3. I am sorry to say I made a more serious error, as regards the South Sea Stocks, than the original proposal. In the summer, I think, of 1853, and a good while before harvest the company proposed to me to take Mr. Goulburn's 3 per cents. to an equal amount in lieu of their own. They were at the time more valuable and I refused; but it would have been wise to accept, not because the event proved it so, but because the state of things at the time was so far doubtful as to have made this kind of insurance prudent.
For the benefit of the expert, I give Mr. Gladstone's further observations on this highly technical matter:—
I have other remarks to offer. I write, however, from memory. Three millions of the £8,000,000 were paid in exchequer bills. The difference between £100 and the price of consols at the time may, in argument at least, fairly be considered as public loss. You say it was 90 or 91. We could not, however, if the operation had not taken place, have applied our surplus revenue with advantage to the reduction of debt. The balances would have been richer by £5,000,000, but we had to raise seven millions for the services of the year 1854-5. Now, as I am making myself liable for the loss of half a million of money in repaying the South Sea Company, and thereby starving the balances, I am entitled to say on the other hand that the real loss is to be measured by the amount of necessity created for replenishing them, and the charge entailed in effecting it. This I think was done by the exchequer bonds: and beyond all doubt a large saving was effected to the public by raising money upon those bonds, instead of borrowing in consols at 84 or thereabouts, which I think would have been the price for which we should in that year have borrowed—say, at 84. The redemption price, i.e. the price at which on the average consols have been in recent times redeemed, can hardly I think be less than 95, and may be higher. There was in 1854 a strong combination in the City to compel a 'loan' by bearing the funds; and when it was defeated by the vote of the House of Commons, a rapid reaction took place, several millions, as I understand, were lost by the 'bear,' and the attempt was not renewed in 1855, when the loan was, I believe, made on fair terms, relatively to the state of the market.
In cabinet on Wednesday Lord John Russell opened the question of the Reform bill, stated the prospect of defeat on Sir E. Dering's motion, and expressed his willingness to postpone the measure until the 27th April. Lord Palmerston recommended postponement altogether. Lord Aberdeen and Graham were averse to any postponement, the latter even declaring his opinion that we ought at the time when the Queen's Speech was framed to have assumed the present state of circumstances as inevitable, and that, therefore, we had no apology or ground for change; further, that we ought if necessary to dissolve upon defeat in order to carry the measure. No one else went this length. All the three I have named were, from their different points of view, disposed to concur in the expedient of postponement, which none of them preferred on its merits. Of the rest of the cabinet, Molesworth and I expressed decidedly our preference for the more decided course of at once giving up the bill for the year, as did the chancellor, and this for the ultimate interest of the plan itself. Lord Lansdowne, Wood, Clarendon, Herbert were all, with more or less decision of phrase, in the same sense. Newcastle, Granville, and Argyll were, I believe, of the same mind. But all were willing to accept the postponement until April 27, rather than the very serious alternative. Molesworth and I both expressed our apprehension that this course would in the end subject the government to far more of censure and of suspicion than if we dealt with the difficulty at once. Next day Lord John came to see me, and told me he had the idea that in April it might probably be found advisable to divide the part of the bill which enfranchises new classes from that which disfranchises places and redistributes seats; with a view of passing the first and letting the latter take its chance; as the popular feeling would tell for the first while the selfish interests were provoked by the last. He thought that withdrawal of the bill was equivalent to defeat, and that either must lead to a summary winding up of the session. I said the division of the bill was a new idea and a new light to me; but observed that it would by no means help Graham, who felt himself chiefly tied to the disfranchising part; and submitted to him that his view of a withdrawal of the bill, given such circumstances as would alone induce the cabinet to think of it, was more unfavourable than the case warranted—March 3, 1854.
CIVIL SERVICE REFORM