' ;'• ■-•■A' V'-i ;,.<-'v;!ffl'it--%i)T«?'^ THE UNIVERSITY OF ILLINOIS LIBRARY 332 5875 V.26 teWWfBJ The person charging this material is re- sponsible for its return on or before the Latest Date stamped below. Theft, mutilation, and underlining of books are reasons for disciplinary action and may result in dismissal from the University. University of Illinois Library Jlil 1 m REFLECTIONS X ON THE FINANCIAL SYSTEM GREAT BRITAIN, PARTICULARLY ON THE SINKING FUND. WRITTEN IN FRANCE IN THE SUMMER OF 1812, BY WALTER BOYD, ESQ. SECOND EDITION. LONDON : J. HATCHARD AND SON, 187, PICCADILLY. 1828. P R E 1 A C E The following little Tract was written in the neighbourhood of Paris, during the summer of 1812, when Bonaparte's successes in the Rus- sian territories seemed to leave to Great Britain no alternative but a long succession of years of warfare. To none of all her numerous subjects was this prospect so truly distressing as to the author of this Tract. He was then passing the tenth year of his detention in France, under cir- cumstances more calculated to drive him to de- spair, than to lead him to look for consolation in any endeavour to be useful to his country. For in this long warfare, what expectation could he reasonably form, but that of a continuation of captivity ? Stifling, however, the sense of his personal sufferings, and elevating, as well as circumstances b'2 IV PREFACE. permitted, his mind to the importance of the subject, he employed his time, during several months, in establishing- a chain of reasoning, from assumed data (for such only he possessed) tending to shew the utility, and even the neces- sity, of some change in the management of the sinking fund, in order to derive from thence part of the permanent taxes, which an indefinite pro- longation of the war would necessarily require. His intention was to send his manuscript to England as soon as a safe opportunity for that purpose should be found ; but at a time when the conveyance of a single letter was very un- certain, it became difficult in the extreme to find the means of transmitting in safety, a packet of fifty folio pages. Before, therefore, any proper opportunity of sending it to England had offered, he learned, with a degree of pleasure and sur- prise, which it would be difficult to describe, that Mr. Vansittart had submitted to the House of Commons a Plan for a Modification of the Sinking Fund. The accounts of it, as given in the Paris papers, were not very intelligible ; but it was sufficient to know that the subject had PllETACE. been taken up by that right honourable gentle- man, to be perfectly persuaded that it would be as clearly and satisfactorily stated, as its objects would be found conducive to the public good. It appeared a very curious coincidence, that the same subject should thus have occupied, at the same time, the attention of two persons, re- siding in different countries, totally unconnected with each other, and placed almost at the two extremities of the scale of rank, fortune, and situation. This coincidence seemed to give to the doctrine inculcated by each, with such ine- quality of talent and information, but with so much similarity of purpose, a sanction to which truth only appears to be entitled. These considerations, joined to the opinion of the intimate friend to whom the manuscript was transmitted, *' that, it would be read with inte- rest on account of the circumstances under which it was written," will, it is hoped, be a sufficient apology for now recalling the attention of the public to a subject which may be considered, as in some degree, gone by. VI J'REFACE. The sinking fund, modified by Mr. Vansittart's plan, and brought back to the principles of the Act of 1792, holds out to the public creditor every reasonable security, while it assures to the country a gradual relief from taxation. Thus secured, on the one hand, against all encroachments beyond the limits fixed by law, and, on the other, against excess of accumulation, it becomes the permanent bulwark of British finance. The sacrifices which a war of unexampled dura- tion and expense has required of this country have indeed been immense ; and they have been borne with a magnanimity which is above all praise. The same spirit which dictated this ready ac- quiescence in every financial measure, while the war lasted, will, doubtless, prompt an equal com- pliance with those measures which the conse- quences of the war may still render necessary. The same high-minded people, who shrunk not from a war- expenditure on the most extended scale that ever the world saw, will bear without a murmur, those burthens which still may be neces- sary for the complete discharge of the debts of PREFACE. Vll every description which that war may have left unprovided for. What these burthens may be, it is not for one, now almost a stranger in his own country, to say ; but he is confident that, what- ever they may be, they will be supported with all the readiness which Britons have ever displayed in doing what their duty required to be done. Superior to all refinements of distinction be- tween one species of taxes and another, they will prefer those, of whatever denomination, against which the fewest objections really exist, and par- ticularly those which experience has demonstrated to be the most productive, and the least oppres- sive, to the great body of the people. Above the weakness of a quarrel of words about war and peace taxes, they will think only of the contribu- tions which the public exigencies may require ; and, knowing that these must be furnished, they will cheerfully acquiesce in the legislative mea- sures by which they may be established. After having viewed, for so many years, at a distance, and through the distorting medium of hostile prints, but with confidence unshaken, and Vlll PREFACE. hope unimpaired, the finances of this country, it is matter of great exultation to the author of this tract to find all that he hoped, and wished, and believed, on this subject, surpassed by what he has seen. Maddox Street, London, JO/// December, IS] 4. REFLECTIONS ON THK FINANCIAL SYSTEM OF GREAT BRITAIN. 8^c. Sfc. If there be a subject which circumstances seem to have placed more effectually than any other out of the reach of the author of the following pages, it is precisely that, of which he is going to treat. In order to write even a paragraph in a newspaper on finance, it is necessary that the author should be possessed of certain data, cer- tain authentic documents, upon which his reason- ings may rest. To pretend, therefore, to write in a foreign country upon the finances of Great Britain, after an absence of ten years from that country, and without any authentic documents whatever, may' appear to be a high degree of presumption. It is not, however, from an over- weening opinion of his own abilities, or from any hope of acquiring the smallest portion of applause, that he ventures, with so many disadvantages B against him, to communicate his reflections on the financial system of Great Britain. Far from supposing that his ideas will be adopted, he aims only at the inferior gratification of perhaps draw- ing the attention of others, better informed and more capable than himself, to a subject of vast importance to his country. If such should be the effect of his reflections, crude and imperfect as they necessarily must be, he may then, to a cer- tain degree, and in a very limited sense, apply to himself the words of a great poet of antiquity : — fungar vice cotis, acutum Reddere quse ferriim valet, exors ipsa secandi. The finances of Great Britain have long been a subject of controversy among the writers on political economy. They have long been the theme of despondency among the gloomy and discontented at home, and of much unfounded invective abroad. There is, perhaps, no subject less understood in foreign countries than the English system of finance ; a system which ena- bles the country to command the use of funds of inconceivable magnitude, which increase with the occasions that call them forth. It is not wonder- ful that such a system should be incomprehen- sible to the subjects of other countries, where the chief elements which compose it cannot possibly exist. But as it is not for foreign countries, but for England itself, that the present reflections are intended, it is not necessary to enter into expla- nations, which, to Englishmen, would be super- fluous. The author has already said that he is possessed of no authentic documents ; but he knows the principles upon which the public debts are con- tracted, and the provision for their redemption is founded ; and he has occasionally learned, though generally through channels little entitled to con- fidence, and never with much accuracy, the various financial operations which have taken place during the last ten years. Information so imperfect is altogether inadequate for furnishing an accurate view of the present situation of the finances of the kingdom ; but the reasoning which an assumed statement (however diff"erent from the real one) authorizes, may, perhaps, be fully as useful as that to which the most accurate official statement could lead. With these preliminary observations, he will at once set out with supposing, what he does not conceive to be very far distant from truth, that the total annual charge of the public funded debt is now to the annual fund for its redemption as three to one ; and, in order to be more easily understood, he will call the interest £.24,000,000 and the sinking fund 12,000,000 making thus the total annual charge £.36,000,000 n 2 which, if continued until the total extinction of the debt, must endure for the space of twenty- two years and a half, supposing the sinking fund to be improved annually at five per cent. ; for a little more than twenty-eight years, if only im- proved at four per cent. ; and for eighteen years and ten months, if improved at six per cent. ; compound interest.* Comparing this assumed statement with the real state of the debt at the creation of the sink- ing fund in 1786, we shall find that the annual million then established for extinguishing the then existing interest of £.7,831,838 was to the total charge of £.8,831,838 as 1 to 8.831,838, and con- sequently would have required to redeem the in- terest, if improved annually at five per cent., very nearly forty-five years. If, therefore, the annual charge of the public debt has, in the course * The sinking fund being improved quarterly, the following calculations show the difference between an annual and a quar- terly improvement of that fund, according to the assumption of its being one half the amount of the interest. Annual Improvement. Quarterly Improvement. Difference. Years. Months. Days. Years. Months, . Days. Y. M. D. At 3 per cent. 37 2 — 36 9 2 — 4 28 At 4 per cent. 28 1 9 — 27 7 6 — 6 3 At 5 per cent. 22 6 6 — 22 1 9 — 4 27 At 6 per cent. 18 10 7—18 5 11 -^ 4 26 But it was not supposed necessary, on the present occasion, to calculate on a quarterly improvement. of twenty-six years, been more than quadrupled, the provision for its redemption has been aug- mented twelvefold. If the country bear at pre- sent four times the burthen which it then bore, there is the consolation of knowing that it will not have to bear it for so long a time. If the country in 1786, looked with w^ell-founded con- fidence to the annual million, (exclusive of the other eventual funds that were to be applied to the same purpose,) for the extinction of the pub- lic debt, bearing an interest of £.7,831,838, it may now look with increased confidence to an annual fund of twelve millions for extinguishing the present debt, bearing, or supposed to bear, an interest of twenty-four millions. But, unfortunately, the present burthens must, in all probability, be followed by new ones. The annual charge of the public debt has not yet, it is to be feared, reached its maximum. New loans must be made, and new burthens laid upon the people ; and thus the final redemption of the public debt seems to become every year more distant. — Let us examine this point. Suppose that, by the continuation ofthe war, it should be found necessary to borrow yearly, for five years to come, twenty millions of money in a three per cent, fund at 60 : these loans would add to the present debt a nominal capital of £.i66,666,666|, bearing interest at three per cent., and conse- quently require annually for interest £.5,000,000 and one percent, of the nominal ca- pital for a sinking fund . . . 1,666,666 making- thus an additional annual charge of £.6,666,6661 But the present assumed sinking fund of twelve millions, if improved annually, at the same rate of interest, five per cent., would, in the same period, redeem an interest of £.3,315,372, and the sinking fund progressively established for the new loans would, in the same period, re- deem an interest of £.267, 303^: consequently the present assumed sinking fund of twelve mil- lions would, at the end of five years, be £.15,315,372 and the present unredeemed interest of twenty-four millions would be reduced to 20,684,628 making the present annual charge . £.36,000,000 The charge for the new loans would then be, for interest .... £.4,732,696 sinking fund .... 1,933,970 6,666,666 Total charge . . £ 42,666,666 And this total charge would then stand thus : interest £.25,417,324 sinking fund 17,249,342 £.42,666,666 which establishes the proportion between the total charge and the sinking fund at 2.47352 to 1. The present assumed sinking fund would, at five per cent., redeem the present debt in twenty-two years and a half. The sinking fund, at the end of five years, would redeem the then existing debt in less than nineteen years. Thus the grand object of the final redemption of the debt, although somewhat retarded by the new loans, would nevertheless still continue to make a gradual progress towards its accomplish- ment. Should the duration of the war be unfortu- nately extended to another period of five years, and fresh loans to the same amount again be ne- cessary, these loans would create a further addi- tion to the annual charge of the public debt of £.6,666,666, and consequently the total charge, at the end of this second period of five years, would be £.49,333,333. But, in the same period of five years, the sink- ing fund of £.17,249,342, improved at five per 8 cent, would redeem of interest . . £.4,765,658 and the sinking fund for the new loans would redeem .... 267,303 £.5,032,961 The interest which was £.25,417,324 augmented by the loans . 5,000,000 £.30,417,324 and diminished by the purchases .... 5,032,961 would then be £.25,384,363 The sinking fund, which was .... £.17,249,342 augmented by the inte- rest redeemed . . 5,032,961 and by the sinking fund for the new loans . 1,666,666 would then be £.23,948,970 £.49,333,333 and the total charge of £.49,333,333, would be to the sinking fund of £.23,948,970, as 2.06 to 1. .9 In other words, the sinking fund would then be only six per cent, of its amount less than the in- terest, and the period of redemption of the whole debt, at five per cent, interest, would then be less than fifteen years. Thus there would be borrowed two hundred millions of money, in a period of ten years, and yet the final redemption of the public debt, notwithstanding this large addition, would still be gradually advancing towards its accom- plishment. We have seen that the present assumed sink- ing fund of twelve millions would, if annually improved at five per cent, compound interest, re- deem the present assumed interest of twenty-four millions in twenty-two years and a half. We see, by the above statements, that, after adding to the annual charge £.13,333,333, the sinking fund, at the end of ten years, would redeem the total debt then existing, in less than fifteen years, from whence it follows that the progress of the re- demption of the public debt would not, by these new loans of two hundred millions of money, be retarded more than two years and a half. But supposing the annual sum to be borrowed, during the period of ten years upon which we have been calculating, should cost six per cent, interest, what would the consequence be ? The loans, if made in a three per cent, stock at 10 50, would create a new nominal capital of £.400,000,000, and require for interest £.12,000,000 and one per cent, of the nominal ca- pital for a sinking fund .... 4,000,000 £.16,000,000 which added to the present assumed charge of 36,000,000 would make the total charge . . £.52,000,000 But, at the end of these ten years, the sinking fund attached to each loan would, at the same rate of six per cent, have redeemed of inte- rest £.1,588,653 which deducted from the new interest of 12,000,000 would leave of new interest unre- deemed £.10,411,347 and the new sinking fund of £.4,000,000 augmented by the inte- rest redeemed . . . 1,588,653 would then be 5,588,653 making the total charge for the new loans £.16,000,000 11 During the same period of ten years, the pre- sent assumed sinking fund of twelve millions would, at the same rate of six per cent, redeem of interest £.9,490,164 whicli deducted from the present assumed interest of .... 24,000,000 would leave of the present interest unredeemed £.14,509,836 and the present assumed sinking fund of . . £.12,000,000 augmented by the inte- rest redeemed . . 9,490,164 would then be 21,490,164 making the present as- sumed charge £.36,000,000 While the total charge for old and new debt would stand thus : — interest £.24,921,183 sinking fund .... 27,078,817 £.52,000,000 Thus the proportion between the total charge and the sinking fund would be as 1 .92032 to 1 . We have already seen that, upon the suppo- 12 sition of borrowing at five per cent, the proportion would be as 2.06 to 1 : consequently there would be a greater progress in the reduction of the debt in the former than in the latter case ; because, in the first, a sinking fund of £.27,078,817 would, at six per cent., redeem an interest of £24,921,183 in eleven years and seven months ; while, in the latter case, a fund of £.23,948,989, to redeem, at six per cent, an interest of £.25,384,344 would require nearly twelve years and five months. Thus, the public debt, although augmented in its annual charge, might, in respect of the aug- mentation of the sinking fund, be considered as actually diminished, by borrowing at six instead of five per cent. ; at the expense, however, of an additional burthen upon the country of £.2,666,666. It may be said, in answer to this reasoning, that the making of new loans is necessarily at- tended with considerable expense, and that it is not to be expected that the sinking fund can be employed at the precise rate at which the loans may be made. To the first part of this objection the answer is easy. The charges of making new loans have always been considered, and, in such a statement as the present, must, of necessity, be considered as being comprehended in the general expenses of the year. In reply to the latter part of the objection, it is only necessary to say, that, neither the interest of the loans, nor that at which 13 the sinking fund may be improved, can, properly speaking, ever be supposed really to exist, with- out variation, for ten years together, at five per cent, six per cent, four per cent, or any other rate ; but the rates supposed are perfectly suffi- cient to demonstrate the necessary consequences of the financial system of the country, and to im- press upon the public mind the consolatory truth, that, if circumstances require the accumulation of fresh debt, that debt, though unavoidably at- tended with fresh burthens, still will be making considerable progress towards its extinction. If it were supposed that the sinking fund could only be improved at 5f per cent, while the loans were to bear six per cent, this would make a dif- ference, against the preceding calculations, of £.573,564 yearly produce of the sinking fund at the end of ten years ; and would be equivalent to an annual sum, during these ten years, of £.327,831, calculating interest at 5f per cent. In this point of view, the sinking fund, at the end of ten years, instead of being £.27,078,817, would only be £.26,505,253, and the proportion between the total charge of £.52,000,000 and the sinking fund of £.26,505,253 would be as 1.96187 to 1 ; and consequently, even after this large allowance for the difference between borrowing and buying up, the sinking fund would still sooner redeem the debt than that which would have 14 existed by borrowing at five per cent. It is not with the view of giving a preference to a high rate of interest that this comparative statement has been made ; but in order to shew, that when cir- cumstances call for a high rate, and consequently- heavy burthens, there is attached to this cruel necessity the consolation that they must neces- sarily be of shorter duration. This cursory view of the effects of the present financial system, seems to authorize the opinion, that the institution of the sinking fund is the most splendid and ingenious monument that ever was erected, in any age or country, to national honour and public faith. As such, it is entitled to, and doubtless will ever experience from the legislature, that sacred respect which'it so justly deserves. No man feels this respect in a higher degree than the Author of the present Reflections ; but he does not conceive that this respect will be diminished by considering the subject in some points of view in which he has not hitherto seen it placed. The annual charge of the public funded debt (here assumed as being thirty-six millions) with the augmentation, upon which we have reckoned in the space of ten years, must, according to one of the preceding hypothetical statements, at the end of these ten years, amount to fifty-two mil- lions of permanent expenditure, which must con- tinue until the provisions of the act of 1802 libe- 15 rate that portion of the charge which existed at the time of passing that act. Without any recol- lection of the amount of that portion of the charge, and consequently without the means of estimat- ing the period of its redemption, it may suffice for the purpose of the present view of the subject, to suppose this liberation as not likely to be ef- fected much within the space of twenty years. Now it seems to be a question, well deserving the serious consideration of public men, whether a perseverance in the present system, which bur- thens the country with the whole charge of the public funded debt, and with all the additions to it, during a period of twenty years, at the end of which time a very considerable part of it is to cease, be preferable to such a present modification of the sinking fund as may have the effect of gra- dually relieving the subject of taxes, as they have been, and may be, gradually imposed. This seems the more desirable, as the burthen of taxes must bear severely on the community, if the necessity of imposing new ones should con- tinue many years longer. The powers of the country may certainly still be stretched much beyond the extent of their present burthen; but taxation, like every other thing, must have its limits, and care ought to be taken that these limits should still be kept at a distance. The financial system of Great Britain 16 turns on three grand hinges : taxation, loans, and the sinking fund. It is the business of statesmen to take care that no one of these should be carried to too great an extent, ft is above all necessary that the first, as the root of the other two, should not be loaded above measure. There is something in the idea of an indefinite increase of taxes upon which the mind cannot rest with entire satisfaction, however strong the conviction may be of the existence of a similar indefinite increase of the powers of the country to pay them. The principle upon which the sinking fund is founded, presents the highest possible security to the public creditors, in so far as it requires that all the present burthens, as well as those that shall in future be imposed for paying the interest and providing for the re- demption of the public debt, shall continue to be borne until the whole debt be redeemed in the manner prescribed by the act of 1802. This principle, which does so much honour to the country, is, from its very excellence, attended with some inconveniences which must necessarily have the effect of defeating, to a certain degree, the object of its institution. For supposing the present debt to have reached the utmost extent to which the present war can carry it, and that ten years of peace were to take place, these ten years of peace would not surely allow the sink- 17 ing fund to be improved at a higher rate than four percent. Of course at the end of these ten years, the interest unredeemed would be £.18,237,072, and the sinking fund would be £.17,762,928; but the public charge would still be thirty-six millions. Now supposing that, at the end of these ten years, a new war were to break out, new loans would again be necessary, and the new burthens to which they would give rise, would be added to those already existing. If we carry our supposition even so far as to imagine the unredeemed interest reduced to six millions, and the sinking fund to be raised to thirty mil- lions, still the burthen of the whole thirty-six millions must, agreeably to the present constitu- tion of the sinking fund, be paid annually until the remaining six millions be bought up ; and although this might then be accomplished in little more than three years, yet if a war were then to break out, and fresh loans were necessarj'^, the whole thirty-six millions, together with all the new burthens, must still continue to be borne. It may be said that the sinking fund having risen to such a height. Parliament would naturally in- troduce some change, in order to reduce so dis- proportioned a burthen upon the public. No doubt it would, and thus from the very nature of things it seems to follow, that some modification of the sinking fund must one day become neces- c 18 sary. Now, instead of waiting until such modi- fication proceed from some such strong motive as that just alluded to, it seems to be much more expedient to adopt now such resolutions as shall have the effect of rendering all future modifica- tions unnecessary. What originally gave rise to the present sink- ing fund w^as the opmion of an ingenious writer who, believing a public debt to be destructive of the interests of the people, imagined a scheme for rendering its influence less hurtful, and for finally accomplishing its extinction. But the illustrious Statesman who first adapted to the finances of a great country, the luminous theory of Doctor Price, probably embraced a wider range of ideas than ever the Doctor had indulged, with regard to the use to which that theory might be applied. Mr. Pitt's penetrating mind probably even then foresaw that the sinking fund would not only be an excellent scheme for re- deeming the public debt, but that, in the hands of the government of a free people, it might be- come an instrument which would, at all times, give them an indisputable financial superiority over every other country. It is rather in this last point of view, than in the humbler, though certainly not less important one, of the redemp- tion of the whole of the public debt, that the sinking fund ought to be considered. The finan- 19 cial system of England, of which the sinking fund is a most important branch, is an instrument of public defence, which no other country ever did, or probably ever can, possess ; and there- fore the great object of public men ought to be, not so much the total redemption of the public debt, as the preservation of the whole financial system in a proper degree of strength and ac- tivity. With these principles, and these views, the Author has turned in his mind various Schemes by which the sinking fund may be maintained in a suitable degree of strength, while the country may avoid, in part at least, the pressure of tax- ation which the present constitution of the sink- ing fund must necessarily bring upon it ; and by which the relief of the subject may be perfectly compatible with all that is due to the public creditor. These various Schemes he submits to the con- sideration of his countrymen, with all the dif- fidence natural to a man, writing on so intricate and important a subject, with so few of the ne- cessary lights to direct him, and under such dis- advantages of every kind as would have deterred him from the attempt, had he not hoped to find in the application, which such a task necessarily re- quired, a powerful antidote to the painful feelings inseparable from his situation. c2 20 FIRST SCHEME. Let it be resolved, that the sinking fund, as it now exists, together with all such additions as shall be made to it by the funding of new debt, or otherwise, shall continue to operate, without any change whatever, for five years ; and that, at the end of that period, accounts shall be made out, and laid before Parliament, of the additions made to the annual charge for interest and for the sinking fund, and of the interest redeemed within that period ; of the interest then remaining unre- deemed, and of the amount of the sinking fund ; and that the then existing sinking fund shall be reduced to the same proportion to the then unre- deemed interest which the sinking fund now bears to the present unredeemed interest, and the sur- plus transferred to a separate account, in the name, and under the direction of the commis- sioners for the reduction of the national debt, to whom the issues for this separate account shall continue to be made, and by whom they shall be employed in the purchase of stock, as they would have been employed, had they remained part of the principal sinking fund, subject, however, to such appropriations as Parliament may direct to be made of the income of this separate fund. Applying the principle of this resolution to the 21 first preceding statement, in which we supposed twenty millions to be borrowed annually, during five years, at five per cent, and the unredeemed interest, at the end of that period, to be £.25,417,324 and the sinking fund to be . . . 17,249,342 it follows of course that an unredeemed interest of £.25,417,324, would only require for a sinking fund the half of its amount . . £.12,708,662 and the sinking fund being . . 17,249,342 there would be a surplus of . . £.4,540,680 Now suppose this annual sum, issuing out of the permanent taxes, to be appropriated by Par- liament to supply the place of new taxes, by five annual portions of £.908,136, the whole of that sum would be exhausted at the end of that pe- riod ; but there would remain a new permanent income of £.526,258, which would be derived from the purchases of stock during the intervals, before the different appropriations could take place. By this mode of reduction, the inconve- nience of withdrawing from the sinking fund so large an amount of permanent income at once, would, in a great degree, be avoided ; and by leaving the income acquired by the purchases of the separate fund, as part of the unredeemed in- terest, another inconvenience would be avoided. 22 namely, that of subjecting that income to a fresh reduction, by swelling the sinking fund and dimi- nishing the interest, at the next statement, by which the sum to be reduced for the saving of f .526,258 would, in fact, be £.789,388, that is to say, IJ of its amount. Applying the same principle to the next period of five years, in which we supposed the same loan of twenty millions a year to take place, we shall find that the annual charge, as fixed at the end of the preceding five years, for interest unredeem- ed £.25,417,324 sinking fund 12,708,662 separate fund 4,540,680 together . £.42,666,666 would be augmented by the interest of the new loans of twenty millions a year £.5,000,000 and by the sinking fund attached to them . . 1,666,666 £S,666,666 deduct the taxes derived from the separate fund 4,540,680 2,125,986 and that the total annual charge would then be ' . . £.44,792,652 23 which would stand thus at the end of these five years : the interest which was £.25,417,324 augmented by the new loans 5,000,000 £.30,417,324 and diminished by the interest redeemed by the sinking fund of £.12,708,662 . £.3,511,154 and by the new sink- ing fund for the loans . 267,303 3,778,457 would then be £.26,638,867 and the sinking fund which was . . . £,12,708,662 augmented by the fund for the new loans . 1,666,666 and by the interest re- deemed .... 3,778,457 would then be 18,153,785 making the total charge .... £.44,792,652 Now, an unredeemed interest of £.26,638,867, requiring only a sinking fund of half its amount £.13,319,433 and the sinking fund being . . . 18,153,785 there would be a surplus of . . £.4,834,352 24 which, transferred to the separate fund, would admit of five annual appropriations of £.966,870; and in the following five years, supposing the same annual loan of twenty millions to take place, the total charge for interest, sinking fund, and separate fund £.44,792,652 would be augmented by the interest of the new loans . £.5,000,000 and the sinking fund at- tached to them . . . ], 666,666 £.6,666,666 deduct the taxes derived from the separate fund 4,834,352 making: the total annual 1,832,314 charge . £.46,624,966 which would stand thus : the interest which was £.26,638,867 augmented by the inte- rest of the new loans 5,000,000 £.31,638,867 diminished, by the interest redeemed by thesinkingfund of £.13,3 19,433, £.3,679,906 and by the interest re- deemed by the fund attached to the new loans 267,303 3,947,209 25 would then be £.27,691,658 and the sinking fund which was . . . £.13,319,433 augmented by the fund for the new loans . 1,666,666 and by the interest re- deemed .... 3,947,209 would then be 18,933,308 making the total charge . . . £.46,624,966 Now an unredeemed interest of £.27,691,658, requiring only a sinking fund of half its amount £.13,845,829 and the sinking fund being . . 18,933,308 there would be a surplus of . . . £.5,087,479 which, transferred to the separate fund, would admit of five annual appropriations of £. 1 ,01 7,495 ; and in the five following years, supposing the same annual loan of twenty millions to take place, the total charge for interest, sinking fund, and se- parate fund £.46,624,966 would be augmented by the interest and sinking fund for the new loans £.6,666,666 deduct the taxes derived from the separate fund 5,087,479 1,579,187 making the total annual charge . £.48,204,153 26 which at the end of these five years would stand thus : the interest which was £.27,691,658 augmented by the new loans 5,000,000 £.32,691,658 diminished by the interest redeemed by the sinking fund of£.13,845,829 £.3,825,339 and by the sinking fund of the new loans . . 267,303 4,092,642 would then be £.28,599,016 and the sinking fund which was . . . £.13,845,829 augmented by the fund for the new loans . . 1,666,666 and by the interest re- deemed 4,092,642 would then be 19,605,137 £.48,204,153 An unredeemed interest of £.28,599,016, re- quiring only a sinking fund of half its amount £.14,299,508 and the sinking fund being . . . 19,605,137 there would be a surplus of . . . £.5,305,629 27 which, transferred to the separate fund, would admit of five annual appropriations of £.1,061,125. Now let us consider the effects of the mode of appropriation by portions of twenty per cent, per annum of the permanent income withdrawn from the sinking fund. The interest redeemed, but considered as unre- deemed, during the first five years after the sup- posed commencement of the Scheme we have already stated, at £.526,258 the interest redeemed in the second period of five years would be . . 705,694 the interest redeemed in the third pe- riod of five years would be . . 929,999 making in all £.2,161,951 Now, if from the unredeemed inte- rest of £.28,599,016 we deduct the above sum of . . 2,161,951 the unredeemed interest will be . £.26,437,065 and if to the sinking fund of .... £14,299,508 we add the above sum of interest redeemed 2,161,951 the sinking fund will be .... 16,461,459 £.42,898,524 28 Consequently, the sinking fund will be fifteen per cent, more, in proportion to the unredeemed inte- rest, than the present assumed sinking fund is in proportion to the present assumed unredeemed interest ; and the fund of £.16,461,459 would re- deem the interest of £.26,437,065 in less than nineteen years and eight months, reckoning inte- rest at five per cent. We began by assuming that the present total charge of the public funded debt was to the sinking fund as three to one ; and that the sinking fund, improved at five per cent, would redeem the interest in twenty-two years and a half. The calculations which we have just made, shew, that after a period of twenty years, in which we have supposed four hundred millions of money to be borrowed, creating an additional charge of £.26,666,666, and making, with the present as- sumed charge of £.36,000,000, a total charge of £.62,666,666 ; £.19,768,140 of permanent income may be withdrawn from the sinking fund, and yet that there may still be left such a fund for the extinction of the interest, then remaining unre- deemed, as shall establish the proportion between the total charge and the sinking fund at 2.606 to 1 ; which fixes the period of redemption, at five per cent, at nineteen years and eight months. Consequently, after all these large deductions from the sinking fund, it would still have been making a certain progress towards the great object of its 29 institution, as the period of redemption would then be two years and ten months shorter than, according to our assumption, it is at present. SECOND SCHEME. The preceding Scheme might be rendered more analogous to the spirit which seems to have dic- tated the various resolutions of the legislature, re- lative to the sinking fund, if Parliament were to resolve that, at the end of every five years, the sinking fund should only be reduced to the same proportion to the total charge which it now bears. The following calculations will shew the effects of this change in the principle of reduction. At the end of the first period of five years, the total charge of the public funded debt, agreeably to the assumption upon which we proceeded, was £A2,666,666 To maintain, therefore, the proportion assumed as now existing between the total charge and the sinking fund, of three to one, there ought to be left a sinking fund equal to one-third of the charge, which would be £.14,222,222 and the sinking fund, at the end of five years, being 17,249,342 there would only be a surplus of . £.3,027,120 30 Now, supposing this sum to be carried to the separate account, and the same to be appropria- ted, by five equal portions of £.605,424, during the five subsequent years ; and supposing also the same annual loan to take place, the total charge of £A2,66Q,(^Q6 would be augmented by the interest and sinking fund for the new loans . . £.6,666,666 deduct the taxes derived from the separate fund 3,027,120 3,639,546 making the total charge . . . . £.46,306,212 Which, at the end of that period, would stand thus : the interest, which was £.25,417,324 augmented by the loans 5,000,000 £.30,417,324 and diminished by the interest redeemed . 4,196,641 would be : £.26,220,683 the sinking fund which was £.14,222,222 augmented by its own purchases .... 3,929,338 by those of the new sinking fund . . . 267,303 31 and by the new sinking- fund itself . . . 1,666,666 20,085,529 ^.46,306,212 The third part of the charge of . . . ^.46,306,212 being ^.15,435,404 and the sinking fund being . . . 20,085,529 there would be a surplus of . . ^.4,650,125 which, transferred to the separate fund, would admit of five annual appropriations of .£'.930,025, during the five subsequent years, in which, sup- posing the same annual loan of twenty millions to take place, the total charge of . £*. 46,306,2 12 would be augmented by the new loans . £,6,666,666 deduct the taxes derived from the separate fund 4,650,125 2,016,541 making the total charge . . . £'.48,322,753 which, at the end of that period, would stand thus : the interest, which was £".26,220,683 augmented by the loans £".5,000,000 and diminish- 32 ed by the pur- chases . . 4,531,812 468,188 would then be ^.26,688,871 The sinking fund, which was . . . =^.15,435,404 augmented by its own purchases. . . . 4,264,509 by the fund for the new loans . . . ], 666,666 and by its purchases . . 267,303 would then be ^.21,633,882 =^.48,322,753 The third part of the charge of £.48,322,753 being .... £.16,107,584 and the sinking fund being . . , 21,633,882 there would be a surplus of . . . £.5,526,298 which, transferred to the separate fund, would admit of five annual appropriations, during the subsequent five years, of £.1,105,259, towards the taxes necessary during that period. The total charge of .... £48,322,753 would, in the course of the five sub- sequent years, supposing always the annual loan of twenty millions to take 33 place, be augmented by the interest and sinking fund for the new loans £.6,666,666 deducting the taxes de- rived from the sepa- rate fund .... 5,526/298 1,140,368 making a total charge of . . . .^f'. 49, 463, 121 which, at the end of that period, would stand thus : the interest which was ^£'.26,688, 871 augmented by the loans ^.5,000,000 and diminish- ed by the pur- chases . . 4,717,522 282,478 would then be d?.26,97 1,349 The sinking fund, which was . . . ^.16,107,584 augmented by its own purchases . . . £4,450,219 by the fund for the new loans . . . 1,666,666 and by its purchases . . 267,303 would then be £.22,491,772 making the total charge . . . £.49,463,121 D The third part of this charge being ^.16,487,707 and the sinking fund being . . . 22,491,772 there would be a surplus of . . ■£'.6,004,065 which, transferred to the separate fund, would admit of five annual appropriations, in aid of taxes, of £".1,200,813. Having thus carried this statement to the same length as that of the First Scheme, it remains now to bring to account the permanent income ac- quired by the separate fund, during the intervals before the appropriations could take place, and which would, at the end of the three periods of five years each, amount to . . . £'.1,898,994 if therefore from the unredeemed in- terest of 26,971,249 we deduct that sum, the unredeemed interest will be £^.25,072,255 and if to the sinking fund of .... £'. 16,487,673 we add that sum . . 1,898,994 the sinking fund will be ... . 18,386,667 £".43,458,922 Consequently the sinking fund, after withdraw- ing from it £'.19,207,608 of permanent income, would still be upwards of forty-six per cent, more in proportion to the unredeemed interest, than the a? 35 present assumed sinking fund is to the present assumed unredeemed interest ; and as the pro- portion between the total charge and the sinking fund would be as 2.36361 to 1, the period of re- demption at five per cent, would be seventeen years, seven months and a half. We have already seen that the period of redemption of the present assumed interest of twenty-four millions, by the assumed sinking fund of twelve millions is, at five per cent, twenty-two years and a half. The period of redemption of the interest of £.25,072,255 by the sinking fund of £.18,386,667, being seventeen years, seven months and a half, it follows of course that, notwithstanding the immense sum of per- manent income withdrawn from the sinking fund, its progress would still have been so considerable as to have shortened the period of redemption very nearly five years. Having thus estimated the eff'ects of these two Schemes, by which the sinking fund maybe safely rendered productive of relief to the country from the pressure of taxation, it may be proper to com- pare with their results the state of the public debt, at the end of twenty years, if no change whatever take place in the operation of the sinking fund, and upon the supposition that loans, at the rate of twenty millions a-year, were to be funded in a three per cent, stock at 60, as supposed in the preceding statements. D 2 36 The unredeemed interest now as- sumed as existing f .24,000,000 would be augmented by the interest of £.666,666,666f three per cents. 20,000,000 £.44,000,000 the assumed sinking fund of ... . £.12,000,000 would be augmented by the hundredth part of the nominal capital created .... 6,666,666 18,606,666 making the total charge .... £.62,666,666 which would stand thus : the interest as above stated .... £.44,000,000 diminished by the pur- chases 24,745,891 would be £.19,254,109 the sinking fund . . £.18,666,666 augmented by the pur- chases 24,745,891 would be 43,412,557 making the total charge . . . £.62,666,666 and the proportion of the total charge to the 37 sinking fund would be as 1.44351 to 1, thus making the period of redemption at five per cent, seven years and a half. By the last of the two Schemes proposed, which is the most favourable to the speedy extinction of the debt, the period of redemption, at the end of twenty years, would, as we have seen, be seven- teen years, seven months and a half; and thus there is a decided preference due to the sinking fund, as it now exists, in so much as it presents the prospect of completing the redemption of the debt sooner by ten years, than the best of the two new modes could accomplish it. But the burthen to be borne by the country for carrying into effect the speedier redemption of the debt would, in the course of twenty years, be constantly increasing from thirty-six millions to £.62,666,666 while the burthens to be borne, by the other mode, would only be aug- mented from thirty-six millions to 43,458,922 difference £.19,207,744 Without entering into the examination of the possibility of such a sinking fund as £.43,412,557 operating upon a debt of £.19,254,109 of interest, existing for a single day as an improveable fund at five per cent. ; without estimating the value, in 38 ready money, of an expenditure of £62,666,666 for seven years and a half, and that of an expendi- ture of £.43,478,262 for seventeen years and a half, (which, it is humbly presumed, would be foreign to the real question which ought to engage the attention of public men on such an occasion,) the author willingly leaves the decision to the good sense, public spirit, and honourable feelings of Englishmen, whether upon the whole, the ge- neral interests of the community would be most promoted by a perseverance in the present system, or by the adoption of one or other of the Schemes proposed, or some other modification, calculated to keep down, as much as may be deemed con- sistent with the prosperity of the financial system of the country, the accumulation of new taxes. In deciding this question, although they will cer- tainly never lose sight of the precious advantages to be derived from the effects of compound interest in the reduction of the public debt, yet it is to be hoped that they will not be solely governed by that consideration. Ignorant, as the author is, how the public mind may relish ani/ change in the management of the sinking fund, and desirous, above all things, that what may be deemed most conducive to the ge- neral interest and comfort of the country may, on this, as on all other occasions, be adopted ; he will now add to the suppositions he has already 39 made, that of a case which seems highly probable. The two new Schemes proposed may be thought too wide a deviation from the principles laid down for the conduct of the sinking fund ; and many very enlightened men, though approving a modi- fication of that fund, may, however, consider that the degree to which it has been proposed to carry it, may be attended with disagreeable conse- quences. If such should be also the opinion of those who are more immediately to decide upon such a question, it is probable that every suffrage may be united in favour of the following modifi- cation of the First Scheme, as being in strict conformity with the respect hitherto observed for the sinking fund. THIRD SCHEME. Let the First Scheme be adopted, but with this important difference, that the permanent income withdrawn from the sinking fund shall be annually funded, and the like amount annually issued by government to replace the same to that fund. By this change, the measure proposed would, in fact, have no other effect upon the ultimate object of the sinking fund than any other addition to the public debt must necessarily have. Let it be supposed then, that the sums annually withdrawn from the sinking fund were to be re- 40 placed to that fund by annual loans in a three per cent, stock at 60, with the accustomed proportion of sinking fund attached to each ; and that the charge arising from these loans were to be defrayed by the public, it is evident that the sinking fund would thus remain in uninterrupted possession of its whole income, notwithstanding the annual ap- propriation of those parts of it, in aid of taxes, which might be transferred to the separate fund. Applying this principle to the annual income of £.4,540,680, supposed to be transferred, at the end of five years, to the separate fund, and to be appropriated by annual portions during the five subsequent years, of £.908,136 each, the loans, during these five subsequent years, for replacing to the fund the income withdrawn from it, would amount to £.13,622,040, creating a capital in three per cents, of £.22,703,400, and bearing interest £.681,102 and requiring a sinking fund of . . 227,034 making an additional charge of . . £.908,136 During the course of these five years there would be redeemed of the new interest by the sinking fund attached to each loan .... £.27,849 therefore the interest of £.681,102 would be reduced to 653,253 £.681,102 4i The sinking fund of . £.227,034 augmented by the purchases 27,849 would then be £.254,883 and the unredeemed interest would be 653,253 making the total charge .... £.908,136 At the end of the same five years, the separate fund of £.4,540,680, though deprived of the whole of this permanent income, yet maintained, by the new loans, in the possession of its whole annual amount, would have redeemed of in- terest £.1,254,501 which added to its annual income . 4,540,680 would make its permanent and an- nual income £.5,795,181 The loans for replacing to the sinking fund, during the next five years, the income withdrawn from it, would amount to £.37,206,450, creating a capital, in three per cents, of £.62,010,750 bearing interest £.1,860,322 and requiring a sinking fund of . . . 620,107 making an additional charge of . . £.2,480,429 to which, if we add the former charge of 908,136 the total charge will be ... . £.3,388,565 42 which, at the end of five years, would stand thus : the unredeemed interest which was ....£. 653,253 augmented by the loans 1,860,322 £.2,513,575 diminished by the interest redeemed .... 160,757 would then be £.2,352,818 the sinking fund for the ad- ditional loans, which was £.254,883 augmented by its own pur- chases 70,149 by the new fund for the loans 620, 1 07 and by its purchases . . 90,338 would then be 1,035,747 making the total charge .... £.3,388,565 and the separate fund composed, as above stated, of ^.5,795,181, augmented by ^.4,834,352, would, in the course of these five years, have redeemed of interest ^£'.2, 936,738, and consequently would then amount to i^*. 13,566,271, viz. permanent income i£*.4, 191,239 annual income ....... 9,375,032 ^.13,566,271 ^ ^ In the course of the next five years, the loans for replacing to the sinking fund the income with- drawn from it, would amount to ;£'.62, 137,757, creating a capital in three per cents, of ^.103,562,625, bearing interest £'.3,106,878 and requiring a sinking fund of . . 1,035,626 £.4,142,504 which added to the former charge of 3,388,565 would make the total charge . . £.7,531,069 which, at the end of these five years, would stand thus : the unredeemed interest, which was £2,352,818 augmented by the loans £.3,106,878 and diminished by the purchases .... 442,659 2,664,219 would then be £.5,017,037 the sinking fund, which was £.1,035,747 augmented by its own purchases .... -286,157 by the fund for the new loans 1,035,626 and its purchases . . 156,502 would then be 2,514,032 making the total charge .... £.7,531,069 44 And the separate fund of £. 13,566,27 1 , augment- ed by £.5,087,479, would in the course of these five years, have redeemed of interest £.5,153,676, and consequently then amount to . . £.23,807,426 viz. permanent income £.9,344,9 1 5 annual income . . 14,462,511 £.23,807,426 And the effect of this modification of the First Scheme upon the w^hole debt would be as follows : By the First Scheme, the unredeemed interest, at the end of fifteen years from its adoption, was £.28,599,016 the additional loans would have add- ed to it 5,648,302 £.34,247,318 the separate fund would have redeemed . . £.9,344,915 and the funds for the loans would have redeemed 631,265 9,976,180 consequently the unredeemed in- ■ terest w^ould be £.24,271,138 the sinking fund, which was £.14,299,508 augmented by the fund for the additional loans 2,514,032 and by the interest re- deemed by the sepa- rate fund .... 9,344,915 would then be 26,158,455 £\50,429T593 45 and the proportion of the total charge to the sink- ing fund would be as 1.92785 to 1 ; consequently the period of redemption, at five per cent, would be thirteen years, five months and a half. Such would be the effect of this measure, con- ducted upon the established principles observed by the public towards the sinking fund. Certain portions of permanent income would have been withdrawn from that fund ; but the actual issues to it would not have been diminished, and its progress towards the object of its institution would have been retarded by these additional loans only in the same degree as it would have been retarded by similar additions to the public debt for any other purpose, and without touching, in any re- spect, the income of the sinking fund. As these loans, however, would have chiefly for object to maintain, unimpaired, the income of the sinking fund, in order not to obstruct its progress in the extinction of the public debt, it may not be unim- portant to consider by what means these loans may be dispensed with altogether, while the pub- lic may avoid the same sum of permanent taxes, and yet the progress of the extinction of the public debt may be equally promoted. This may be effected in the following manner : Let the whole annual expense which the pro- posed additional loans would occasion to the pub- lic for interest, and the sinking fund, attached to 46 each of them, be paid annually to the sinking fund, or (which is more simple) be retained by the se- .parate fund, and not only the same but a greater effect would be produced in the extinction of the public debt than would be produced if the loans were to take place, and the income of the sinking fund were thereby to be constantly maintained unimpaired, for the fund formed by the interest and sinking fund which would be necessary for these loans, if they were to take place, must, if improved at five per cent, have precisely the same effect upon the general state of the sinking fund (with no additional interest to buy up), which a sinking fund equal to the amount of any annuity improved at five per cent, must necessarily have upon such annuity, that is to say, that of anni- hilating such annuity in the space of fourteen years, two months and a half. The object of the fund proposed being to put the sinking fund in the same situation in which it would be placed, if its income were to be constantly kept up by these additional loans ; to produce that effect, it is ne- cessary that the interest and sinking fund of these imaginary loans, improved at five per cent, should leave the general sinking fund and the general in- terest exactly the same, as they would be, if the loans were actually to take place. Now this effect would be produced by the proposed fund in the space of fourteen years, two months and a half; 47 and consequently, at the end of fifteen years, the interest remaining unredeemed must be less, and the amount of the sinking fund greater than they would be if the additional loans were actually to take place, by ^.359,168, which is the interest of the proposed fund, amounting, at the end of four- teen years, to ^£".9,577,291, for the remainder of the year, or nine months and a half. By the preceding calculation we have seen that, by the intervention of loans for maintaining the income of the sinking fund, the unredeemed in- terest, at the end of fifteen years, from the adoption of the Scheme, would be . . . ^.24,271,138 By the operation of the fund pro- posed, in order to render the loans unnecessary, the unredeemed interest would be reduced to 23,911,970 consequently there would be more interest redeemed in the latter case than in the former ^^.359, 168 The permanent income of the sinking fund which, by the intervention of loans, was found at the end of fifteen years to be ^.26,158,455 would, by the substitution of the pro- posed fund, acquire an addition of 359,168 £.26,517,623 while the unredeemed interest would be 23,9 11,970 total charge £.50,429,593 48 making the proportion of the total charge to the sinking fund as 1.90173 to 1, and the period of redemption, at five per cent, thirteen years and two months. Supposing this state of things realised, at the end of fifteen years from the adoption of the Scheme, or of twenty years from the present time, it may surely be presumed that nobody would then think it necessary to carry on, for a longer time, the measure of compensating to the sinking fund the income withdrawn from it. With a fund exceeding the amount of the redeemable interest by £.2,605,663, it would certainly be the unanimous opinion of Parliament and of the pub- lic, that no further compensation would be neces- sary either for the former reduction, or for the one then to be entered upon of £.5,305,629, of which, although then deducted from the general charge, the public would only enjoy the advantage in the five following years. Thus far the several Schemes proposed for de- riving relief from the pressure of taxation have all been formed upon the principle of their beginning to operate only in five years hence. The author's ignorance of the true state of the public resources at the present moment, must apologise for put- the case, (which he is, however, far from suppos- ing a probable one,) that the five years upon which he has all along been reckoning, as being 49 to precede the adoption of any of the ideas sug- gested, should be considered as a period of equal difficulty with any of those which may succeed it. His ignorance also of the state of the public mind, must apologise for his supposing that per- haps this may not be considered as a favourable moment for agitating the question of any change whatever in the management of the sinking fund- Should either or both of these possible cases actually exist, he trusts that the following suggestions will be favourably received, as tending to derive an im- portant and most legitimate resource for diminish- ing the pressure of taxation. This resource, he conceives, may be found by annually converting a part of the tax on income (which is an annual tax during the war) into a permanent tax, and providing for the deficiency of revenue, occasioned by such conversion, by an annual addition to the public loan. Supposing it resolved then, to convert annually, during five years, £.600,000 of the tax on income into a permanent tax, and to replace to govern- ment the amount of revenue thus withdrawn, by an annual addition to the public loan, this measure would furnish, during these five years, towards the permanent taxes to be provided during that period £.3,000,000 subject, however, to the deduction for interest and sinking fund, which 50 the additions to the annual loan would require 600,000 making of net addition to the per- manent taxes £.2,400,000 This addition to the permanent taxes would not, in any degree, augment the present pressure of taxation, seeing it would only be, under a new form, part of the burthen which the country now bears. The charge of the public funded debt, which we have supposed to be, at the end of five years £A2,666,666 would be augmented by this measure as follows : by the interest of these additional loans, which, in five years, would amount to f .9,000,000 £.450,000 and by the sinking fund which they would re- quire 150,000 . ■ 600,000 which would make the total charge £.43,266,666 which, at the end of five years, would stand thus : the unredeemed interest, which, with- out these loans, was .... £.25,417,324 augmented by these ad- ditional loans . . . £.450,000 51 and diminished by the purchases of the fund attached to each of them 1 8,40 1 431,599 would then be £.25,848,923 and the sinking fund, which, without the additional loans, was found to be £.17,249,342 augmented by the fund for the additional loans 1 50,000 and by its purchases . 18,401 would then be . . .~~. '. '. ' 17,417,743 making the total charge . . . £.43,266,606 Supposing the operation to be continued for another period of five years, in which £.900,000 of the tax were to be annually converted into a permanent tax ; this new conversion, together with the continuation of the former, would furnish, during these five years, towards the permanent taxes for that period £.4,500,000 subject to the deduction for interest, on the additional loans, which would amount to £.28,500,000 . . £.1,425,000 and for the sinking fund which they would re- quire 475,000 1,900,000 net addition to the permanent taxes £.2,600,000 E 2 and the charge for the whole debt, at the end of these five years, would stand thus : the unredeemed interest of £.25,848,923 augmented by the loans of twenty millions a- year 5,000,000 and by the additional loans of £.28,500,000 1,425,000 £.32,273,923 and diminished by the purchases .... 5,147,190 would then be £.27,126,733 The sinking fund, which was £.17,417,743 augmented by its own purchases . . . • 4,812,191 by the fund for the loans of twenty millions a- year 1,666,666 and by its purchases . 267,303 by the fund for the addi- tional loans .... 475,000 and by its purchases . 67,696 would then be 24,706,599 making the total charge . . . £.51,833,332 53 which would make the proportion between th,e total charge and the sinking fund to be as 2.09795 to 1, and the period of redemption, at five per cent, fifteen years, two months and seven days. We have seen that, at the end of ten years from the present time, upon the supposition that twenty millions a-year were to be borrowed at five per cent, the sinking fund would redeem the interest then remaining due in less than fifteen years. The exact period would, in fact, be four- teen years, nine months and twenty-two days. Therefore we are warranted by the preceding calculation to say that the operation of the addi- tional loans, during ten years, would only retard the progress of the sinking fund in the redemp- tion of the public debt four months and a half. Let us now consider the efi'ect of the measure upon the burthen to be borne by the country. The taxes which, without the measure pro- posed, would, agreeably to the supposition upon which we have all along gone, be £.13,333,333 and would be increased by the interest and sinking fund for the additional loans . £.2,500,000 but, as there would be derived from the mea- sure, permanent taxes to the amount of . . 7,500,000 54 there would, in fact, be a saving of taxes of 5,000,000 and consequently there would be to provide only £.8,333,333 Now, let it be supposed that, at the end of these ten years, the blessings of peace were re- stored to the country, it would surely, in that case, be much more easy and agreeable for the public then to remain burthened with a part of the tax on income, of which they now bear the whole, than to be loaded, during ten years of war, in addition to what they now bear, with the taxes,, which the proposed Scheme would render unne- cessary. It would then be for the consideration of Par- liament to determine, whether the portion of the tax on income, rendered permanent, should remain so, or be replaced by permanent taxes of some other description. It would then also be matter of con- sideration, whether any, and what reduction of the sinking fund should then take place. The measure which we have just considered, could never be objected to as encroaching upon the sinking fund, as its income would all along remain untouched, and all its rights be respected ; yet if the whole of the net permanent taxes which would be procured by the proposed measure were 55 simply to be withdrawn from the sinking fund, without any compensation whatever, during ten years, the progress of that fund in the reduction of the public debt would be still greater than if the measure proposed were to take place, by £.108,233 of interest, corresponding to a capital of £.2,164,660. This must necessarily be the case, agreeably to what has already been said,, upon the means of dispensing with additional loans for replacing to the sinking fund the income proposed to be withdrawn from it. In the pre- sent case, it would be more advantageous to the sinking fund to furnish the whole permanent in- come which would be derived from the conversion of the tax on income, than to allow the loans, which it would require, to take place. It was demonstrated, that if the interest and sinking fund required for the additional loans were paid to, or retained by, the sinking fund, and thus no additional loans were to be made, that fund would redeem more interest than if the loans were to take place, and its income were thereby con- stantly maintained unimpaired. It follows, there- fore, that if, instead of taking the gross amount of permanent income, rising during ten years from £.600,000 to £,7,500,000, and paying back the proportional charge during the same period, rising from £.40,000 to £.2,500,000, the net amount of permanent income were withdrawn, rising from 56 £.560,000 to £.5,000,000, the effect to the sink- ing fund and to the public must necessarily be the same. If further proof of this obvious truth be required, it will be found by calculating the value of the net income withdrawn from the sinking fund, which, at the end often years, will be found to be ^.6,634,138, which establishes the inte- rest that would have been redeemed by the ^.5,000,000 taken out of the fund at £.1,634,138 now the interest which the sinking fund, without any diminution, would have left unredeeemed at the end of ten years, being 25,384,363 the interest unredeemed, after with- drawingthese £.5,000,000 of income, must be £.27,018,501 the interest, which would be unre- deemed, at the end of ten years, if the additional loans were to take place, would, as we have seen, be 27,126,734 which makes the difference, already noticed, between making, and not making, the additional loans . £.108,233 Supposing then, that instead of annually con- verting into a permanent tax, part of the tax on 57 income, during ten years of war, it were resolved to take, during these ten years, the net amount of permanent taxes which that measure would supply, directly from the sinking fund, and to engage to the sinking fund, at the end of that pe- riod, the gross amount of that part of the tax on income which would have been converted, the public debt, at the end of these ten years, agree- ably to the principles on which we have all along calculated, would stand thus : the unredeemed interest would be ^.27,018,501 the sinking fund which (without any diminution,) would have amounted to ^.23,948,970 less the sums withdrawn and their compound interest .... 6,634,138 £.17,314,832 add the gross amount of permanent taxes to which the fund would be entitled .... 7,500,000 24,814,832 total charge £.51,833,333 which would make the proportion between the total charge and the sinking fund as 2.088 to 1, 58 and the period of redemption, at five per cent, fif- teen years, one month, and two days, being one month and five days less than if the additional loans had taken place. Such would be the effect of this measure, if it should appear necessary, at the end of ten years of war, and upon the return of peace, to continue the burthen of i^*.?, 500,000 in order to raise the sinking fund from ^.17,314,822 to ^.24,814,832. If this should then appear unnecessary, the public debt would stand thus : the unredeemed interest would be ^.27,018,501 the sinking fund would be . . 17,314,822 making the total charge . . . ^£".44,333,333 And the proportion of the total charge to the sinking fund would be as 2.56042 to 1, and the period of redemption, at five per cent, nineteen years and a quarter. CONCLUSION. On an occasion in which a reduction of the sinking fund has been considered in so many points of view, it may appear extraordinary that no mention has been made of the plan, originally 59 adopted in 1786, for preventing the excessive accumulation of the fund, and which, if the author's memory may be depended upon, con- sisted in fixing a certain amount of annual in- come, beyond which the fund was not to accu- mulate. This annual income, he believes, was four millions, including the annual million origi- nally vested in the commissioners for the reduc- tion of the national debt. As well as he recol- lects, it was provided, that as soon as the sinking fund should reach this ma.vimum, the interest of the stock purchased thereafter was no longer to be issued, and consequently taxes, to the amount of such interest, were annually to be taken off. The truth is, that this mode, however judicious and adequate to all the purposes in contemplation at the time when it was adopted, seemed much too slow and ineffectual for affording that relief to the subject which the large additions made to the public burthens, during the last twenty years, seemed to require. Another obvious scheme of reduction, by ap- plying the sums to be taken from the sinking fund, to diminish the amount of the annual loans, he likewise declined from a similar motive. It will remain with those who know the real state of the public resources, to determine how far he has been right in doing so, and whether any of the ideas which he has ventured to suggest. 60 for affording relief from the pressure of taxation, may, under all the circumstances of the country, be applied, either now, or at some future period, to produce this effect. Of calculation there has been more than most people will have the patience to attend to. It is indeed a dry and ungrateful subject, from which the public at large turn away with disgust ; but it was necessary to sanction suggestions so novel in appearance, and so important in their conse- quences, by the authority of figures, which in matters of finance, is paramount to all argument whatever. There are, however, other considerations, be- sides those within the province of calculation, which well deserve attention. The borrowing- system owes its origin to the desire of sparing to the public, as much as possible, the burthen of taxes, which, but for its invention, must have withdrawn from the industry of the country a very large portion of those pecuniary means which have carried that industry to the astonish- ing pitch it has attained to. In proposing, there- fore, a modification of the sinking fund, in order to alleviate the pressure of taxation, raised by un- avoidable causes to its present height, there is nothing which ought to alarm ; there is no room for deprecating innovation, for innovation there would be none, in adapting to present circum- 61 stances the principle which is coeval with, and actually gave rise to, the funding system. By raising money upon loan for a large proportion of the public exigencies, our ancestors thought, and thought wisely, that the money so borrowed, in order to leave a like amount in the hands of an ingenious and industrious people, would, in fact, be improved to an advantage infinitely superior to the consideration of the interest paid for it. If this be true with regard to loans which required only the payment of interest, it must be at least equally true, with regard to the public debt, as now constituted, of the charge of which the fund for its redemption forms so considerable a part. Much has been said and written of late years On the increase of prices, which has been imputed by some to one cause, and by some to another ; but the warmest partisan of any of the assigned causes, cannot deny that the augmentation of taxes has had a considerable share in such in- crease. Any measure, therefore, (not inconsist- ent with good faith and the general financial pro- sperity of the country,) which is calculated to keep down the augmentation of taxes, ought to be cordially supported by all parties. Not one of the various modes now suggested for attaining that desirable object, can justly be deemed the ofi"- spring of party spirit ; for the author is altogether, as well by situation as by principle, beyond the 62 reach of party. Not one of them can justly be considered as tending to favour a dereliction of the principle of the sinking fund ; of which, as far as his very limited means have permitted, he has always been a strenuous defender. In proposing to lop the luxuriance of that fund, when it seems to counteract the very object of its institution, his own mind is as clear of all intention to weaken the respect due to that admirable institution, as the general feeling of the public would be ad- verse to such intention, if it were possible to exist. He is, however, well aware of the plausibility with which objections may be made to any reduc- tion whatever of the sinking fund. The example of the abuses which crept into the management of what so undeservedly bore the name of a sink- ing fund in former reigns, and even during part of the present reign, will be produced as a proof of the danger of diverting any part of the present fund from its declared destination. In answer to all such objections, it is only necessary to observe, that the various modes now proposed for modify- ing the present sinking fund are, all of them, cal- culated to guard against such abuses as prevailed in the management of the former one. By esta- blishing beforehand certain fixed regulations, which are to determine the nature and extent of the resources to be derived from the sinking fund, the great complaint against former abuses will be 63 completely done away. It is not proposed that the present fund should be (what the former so often was) a convenient resource for supplying occasional calls for money. It is not meant that this fund should be used as a substitute for bor- rowing; but that such part of it as Parliament, in its wisdom, shall think an unnecessary burthen upon the public, shall be applied to the diminu- tion of taxes. It is not to be a convenient mode of affording occasional ease to ministers; but, in proportion to the progress actually made in the reduction of the public debt, it is to afford a regu- lar and systematic relief to the subject. There is still another point of view in which a modification of the sinking fund will, perhaps, appear to be not less important to the real inte- rests of the public creditor than to the relief of the subject. If the fund be allowed to operate, with- out reduction, until it become equal, or perhaps, superior to the interest to be redeemed, the effect must infallibly be to diminish materially the value of capital. The author of the present Reflections is far from subscribing to the sophistical doctrine which holds up to view the sinking fund, having for object the payment of the public debt, as big with all the dangers to capital, which probably might attend a fund having no object but accumulation ; but he is nevertheless convinced that, in order to maintain the value of the capital restored to the 64 public creditor by means of the sinking fund, it is necessary to guard against e.vcess in its operation. This is no more than is necessary to be observed in the use of every comfort, in the exertion of every faculty, and in the application of every principle for the benefit of mankind. THE END, IBOTSON AND PALMER, PRINTERS, SAVOY STREET, STRAND. *>1*. ttih^' v:J:\^-