a net profit. Indeed, at the close of the financial year, Mr. Gladstone was obliged to pay off at par six millions of South Sea annuities which, without his intermeddling, would at this moment only command £85 for every £100 of stock at the Exchange. Thus he not only made needlessly away with six millions of the public funds, but the public incurred by this brilliant operation an actual loss of at least one million, while the balance in the Exchequer, which was in April, 1853, £7,800,000, has been reduced in April, 1854, at a time of war, to only £2,778,000, being a loss of more than £5,000,000. The abortive conversion scheme of Mr. Gladstone is at the foundation of all the monetary difficulties against which the Government has now to contend. On the 6th of March, only 24 days before the declaration of war, Mr. Gladstone laid down[b] as the very basis of all his operations that the supplies should be provided within the year to pay the current expenses, and declared he had taken measures to cast the burdens of war only upon the present, and that a resort to the money market for a loan was out of question. He repeated his statement again on the 22d of March, and even on the 12th of April[c]. Yet on the 21st of April, when Parliament was not sitting, an official notice appeared that a loan would be required, and that Exchequer Bonds to the amount of six millions would consequently be issued[d]. The Exchequer Bonds, you will remember, are an invention of Mr. Gladstone, contemporaneously introduced with his conversion scheme.

The ordinary Exchequer Bill is a security for 12 months, and is generally exchanged or paid off at the end of that time, and its rate of interest fluctuates with the market rate of interest. The Exchequer Bonds, on the contrary, bear a fixed rate of interest for years, and are a terminable annuity, transferable from hand to hand by a simple endorsement, without any cost whatever to either buyer or seller. Upon the whole, they may be described as imitations of railway debentures. When Mr. Gladstone first invented them in 1853, he took power to issue 30,000,000, and so proud he was of his invention that he thought the 30,000,000 would not be sufficient to answer the public demand, and that they would be at a high premium. However, "the public were glutted by very little more than £400,000, or about one-seventh of the amount he expected would be required." In order to raise his loan of 6,000,000, Mr. Gladstone brought out three sorts of Exchequer Bonds, such as have four years to run, such as have five years to run, and such as have six years to run. To make them more acceptable to the Exchange, he decided that the interest would be allowed on installments not yet paid. He pretended to issue them at par, with an interest of three and one-half per cent., considering the extraordinary advantages belonging to the new form of securities as being equivalent to from 10 to 16 per cent., on the amount of the dividend. When the tenders were opened, it was found that the amount bid for was but £800,000 of bonds of the first series, to be paid off in 1858; while with respect to the other series of bonds of 1859 and 1860 no offers were made at all. This is not all. He was forced to issue his commodities at a discount, selling them at the minimum of ninety-eight and three-fourths, and throwing in a few months interest, so that he is simply borrowing at four per cent. in exchange for the South Sea Stocks, which were at three per cent. annuity, thus losing on the capital fifteen per cent., and on the interest twenty-five per cent. Notwithstanding all these concessions, his failure was complete, he being obliged to extend the period for receiving tenders to the 8th inst., and to come down from his demand of 6,000,000 to the "ridiculously small sum" of 2,000,000. The failure was necessary, because his commodity was neither well adapted for permanent investment nor for temporary use, because the repayment in 1858 and 1860 appears, under the present circumstances, to be very problematical, and, finally, because, with a rising market, bonds with a fixed rate of interest for years cannot be as acceptable as Exchequer Bills, of which the interest is sure to be raised if the value of money increases.

Mr. Gladstone, not content to throw upon the market three different sorts of Exchequer commodities, felt himself obliged to bring to the House of Commons not one but two, and perhaps three or four budgets. For contradistinction to the former Chancellors of [the] Exchequer he made his financial statement on March 6, before the termination of the financial year with the view, as he said, to make the country clearly understand its position: The House were then told that there was a surplus of £3,000,000, but that in consequence of the perilous position in which they were placed, they had to incur an increased expenditure of £6,000,000, so that they were to be prepared for a deficiency of three millions this year. Before eight weeks have passed, he comes down to the House and asks for about seven millions more, although certainly in March he ought to have formed more correct estimates of the demands to be made upon the public resources.

The new supplementary estimates he asks for are:

The navy, army and ordnance estimates have already been voted without division on Friday evening[e], and I shall give a short resume of the different items on account of which they were asked for, viz: £300,000 were voted for addition of the army by 14,799 men of all ranks, which would raise the number of land forces to 40,493 above that voted last year, or 142,000 men. The supplementary ordnance estimates amount in the whole to £742,132. The supplementary navy estimates, amounting to £4,553,731 and including a part of the supplementary ordnance estimates, may be classed under the following heads:

Mr. Gladstone proposes to raise new taxes by continuing the double income tax to the end of the war, by increasing the malt duty from 2/9 to 4/-, by augmenting the duty on spirits 1/- per gallon in Scotland and 8d. per gallon in Ireland, and by putting off the fall upon the duty on sugar, which was to occur on the 5th of next July. The resolutions respecting spirits, malt and sugar were passed immediately.

The duty on spirits will cancel itself, because it will greatly reduce the consumption of spirits. The duty on malt is a punishment inflicted on the licensed victualers and their customers, because their official organ, The Morning Advertiser, signalised itself by sounding the trumpet of war. The duty on sugar is calculated to embitter the pickles and preserves of the current year. As to the income tax, it is well-known that on the 18th of April, Mr. Gladstone proclaimed its death at the end of seven years[f], only three days after having received the communications from Col. Rose and Consul Cunningham describing the Russian preparations for war. It is no less known that on the 6th of March he declared it sufficient to double the income tax for half a year only[g]. Mr. Gladstone is either the most improvident and short-sighted Chancellor of Exchequer that ever existed, or it was his deliberate plan to grope in the dark, to mislead, to bewilder and to mystify the public.

The British public has not only to pay for the war against Russia, and also for the quackery and the hair splitting ingenuity of Mr. Gladstone, but besides it has to furnish the Czar with the means of carrying on the war against itself, as Lord John Russell declared on Friday evening[h], that the British Government would continue to pay the principal and the interest of the debt called the Russo-Dutch loan[139], inserted in the treaty of Vienna, one of whose principal arrangements is that Poland should remain an Independent Constitutional Kingdom, that Cracow should be protected as a free town, and that the navigation of all European rivers, consequently of the Danube, should be free.

The distrust in Irish loyalty must be very great, as Lord Palmerston declared that during the present year Her Majesty's Government did not intend to enroll the Irish militia; the same Palmerston having broken up the Russell Cabinet on the pretext that Lord John exasperated Ireland by excluding it from his Militia bill.

Ministers have sustained a virtual defeat on their Railway hill, which contained only some enactments recommended by a Parliamentary Committee sitting on that subject[i]. As the railway interest is powerfully organized, the gallant Mr. Cardwell preferred, in the name of the Ministry, to withdraw his original bill and to substitute for it one framed by the railway directors themselves, which enforces nothing nor adds anything to the stringency of already existing enactments. When the bill was discussed there was nobody present in the House except those railway directors who are M.P.s.

"It appears," says a weekly paper, "that Ministers and Parliament are not strong enough to protect the property of shareholders and the pockets of travellers, or the life and limb of the public, against the right which the railway companies claim to dispose of those valuables at pleasure."

Notes

[139] The reference is to agreement signed by Russia, Britain and the Netherlands in London on May 19 (7), 1815 to defray Russia's war expenses incurred in driving out Napoleon's army from the Dutch and Belgian provinces. The governments of Britain and the Netherlands undertook to pay in compensation part of Russian debts to the Dutch bankers Hope and Co. (25 million Dutch guldens each). A special article of the agreement stipulated that payments would be suspended if the Belgian provinces separated from the Netherlands. After the revolution of 1830, when an independent Belgian state was formed, the Netherlands Government ceased payments. Palmerston signed, on behalf of the British Government, a new agreement with Russia on November 16 (4), 1831 confirming Britain's former financial obligations.