the affairs of the company after their bankruptcy, there resulted, from this commutation and other circumstances, a reduction of the annual payment for interest and annuities which amounted to about 377,000l.

The profit of money employed in private loans continuing to diminish, Mr. Pelham was enabled to make a third reduction of the interest of the national debt in 1749, by which an annual saving was made of about 565,000l.

All these measures, if in each case the saving had been applied solely to pay off pre-existing debt, and "for none other use, intent, or purpose whatsoever," would have been very efficient.

If the original sinking fund had been strictly employed according to its original intention, it would have redeemed the whole funded debt which then existed, and which amounted to about 33,700,000l., within 36 years; and although the subsequent reductions of interest would have diminished the profit derived from employing the fund and its gains, yet they would have at once increased its amount so much as to shorten considerably the period in which its object would have been accomplished. Nothing indeed can be clearer than the meaning of the act by which it was established; but plausible reasons were given for the application of a portion of its revenue to pay the interest of new debts, and for other contingent purposes; and the conse-quence was, that little progress was made in redeeming the debt during peace, that in war it continued to accumulate, and at last, any regular system for redeeming it was abandoned, and no progress at all was made but by the casual employment of any surplus of the whole revenue which might be saved during a peace.

It may be doubted, whether the unfortunate deviations from the original plan, which took place at an early period, would have happened if there had been any thing alarming in the state of public credit. If at that time the transferable value of the stocks had been in a declining state from any causes, however foreign to the funding system, or the magnitude of the debt, a strict application of the whole sinking fund would have been ne cessary to quiet the fears of the public creditors; and periodical evidence would have been called for of the progress made in redeeming their depreciated property at its original value. But at that time circumstances, wholly unconnected with our national debt, contributed to lower very much the profit which could be made by lending money to private persons; and consequently, not only to increase the transferable value of all irredeemable incomes, but also of any others of which the repayment would probably be distant. It cannot be expected that there would be any strong

feeling of the propriety of an undeviating application of the sinking fund to its original purpose, at a time when the public creditors were necessarily more afraid of being called on to receive the money due to them, than that it never would be paid off at all. The state of the English public funds for many years was such, that the stockholders received much less than the legal rate of interest for their capitals invested in them. The great cause of this was the very low profit of money in a neighbouring country, with which, at that time, we had most extensive commercial and pecuniary connexions. By a long period of great industry, economy, and commercial prosperity, Holland had acquired an immense superabundance of capital, beyond what it could continue to employ at home with any adequate advantage. Wealth flowed to that country in abundant streams, not only from the profits of its industry, but from the profit of money lent to foreign merchants and governments.

The effects of superabundant riches differ very remarkably and nationally, according to the moral and, perhaps, constitutional temperament of those who receive them. Gold flowing from America to Spain, became there a welcome substitute for national industry, flowing away with equal rapidity to other countries, to purchase what national labour might easily have provided. Received in Holland it was considered as useless if hoarded, mischievous if wasted, and only valuable when so employed as to make a profitable return.

During the early part of the last century the commerce of Holland, having already passed its greatest extent, offered no increasing means of employing its continually increasing capital, which therefore must have remained unproductive in the chests of its proprietors, unless made profitable by lending it at interest. Cheapness was in this, as in all other instances, the consequence of a supply beyond the demand; and when the pacific state of Europe in general suspended the demand for money to pay unprofitable expences, while at the same time the gains by commerce, and the revenue of money already lent, occasioned an unceasing and undiminishing flow of it towards Holland, the necessary consequence was, a very great diminution of the profit to be obtained by lending it. Contented with small annual returns, rather than to let their capitals remain wholly unprofitable, the monied men in Holland continued to invest large sums in our funds, notwithstanding the reduced rate of interest, because it still continued higher than in their native country. To them, shares of our national debt were a much more convenient property than debts from private persons in a foreign country, and therefore they would be satisfied with smaller profit from them

than the common rate of private interest; and would oblige those among ourselves who might choose to purchase stock, to give as high a price as they were ready to do. At that time the very high credit, or rather marketable value of our stocks, was not so much a proof of our own prosperity as of the superabundance of capital in Holland; and the annual interest paid to that country absorbed a considerable proportion of the produce of our industry.

In such a state of things the successive reductions of the annual interest of the national debt were measures of obvious and unquestionable policy, and would have been exceedingly advantageous, if, instead of promoting an increasing indifference respecting the redemption of the debt, they had been accompanied by such regulations as would have preserved the original sinking fund in full activity. As the reduction of interest on the capital to be afterwards redeemed or repaid would have diminished the rate of increase of the sinking fund by compound interest, and as the amount of that diminution was a question of easy calculation, so much therefore out of the saving effected by these reductions might have been added to it as would have been a compensation for the diminution of its profit, and the remainder might have been fairly applied to the general use of the nation. Instead of this, the whole system was neglected.

We are the more desirous to impress these observations, because we can anticipate the recurrence of similar circumstances, and even to an extent which may make it difficult to carry on the progress of a sinking fund on any other than a very moderate scale; and altogether impossible to carry it on with the increasing rapidity of compound interest. On the former occasion, the operation was suspended before the experiment could fairly be tried; but it may hereafter be found, that the difficulty of employing the means of paying off a great national debt is at least equal to the difficulty of providing them; equally attended with such private inconveniences as are sure to be exaggerated by the clamours of faction, and alike productive of many moral and political disadvantages. We do not mean these remarks, and others which we shall hereafter make on the same subject, as adverse to the principle of a sinking fund when properly regulated, but as cautionary against the very dangerous opinion, that we may contrive to toil up-hill as speedily as we have descended, and need take no concern for the magnitude of debt contracted, relying on the omnipotence of compound interest for its easy redemption.

The two reductions of interest of the national debt, which have led to these remarks, can by no means be considered as having had for their primary object the diminution of the capital of the national debt by increasing the means of repaying it, although that

consequence might contingently have followed, but as intended to improve the revenue for general purposes. In fact, therefore, after the commutation of the temporary for perpetual annuities, which was a part of Sir Robert Walpole's original plan, and was the foundation of the South Sea scheme, no attempt was made to augment the sinking fund originally established, nor any one measure adopted to enforce its due application.

In this state it remained when Mr. Pitt became minister. A long and very expensive war had greatly increased the funded debt, and left an immense floating debt, at a ruinous discount, wholly unprovided for; the public credit was very low, the value of lands and of their produce had fallen, consequently, the value of the capital and income pledged for the payment of the interest and principal of the national debt seemed to be diminishing; many works of great expence which had been undertaken still remained half finished; and although there can be no doubt that some increase of the intrinsic wealth of the country had taken place, even during the war which led to these consequences, yet the pecuniary means of giving to it its usual commercial value were grown

scarce.

In this situation of things we do not so much extol the political courage of Mr. Pitt in proposing an efficient sinking fund (for some very strong measure to restore the opinion of the efficiency of the national resources was become necessary), as we feel the prudence with which he considered the defects of the mechanism of the plan adopted in the year 1717, and the good sense of the regulations by which he corrected them.

The most important defects in the mechanism of the plan adopted in 1717 were, that it did not separate the fund from the general account in such a manner as to make it ever after a distinct object of political observation; that it did not, by creating for it a separate administration, increase the ministerial difficulty of perverting it from its original purpose; and did not contemplate that the progress of such a fund, at compound interest, might increase to an unnecessary and even inconvenient extent.

When Mr. Pitt proposed his new sinking fund in the year 1786, the reductions which had taken place in the original interest of the ancient national debt, and the plan, which had been adopted to a great extent, of borrowing money at a low rate of interest on a capital of far greater nominal amount than the sum borrowed, made it necessary to propose that, instead of attempting to repay the existing debt according to its nominal value, a plan should be adopted by which it might be at all times redeemed according to its actual value, by employing fit agents to purchase stock at the market price for the public benefit. Well

́aware that the actual public revenue of Great Britain at that time was barely equal to the cost of a moderate peace establishment, and that without a real surplus of revenue any attempt to reduce the heavy load of national debt would be a mere illusion, he had the courage to propose an addition to the taxes great enough to allow of an annual payment of one million to commissioners appointed to act as managers for its employment in redeeming the debt, and as trustees for the portion of it which by these means might be transferred to them for the use of the nation.

Every precaution was adopted to provide that the new sinking fund should be so promptly and regularly employed as to derive the greatest practicable increase by the profit of compound interest, until it should have grown to such a magnitude as to make its future improvement no longer necessary, or even perhaps expedient. We are not aware of the reasons which induced Mr. Pitt to fix on the sum of four millions a-year as the highest amount of his fund, but it is evident from this limitation that he did not adopt the `profit of compound interest as a permanent and essential principle of his system, but only as a very convenient aid in augmenting his fund till it should become great enough to be afterwards employed in redeeming the remaining debt by equal annual payments. Though he readily and skilfully availed himself of every hope which his plan was calculated to excite, yet he had too strong a judgment to have adopted this restriction for no better reason than to display the remote prospect of a gradual and very slow diminution of the heavy burthen of the debt, after twenty or thirty years of patient submission to an additional million a-year. Nothing so frivolous could be the motive which prompted Mr. Pitt to introduce this very important restriction.

Every precaution was also taken by him to make the progress of redemption by his sinking fund as regular and as public as possible. Its management by being laid open might be constantly scrutinised by numberless persons well qualitied to detect any frauds or errors, and all temptation to misconduct was counteracted by the certainty that it must be discovered.

The progress of redemption might have been exactly the same, if, considering the stock purchased by the commissioners as cancelled, the periodical reports should only have stated the increase of the fund, omitting any statement of the capital redeemed; but their conduct would not in that case have been so distinctly laid open to public inspection, and the efficacy of the system would have been much less striking than by the method which has been adopted, because the sum redeemed so very much exceeds the sum employed, that the magnitude of the effect is far more in