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and appropriated as would not only pay the annual interest, but give a surplus sufficient to repay the money borrowed during the period of its continuauce and appropriation.
By the first of these acts 1,928,5701. was borrowed, and the annual sam of 135,0001., during 39 years, was appropriated, being (with the excess of a very small fraction) six per cent. for interest, and one per cent. to pay off the principal.
But one per cent. annually employed to pay off portions of the principal debt at six per cent. interest, together with the redeemed interest in like manner employed, or in other words, one per cent. per ann., improving at six per cent. compound interest, was not quite enough to extinguish the debt within the period limited, and the deficiency was made up by an adequate addition to the annual suin appropriated by the second act of the same year.
By that act 2,602,2001. was borrowed, and the annual sum of 186,6701. was appropriated. Six per cent. for interest, and one
per cent. for a sinking or redeeming fund, as provided in the former instance, would only have required an appropriation of 182,1541.; but one pound a year, improving at the rate of six per cent. compound interest, would not amount to 1001. in less han alniost 33, instead of 32 years. It was therefore necessary 'either fo prolong the terni, or a little 'increase the annual appropriation, and the latter course was adopted. By adding 4,5161: a year on this occasion, a sufficient provision was inade (if strictly employed) to pay off both
the debts within the limited term.
Principal borrowed. Debe created. Sinking Fund. By the first act
19,285 By the 'second àct 2,000,000 2,602,200 30,538
By both united
These united funds, improved at six' per cent. compound interest, would, in 32 years, amount to 4,328,3921. 16s., or only 2,3771, 4s. less than the sum to be discharged; but as some of the duties imposed for this purpose were to take place at an earlier time than the commencement of the interest, this circumstance more than compensated the above-mentioned small deficiency.
It is evident, therefore, that in the very first commencement of our funded debt, the principle, though not the name, of a sinking Sund, was systematically adopted, and the appropriation to pay off each debt respectively was, in the first instance, at the rate of one per cent of the debt to be redeemed, and afterwards, just so much more as (if duly employed) might pay it off in about 32 years. We have been the more desirous to explain fully the principle and extent of the provision to pay off debt contracted as it was first introduced by Mr. Harley, on account of its remarkable agreement with the plan of Mr. Pitt in the year 1792, to provide for the separate redemption of every debt which might after that time be funded, by an annual appropriation of one per cent. in proportion to the capital created. In this first instance, the money borrowed was only, as already stated, 1,500,000l., but the appropriation was one per cent. on the debt funded.
Not long after the peace of Utrecht various plans were proposed for accelerating the repayment of the whole national debt; and the great reduction of the rate of interest at which money might be borrowed by private persons, naturally suggested that by a similar reduction of the interest paid by the public an important annual saving might be made, which might be advantageously employed in redeeming the principal inoney of the national debt.
Sir Robert Walpole was at that time chancellor of the exchequer, and as a preliminary step to such a reduction he had obtained an act' for reducing the legal rate of interest on all private debts from six to five per cent. "In March 1716-7, he introduced his plan in the House of Commons, and fourteen resolutions were agreed to, which if they had afterwards been adopted in their full extent would have provided the means of paying off the whole debt, including the temporary annuities, within about 35 years.
A part of his plan was to commute the temporary annuities for redeemable capital at five or four per cent. interest, whichever, according to the terms proposed, might be most agreeable to the present proprietors of them. But a change of ministers took place before the bills, founded on his resolutions, were introduced, in consequence of which this important part of his plan was abandoned.
On this occasion tliree acts were passed, by one of which several former funds, which had been created to pay the interest and principal of certain debts, were united into a general fund, and a provision was enacted to make good any detieiency of it in any quarter of a year in which it might happen, out of the first aids granted by parliament.
The amount of this general fund was 724,3191. 6s. 10d. The two other bills related to the reduction of interest paid to the bank and the South Sea Company.
As very considerable mistakes have been made respecting the produce of the sinking fund, established by these bills, we have referred to the Journals of the House of Commons, and the va
rious acts which bear on the question, and we believe the following statements are very nearly correct.
The general fund was made up in the following manner: Aunual sums appropriated for interest and
to repay the capital of debts contracted in 1711 and 1712, by lottery loans
£657,676 00 Average surplus of taxes imposed on account
of those debts, which was now added to the previous appropriation.
27,317 11 Annual sums which had been appropriated to pay bankers' annuities
39,855 15 75
724,849 6 10 In the first of these annual sums was included 104,8061., ori
ginally appropriated beyond the interest of the capital debts created and added to repay them, and also 22,3991. 15s. which was the amount of interest of debt that had been paid off.
Various debts were charged on this general fund, for which no provision had been previously made, or the temporary taxes appropriated to them had expired. By the recital in the South Sea Act (6th Geo. I. 1719) it appears, that the total charge for interest of the original debts, on account of which parts of this fund had been previously appropriated, amounted to £476,717 17 8
And for the debts added by authority of the act, including two large sumns for deficiencies 102,036 13 2 and army-debentures And by two subsequent acts
5,539 0 31
584,293 11 11
The author of the History of Debts and Taxes states this sumas only $ 20,0001. a year; and Rapin more nearly at 570,5801.
The surplus, therefore, made applicable to pay off the debts charged on this fund was
140,555 15 818
The difference saved by the bank reduc: } 130,332 9 11}
tions was .
And by the South Sea reductions
The surplus of the general fund was made subject to any deficiencies of the South Sea fund below the original appropriation of 608,000l.; and on the other hand, might be increased beyond the amount of 724,8491. 6s. 10 d., if the taxes should produce more than that sem, for it was provided that the whole surplus
produce of those taxes, beyond the interest payable out of them, should be applied to pay the principal money, and that any deficiency below this sum in any year should be supplied out of the general revenue.
It is evident, therefore, that (subject to variation from these causes) the original sinking fund amounted to 370,8881. 55. SZ.d. We know not on what grounds Sir John Sinclair has stated its actual amount at 686,0001. only, and Professor Hamilton at only 323,4391., for it appears by the recitals in the act 5th Geo. I. when
part of the produce of the new sinking fund was applied to assist in paying off exchequer bills held by the bank, that during the preceding year its amount had been as follows:
General fund £320,436 15 1126
19,577 10 0
196,444 18 31
536,459 4 220
As the clause in the general fund act, by which these surpluses were appropriated, has been more than once incorrectly quoted, we give the words as they stand in it. The clause enacts, " that all the monies to arise from time to time as well of or for the excess or surplus of an act made this session for redeeming the funds of the governor and company of the bank of England, and of or for the excess or surplus by virtue of one other act made likewise this session for redeeming the funds of the governor and company of merchants of Great Britain trading to the South Seas and other parts of America, and for encouraging the fishery, as also of or for the excess or surplus of the duties and revenues by this act appropriated as aforesaid; and the overplus monies of the said general yearly fund by this act established, shall be appropriated, reserved, and employed to and for the discharging the principal and interest of such national debts and incumbrances as were contracted before the 25th day of December 1716, and are declared to be national debts, and are provided for by act of parliament, in such manner and form as shall be directed and appointed by any future act or acts of parliament, to be discharged therewith or out of the same, and to or for none other use, intent, or purpose whatsoever."
The next considerable reduction of the interest of the national debt was connected with the South Sea scheme, by means of which the part of Sir Robert Walpole's original plan that related to a commutation of the temporary annuities was carried into effect; and at length, by the ultimate arrangement in settling the affairs of the company after their bankruptcy, there resulted, froin this commutation and other circumstances, á reduction of the annual payment for interest and annuities which amounted to about 377,0001.
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 565,0001.
All these measures, if in each case the saving had been applied solely to pay off pre-existing debt, and “ for none other use, iittent, 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 . 33,700,0001., 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 consequence 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 systen, or the magnitude of the debt, a strict application of the whole sinking fuud 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