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Clause 30—(Amendments As To Sinking Funds, And As To Manner Of Accounting For Issues Out Of Consolidated Funds)

Volume 529: debated on Monday 28 June 1954

The text on this page has been created from Hansard archive content, it may contain typographical errors.

Motion made, and Question proposed, "That the Clause stand part of the Bill."

This Clause is certainly nothing like so important as that with which we have been dealing, but although, as the Financial Secretary said just now, we still have a good deal of work before us this evening, it would not be right to pass over it without some comment on what it contains and without eliciting some explanation from the Financial Secretary.

What this Clause does, I understand, is to abolish the permanent annual fixed debt charge which was instituted by Section 23 of the Finance Act,1928. Under the provisions of that Section, £355 million were automatically to be earmarked year by year to meet interest, management and sinking fund on the National Debt. It is perhaps interesting, looking back, for us to remember that this provision was inserted by the present Prime Minister, when Chancellor of the Exchequer. I took occasion to turn up what he had to say on that occasion. I do not intend to inflict—if "inflict" is the right word for any speech of the right hon. Gentleman—nor do I intend to read the whole of what the present Prime Minister had to say then, but it may be of interest if I do quote one or two passages. He said:
"I propose to comprise both our proclaimed shortcomings and our equally veiled virtue in a general treatment of the problem of the National Debt. I have noticed a good deal of anxiety and loose-thinking in recent public discussions on this subject. Even quite high authorities tell us that we are making no headway in paying off our gigantic Debt, and they preach the need of some drastic taxation like a surtax or a capital levy. …"
He goes on later to say that he proposes:
"… to recur to the policy instituted in Mr. Disraeli's Government by Sir Stafford Northcote in 1875 …"
and I take it that tonight we shall hear from the Financial Secretary whether it is true or not that the present Government intend once more to recur, in quite another way, to the same Act of 1875.

The right hon. Gentleman the present Prime Minister then indicated that he proposed to establish a fixed debt charge and to put that charge at £355 million a year, which compared favourably with Sir Stafford Northcote's debt charge of £28 million. Then he said:
"I propose, as far as I have any thing to say to it, that the Income Tax payer shall look forward to any relief which may be yielded by the conversion of the Debt or any large portion of the Debt to a lower rate of interest. He has that hope for the future. That is not included in the calculations of the fixed Debt charge. All the rest of the annual sum will continue to roll up until, or unless, the day dawns when some unholy hand is laid upon it."
We have had to wait until tonight, with a Government presided over by the same right hon. Gentleman, for unholy hands to be laid upon this Fund.

The right hon. Gentleman went on:
"The payment of £355 million a year, if steadily maintained, even if the rate of interest falls no lower than 4½ per cent., will extinguish our entire Debt, internal and external, including our Debt to the United States, without any addition to present taxation in a period of exactly 50 years."—[OFFICIAL REPORT, 24th April, 1928; Vol. 216, c. 828–830.]
It is true that we have not yet completed the 50 years to which the right hon. Gentleman referred, but we have certainly covered more than half the distance. Whereas, when the right hon. Gentleman was speaking in 1928, the National Debt was about £7,500 million, it is now something like £26,500 million. That is a vast increase, and it seems, if anything, to be growing larger each year. I know that the Government and the party opposite are very fond of complaining that the Labour Government were extremely extravagant, and piled debt upon debt, but it has been left to the present Government to increase the National Debt instead of reducing it as we tried to do, and I think did, when we were in office.

I realise that another devastating war has occurred since the right hon. Gentleman the present Prime Minister instituted this Fund in 1928, and that both the Labour Government and the present one have sometimes not been able strictly to comply with the provisions of Section 23. It has, I know, been suggested more than once that, as it is impossible, year by year, to allocate the £355 million, something should be done to abrogate that Section, but we are entitled tonight to hear what are the Government's proposals, and how much of Section 23 still subsists. It is a fairly long Section, much of which remains, I assume, in operation, and we should like to know the Government's intentions in regard to it.

It would also be interesting to know what is going to happen to the old Sinking Fund Act of 1875. I gather that the future repayments of the Debt will be made under the provisions of Sections 4 and 5 of that Act, but, as I understand it, any moneys which fall to be paid thereunder must be applied to the Rating Relief Suspense Account. We should, therefore, like to know whether anything is to be done in order to change the destination of such moneys as may be paid from the Consolidated Fund to the National Debt Commissioners under that Measure.

I shall listen with great interest, as I am sure will my right hon. and hon. Friends, to what the right hon. Gentleman has to say. I hope that he is not going to tell us that the 1922 Committee has been busy again and has decided that the promises made by the present Prime Minister as far back as 1928 have now to be abrogated. I hope, therefore, he will let us know what the Government propose to do, because the Debt is mounting up, and is now of a size that previous generations would have thought impossible to be borne either by themselves or by any future generation.

As the right hon. Gentleman has pointed out, the effect of the Clause is to dismantle the provision for the permanent annual charge for the National Debt which was provided by Section 23 of the Finance Act, 1928. The right hon. Gentleman has quoted from HANSARD the description of the purposes of that provision which was given at the time, by the then Chancellor of the Exchequer the present Prime Minister. I think it would be gross impertinence for any of us to try to re-describe what has already been described in his customary majestic language, but, as the right hon. Gentleman has pointed out, its purpose is to provide for paying off the National Debt, then totalling £7,528 million, in 50 years, and the annual debt charge prescribed, £355 million, was, on certain assumptions, actuarially calculated to pay off the Debt in that period.

In fact, as the right hon. Gentleman has said, the hope of so paying off the National Debt has faded. As he said, one of the major causes is that this country fought a Second World War. As a result largely of that, the National Debt now stands at £26,583 million. The main cause of that increase was undoubtedly the war, though right hon. Gentlemen opposite contributed a little to it, and we have made our contribution, largely, in our case, in respect of the financing of housing.

The proposal before us, therefore, really amounts to no more and no less than the bringing of the technical position into line with the real position. For many years past this provision has not operated. It has become almost a custom to put into every Finance Bill a Clause solemnly suspending this provision and substituting some other figure calculated in accordance with the needs and policies of the time. It seemed to us that it was a somewhat unreal procedure solemnly to go on suspending year by year a proposal which had ceased to operate, and when the circumstances in which it had been considered had altered so drastically. Therefore, we are proposing its repeal.

The right hon. Gentleman asked what we are doing. If he will look at the Sixth Schedule to the Bill he will see that the whole Section is repealed. Consequently, in future the provision, which is, of course, from the Consolidated Fund, for the service of the National Debt and for the payment of the statutory sinking funds will be made, as it has been in recent years, but it will not be necessary, in so making it, to suspend that Section.

9.15 p.m.

Opportunity is similarly taken to dispose of two other obsolete provisions. Just as in each year we have suspended the operation of Section 33 of the Finance Act, 1928, so we have suspended the operation of certain provisions of the Sinking Fund Act of 1875. It has been necessary to do so because under the old provisions, when money was to be used for the redemption of debt, it had to be retained until the end of the year and the debt then redeemed. That is obviously a wasteful method of proceeding as a result of which modern Governments have suspended that provision and when a balance has been available have used it for the redemption of debt. In the second subsection we propose to repeal that provision.

In the third subsection we propose to repeal another out-of-date provision with respect to quarterly accounts, which were never laid before the House in any event but which were required by Section 12 of the Exchequer and Audit Departments Act, 1866. These Amendments will bring our procedure on the Finance Bill into line both with modern practice and with modern requirements. Like the right hon. Gentleman, one cannot forbear a sentimental tear over the high hopes which ranged in 1928, but it is perhaps wise to face realities and not waste time in solemnly maintaining provisions which it is annually necessary to suspend.

The right hon. Gentleman has told the Committee that he is bringing this procedure into line with reality. I would add that he is bringing the attitude of the Conservative Party towards the National Debt into line with reality, too, because if there is anything for which the Conservative Party stands, it is the National Debt. Surely the whole reason why the Conservative Party is in existence is to provide methods, instruments and opportunities whereby some people may live without working through exercising the claims of ownership.

As long ago as the reign of William III it was recognised that what was then called "the funds" was a very useful system whereby people could live by owning and not by working. I never could understand why the Conservative Party, including the ancestor of the hon. and gallant Member for Cheltenham (Major Hicks Beach), used to genuflect, as they always did, on the altar of the sinking fund. The ancestor of the hon. and gallant Member for Cheltenham would rather have gone to live in the East End of London than fail to apply a sinking fund to the National Debt.

Before you came into the Chamber, Sir Rhys, the Financial Secretary was pointing out that it was no longer practicable to apply a sinking fund, and all I am doing is pointing out that the Conservative ideology, in taking cognisance of this fact, is reflecting what Conservatives really think. My right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall) quoted a speech of the present Prime Minister, when he was Chancellor of the Exchequer, in 1928, supporting Section 23 of the Finance Act of that year, which is repealed under this Clause and its consequent Schedules. I put it to you, Sir Rhys, that I am therefore quite in order in discussing the motives which influenced the Conservative Party of that day in including Section 23 in the Finance Act, 1928.

That may be historically interesting, but it does not come within the Clause.

My right hon. Friend quoted what the Prime Minister, then Chancellor of the Exchequer, said. I was not there, but I was here when Section 23 of the Finance Act, 1928, was laid before the House. I happened to be in the Press Gallery at the time, and I remember the occasion very well.

The whole case for that Section, which is now to be repealed, was that if one repaid debt, that was rectitude; if one did not repay debt, that was turpitude. The Financial Secretary, the successor to Mr. Arthur Michael Samuel, of 1928, who said that one was no good if one did not repay but was good if he did repay, is saying that it does not matter whether we repay debt or whether we do not. We on this side much regret that this Clause should have been included in the Finance Bill of this year. We think it is a bad thing that the Government of the day should make no serious attempt to deal with what we regard as the evil of a big National Debt.

The Financial Secretary has just said, "We cannot do anything about it, anyway. Let us bring our legislation into line with reality. Let us admit that we cannot pay off this National Debt." We challenge the whole conception behind the Clause. First, it is not a good thing for the country that a huge National Debt. no matter how created, should continue to be in existence. We say that any Government occupying the Front Bench opposite that was worth its salt would do its best to get that National Debt down, because it is a burden. The Tory Government of 1954, including this Clause in their Finance Bill of 1954, are shirking a responsibility and acquiescing in an evil: namely, the existence of the National Debt, the effect of which is to make all of the people as taxpayers contribute to some of the people as moneylenders.

It so happens that the "some of the people as moneylenders," whether individuals or institutions, are most supporters of the party opposite. In this, as in the preceding Clause and as in everything it does, the Party opposite is looking after its own kind. But the people whom we represent are the people who pay taxes in order that the larger part of the yield of those taxes should be handed to these holders of the debt. The Conservative Party is running away from all the things it used to pretend to believe in, but in doing what it is doing, in saying, "Yes, here is this National Debt; nobody can do anything about it," the Conservative Party is merely meeting and suiting its own convenience.

He did not do it, but it would have been possible for the Financial Secretary, when he said that at the time of the 1928 Act the National Debt was of the order of £7,500 million, whereas now. he said, it is £26,000 million, to have said, had he wished, that there really was not much change, that the change was more apparent than real, that the debt, it is true, had been multiplied by three and a half, but that the purchasing value of the money, the units of which the debt is made up, had depreciated in about the same proportion.

It is approximately true that the debt, in so far as it is a burden, is about the same—it is not very much more, anyway—as it was in the period to which the Financial Secretary referred. He might have said that, because had he said it he would have been dealing with reality. But in this business of money we are not dealing with realities, and where the right hon. Gentleman—no doubt unintentionally and through lack of knowledge of the facts—misled the Committee was when he said, just before you came in, Sir Rhys, that this large increase in the nominal amount—

I do not understand how this is related to the provisions of the Clause.

It is related in this way. The Government include in the Finance Bill a Clause the effect of which is to abandon all pretence at statutory provision for annual reductions of National Debt. The Financial Secretary justified that on the grounds that it was not practicable to carry out any reduction any way, and he gave the Committee to understand that this was the inevitable result of World War II.

He said that the great increase since the Act of 1928—of which Clause 23 is now being repealed under Clause 30 of this Bill—in the National Debt had been due to World War II. He ought to know—it is his duty to know such things—that that is entirely due to the circumstance that we are dealing with interest-bearing paper as distinct from currency notes. We do not allow the Government to create it; we allow the private institutions to create it.

I feel that in this matter the Government and the Financial Secretary have been less than candid with the Committee. They are the great opponents of inflation. They are telling us that inflation is all wrong. But if anything is inflationary it is the existence of a large National Debt, because that means the existence of an enormous quantity of negotiable paper. It is currency with a difference. Instead of bits of paper bearing no interest, it is bits of paper bearing interest. He might have faced the inflationary implications of the existence of a large debt, but he did not do so.

He replied to my right hon. Friend the Member for Colne Valley (Mr. Glenvil Hall), in complacent purring tones, as if the whole thing did not matter. He is perpetuating the thing which he and his hon. Friends believe in. I am sure that I should be out of order if I proceeded to give the Committee a method of reducing the National Debt. I take it that that would be out of order, Sir Rhys.

This is a very happy occasion. For once, I find myself in complete agreement with the occupant of the Chair. Tonight the Committee is doing a had thing and the Government are doing a bad thing. They are giving up any attempt to fight against inflation, and they are doing so for the good old Tory reason that the cause of inflation, in this case the existence of an enormous amount of negotiable paper, is a good thing for them and their hon. Friends, because it helps them to live without work.

We do not intend to divide on this Clause, but at the same time I do not think that the Government should be under any illusion. We are not satisfied with the explanation given by the right hon. Gentleman. We realise that during the past years it has been inevitable that the payment of a fixed sum year by year was a great strain on both the Labour Government and, to a certain extent, this Government. It has, as the right hon. Gentleman said, been impossible for them to implement in full the sinking fund which was provided for under Section 23 of the 1928 Act.

But he should recollect that the provision has been there as a constant reminder year by year that it was not a bad thing, other things being equal, to do something to try and reduce the National Debt. After all, the service of the debt alone now is something over £500 million a year, which is a considerable sum. That money in happier times could be used for education, hospitals and for all sorts of other amenities for the people. It could have been used for these purposes without increasing taxation. We cannot therefore pass this over as something which does not matter, in spite of what my hon. Friend the Member for Nottingham, South (Mr. Norman Smith) has said, although much of what he said is, of course, true. A great part of this debt has been created by the banks, but we cannot go into that tonight, although in passing we can note it.

We have had no indication from the Financial Secretary that the Government are alive to the fact that something should be done to try and reduce this enormous burden which, as I say, takes over £500 million each year in interest alone. Finally, he did not make it clear what use the Sinking Fund Act, 1875, now performs. That Act has not been repealed, but I am not quite sure what use it now is. Perhaps the right hon. Gentleman will make it clear.

9.30 p.m.

The only point at which the 1875 Act is affected by this Clause is that the annual exercise known as suspending the old Sinking Fund will no longer be required, because the particular provision of that Act is abrogated by this Clause.

On the broader issue which the right hon. Gentleman raised, I did not think from his earlier speech that he wanted to deal with this matter otherwise than on the basis of a rather interesting change in procedure which is involved in the Clause. I would not, however, wish to leave him or anyone else under the impression that we were not at least as concerned as he is with the desirability of keeping the growth of the debt in check. As the right hon. Gentleman knows, the practice over a good many years has been that any Budget surplus is applied for the reduction of the debt and it has certainly been the case that from time to time that has had some effect on the debt.

I should not like to leave him under the impression that in repealing this provision, which, of course, provides for a much smaller figure for the service of the debt than annually has been provided for a great many years, we do not regard it as a serious matter. We do, but what we are concerned with here is very largely a question of machinery, and I am afraid that it is so out of date machinery that it would hardly be entitled to an investment allowance.

Question put, and agreed to.

Clause ordered to stand part of the Bill.

Clause 31 ordered to stand part of the Bill.