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 A LETTER 
 
 LORD GRENVILLE, 
 
 SINKING FUND. 
 
 THOMAS PEREGRINE COURTENAY, Esq., MP. 
 
 LONDON : 
 JOHN MURRAY, ALIJEMARLE STREET. 
 
 MDCOCXXViri.
 
 LONDON : 
 PRINTED BY WILLIAM CLOWES, 
 Stamford-Street.
 
 PREFACE. 
 
 It is perhaps necessary to assure the reader that, 
 although the following observations proceed from 
 a person who holds an office under His Majesty's 
 Government, they express only the sentiments of 
 the individual writer. 
 
 He is entirely ignorant of the opinions enter- 
 tained by the Cabinet, or by the Ministers of 
 Finance, upon the great financial question now 
 at issue. 
 
 He thinks it also necessary to apologise for the 
 length of this tract. He was desirous of giving 
 a full, historical, explanation of the system of 
 finance, established by Mr. Pitt the author of the 
 Sinking Fund ; and he was also desirous of pursu- 
 ing Lord Grenville's argument, point by point. 
 He fears that the connexion of these two purposes 
 has occasioned repetition.
 
 CONTENTS. 
 
 Sect. Page 
 
 I. Introduction . . . . .1 
 2 Principle of the Sinking Fund , . . . 7 
 
 3. On the Essay, Chap. I. — Necessity of a Surplus Re- 
 
 venue for the support of a Sinking Fund . .12 
 
 4. History ofthe Sinking Fund of 1716 . 22 
 
 5. Mr. Pitt's system of Finance; Sinking Funds of 1786 
 
 and 1792. . . . . .30 
 
 6. On the Inutihty of borrowed Sinking Funds ; and In- 
 
 efficacy of Sinking Funds operating in War . 38 
 
 7. On the Essay, Chap. II. — Operation and results of 
 
 the present Sinking Fund ; — its benefit consisting in 
 the release of previously appropriated taxation . 48 
 
 8. On nominal Capitals given for money borrowed . 51 
 
 9. On the operation of the Fund, as supported by sur- 
 
 plus taxation . . . .54 
 
 10. On the reduction of Debt, as effected by mere ex- 
 changes of Equivalents. Compound Interest . 55 
 
 II. On the Essay, Chap. III. — Attempted Permanence 
 
 and frequent Interruption of the System . . 59 
 
 12. On the benefits of Compound Interest; provisions 
 adopted for giving permanence to the Sinking Fund 
 of 1786 ..... 61
 
 Vm CONTENTS. 
 
 Sect. Page 
 
 13. On the actual Failure of these endeavours ; history of 
 
 Mr. Pitt's Sinking Fund, 1786 to 1793 ; effects of 
 taxes, and their repeal ... 63 
 
 14. Sinking Fund during the war of 1793 . . 79 
 
 15. Modification of the Sinking Fund in 1802 . 89 
 
 16. Sinking Fund in the war of 1803 . . . 92 
 
 17. Modification of the Sinking Fund in 1813 . 93 
 
 18. The Sinking Fund during the present period of peace ; 
 
 Repeal of Taxes ; Deadweight . . .100 
 
 19. Alleged Failure of the System generally . . 108 
 
 20. On Lord Grenville's conclusion ; supposed advantages 
 
 of the Sinking Fund . . . . .113 
 
 21. Concluding Observations and Suggestions . 118
 
 LETTER 
 
 LORD GRENVILLE, 
 
 My Lord, 
 
 Though not unused to political contro- 
 versy, I undertake, with unfeigned diffidence, 
 the task of commenting upon your Lordship's 
 Essay. I never read an appeal to the public, 
 more likely to produce the effect which it 
 contemplated. Your authority as a states- 
 man, great for the last forty years, is 
 strengthened and embellished by the ab- 
 sence of personal interest. The ingenious 
 malignity, often effectual against ministers, 
 cannot impute to your Lordship, retired 
 among your pines, and disconnected from 
 parties, any other motive than that which 
 you avow ; — a desire to advise your country 
 
 B
 
 " in a discussion of urgent interest, and per- 
 manent importance." 
 
 The advice, moreover, penetrates willing 
 ears, because it tends to reconcile duty and 
 inclination. Its effect is to relieve govern- 
 ment from an invidious task, and the country 
 from a burdensome obligation. I will not 
 say, considering your lordship's peculiar 
 situation, that these circumstances justify a 
 distrust of the advice ; but I do submit, that 
 they detract much from the value of the 
 testimony which is borne to the soundness 
 of that advice, by the sympathy, and the 
 applause, with which it is received : at the 
 least, I may urge them as a part of my own 
 justification, for setting forth my doubts as to 
 the wisdom of the counsel. 
 
 I am painfully sensible of the inequality of 
 the contest in which I engage. The opinions 
 of a subordinate official man have no extrinsic 
 value ; they can derive no weight except from 
 the force of the arguments which support
 
 them. Nor could I with perfect confidence 
 repel an imputation, that they are tinged 
 with prejudice. I do not wish to deny, that 
 my notions of public finance were formed in 
 the school of Mr. Pitt, the author of the 
 measure which it is now proposed to con- 
 demn; of that great and amiable man I 
 have an affectionate remembrance which has 
 tempted me, in the society of his successors, 
 to exclaim : 
 
 " Heu ! Quanta minus est cum reliquis 
 versari, quam tui meminisse T 
 
 This feeling, I own, has generated an un- 
 willingness to admit, that his principles, in 
 any branch of pohtical science, were funda- 
 mentally wrong and dangerous. I make this 
 admission, because, though probably neither 
 Lord Grenville, nor the public, knows enough 
 of my history, to lead either to ascribe my 
 opinions to this prejudice, there are those in 
 high places who, being aware of the perti- 
 nacity with which I have, for more than five 
 
 B 2
 
 and twenty years, advocated the principles 
 of Mr. Pitt's Sinking Fund, (though I have 
 certainly modified some of my notions as to 
 their application) may detract, on that ac- 
 count, even from such weight as belongs to 
 my opinion. All that I desire is, that while I 
 claim no credit for the deep and continued 
 attention which I have bestowed upon the 
 matter in question, my suggestions may not 
 receive less than their due consideration, be- 
 cause the opinions on which they rest were 
 learned in youth from an admired master. 
 
 Your Lordship deprecates an imputation 
 opposite in its kind. I subscribe readily and 
 heartily to the forcible observations, which 
 you have made, upon the arrogation of poli- 
 tical consistency. No doubt, it is peculiarly 
 absurd, for us who make a daily boast of 
 the progress of science and intelhgence, and 
 thereupon justify important changes, to con- 
 fine each individual man to the opinions 
 which he may have originally formed or im-
 
 bibed ; whatever may be the duration of his 
 life, or the variety of his experience. Accord- 
 ing to this plan, error has a life-estate in 
 every living mind ; the heir may discard it, 
 but the existing possessor must sustain it. 
 
 From your Lordship, apologies for incon- 
 sistency were quite unnecessary ; but here 
 again, I must make a distinction between 
 him who gives, and those who follow, the 
 advice. Pre-conceived opinions, and the doc- 
 trines inculcated by departed authority, may 
 unquestionably lead to a dangerous persist- 
 ance in error ; but there is another danger, 
 not entirely to be disregarded; the very 
 progress of improvement, and the habit of 
 discarding opinions formerly sacred, engender 
 an aptitude to dissent, and a love of paradox. 
 Some men, afraid of giving too much weight 
 to opinions consecrated by time or authority, 
 are tempted to give too little. T am per- 
 suaded that, among a great portion of the 
 House of Commons, and of literary and poli-
 
 tical writers of the present day, contradiction 
 to an opinion received twenty years ago, 
 would be the characteristic of a doctrine 
 most likely to ensure its reception. 
 
 Again, exaggeration on one side, produces 
 depreciation on the other. A measure or a 
 doctrine truly wise or sound, is commonly 
 praised even far beyond its merits, and, 
 usually, praised ignorantly and inaccurately. 
 This has been eminently the case of the Sink- 
 ing Fund ; its invention has been spoken of as 
 an effort of genius, and its operation as a 
 work of enchantment. It is not unnatural, 
 that the real beauty of a figure so tawdrily 
 disguised, should not always receive the 
 praise, which it deserves in its native sim- 
 plicity. 
 
 It appears to me that, as well in the form- 
 ation of your judgment, as in the argument 
 in which it is conveyed, you lay too much 
 .stress upon adventitious and incidental circum- 
 stances ; you combat opinions which are un-
 
 justly imputed to your opponents : above all, 
 you entirely neglect the fundamental princi- 
 ple of the measure which you condemn. You 
 have, therefore, not presented to the public 
 the question which they are required to de- 
 cide. This view of the defects in your lord- 
 ship's treatment of the great subject of con- 
 troversy, emboldens me to offer the following 
 observations. 
 
 §2. 
 
 You have no where, as I humbly submit, 
 distinctly stated the true principle of the sink- 
 ing fund; this is, — That the Legislature ought 
 not to impose a perpetual burdeii upon the 
 resources of the country. Those who have 
 the supreme power of the state at any parti- 
 cular period, ought not, indefinitely, to anti- 
 cipate the means wherewith their successors 
 are to administer its affairs. They must not 
 provide for the expenses to which they are 
 subject, by a perpetual mortgage of the rcn-
 
 8 
 
 tal and income of the people, for all ages 
 to come. They must, themselves and their 
 existing constituents, bear the additional bur- 
 den, which is necessary to avoid such per- 
 petual or indefinite anticipations. 
 
 These maxims, which in truth are only 
 various expressions of the same meaning, 
 constitute, as I suggest, the principle of the 
 sinking fund ; that upon which it is endea- 
 voured to give to arrangements for redeeming 
 the public debts, the character of sacred obli- 
 gation, and fundamental law. 
 
 I may be under a prejudice, or a delusion, 
 but I own that the principle appears to me 
 to be obviously just. 
 
 It is, indeed, only the application to the 
 whole rental and resources of the country, of 
 a principle which our law has, by repeated 
 acts, imposed upon all those individual or 
 corporate proprietaries, which have a perpe- 
 tual succession ; upon the crown, for instance, 
 and the church. A corresponding restriction
 
 is voluntarily imposed by the acts of indivi- 
 duals, who leave their property to more than 
 one heir in succession ; all, but the last, (and 
 in the case of the state, the crown, or the 
 church, there is no last) are limited in their 
 power of charging the land, for jointures, 
 marriage portions, and other perfectly legiti- 
 mate expenses : still more, in their power of 
 mortgaging it for personal debts. 
 
 Distinctions might, unquestionably, be 
 shown between these cases and that of the 
 state ; but I am the more confident in using 
 them as illustrations of my position, because 
 your lordship has correctly observed that " a 
 reference to similar transactions in private life 
 is the best of all instruments for the discovery 
 of truth in political economy."* 
 
 There is, indeed, a class of public debts to 
 which the limitation of duration is applied 
 by law. Parishes, and sometimes, I believe, 
 counties, are empowered to raise money for 
 
 * Essay, p. 41.
 
 10 
 
 certain public purposes, by anticipation of 
 their rates ; parliament has never thought fit 
 to allow of a perpetual charge upon these 
 funds. The power of charging is, usually, for 
 twenty-one years, within which time, the debt 
 must be discharged, either by the original 
 terms of the loan, or by the application of a 
 sinking fund. Yet the purposes for which 
 this charge is permitted, are not usually ephe- 
 meral ; and a perpetual mortgage might be 
 allowed, with, at least, as much reason as in 
 the case of a national debt. 
 
 The sovereign power of the state is un- 
 controlled by laws ; humanly speaking, it is 
 omnipotent ; but it surely will not be con- 
 tended that those who exercise it are not 
 under an obligation, I would even say a moral 
 obligation, to regard the interests of their 
 successors and descendants. If the payment 
 of taxes is burdensome to the people, and 
 the operations of finance are difficult to the 
 legislature, it is not just or equitable for the
 
 11 
 
 occasional holders of the power, to relieve 
 themselves by imposing that burden and 
 difficulty upon those who are to follow them. 
 It is quite unnecessary to consider here, in 
 what degree taxes are an evil ; because, if 
 they are not so, and if there be no difficulty 
 in raising them, we can have no excuse, nor, 
 indeed, any advantage, in borrowing money 
 for our own expenses, and throwing the in- 
 terest upon posterity. The measure which 
 we take to ease ourselves of the weight, 
 proves that it is a burden disagreeable to be 
 borne. 
 
 It is strange, indeed, to listen to what one 
 frequently hears, an objection to sinking funds, 
 as attempts to bind posterity. Do not those 
 who make the objection, does not your lord- 
 ship, perceive, that the law of the sinking fund 
 only imposes upon posterity an obligation, 
 from which, at most, they may rid themselves 
 by a sacrifice of uniformity or consistency ; 
 while the obligation imposed by the law
 
 12 
 
 which creates a perpetual annuity, can only 
 be renounced through a breach of faith ? 
 
 Thus much, preliminarily, on the principle. 
 I will now follow your lordship through the 
 details of your argument ; and shall have fre- 
 quent occasion to enforce and illustrate the 
 fundamental doctrine, the maintenance of 
 which is essential to the greater part of what 
 I shall offer, in opposition to your several pro- 
 positions. Perhaps, the arrangement which 
 you have made of your argument, is not the 
 most convenient for discussing the question 
 in reference to that doctrine ; but I still think 
 it best to pursue the Essay through its regular 
 course, as well in deference to your lordship, 
 as because it contains very few observations 
 which are not worthy of separate notice. 
 
 §3. 
 
 You begin by laying down as a rule, " The 
 " necessity of a surplus revenue for the sup-
 
 13 
 
 " port of a sinking fund*." And from this 
 you, naturally and reasonably, deduce the two 
 further positions ; the one affirming " The 
 " inutility of borrowed sinking fundsf ;" the 
 other, *' The inefficacy of sinking funds ope- 
 " rating in war J." 
 
 According to my principle, the parliament 
 which raises money by anticipation of the 
 revenue, is limited as to the period for which 
 the mortgage is to endure. The plainest and 
 simplest mode of effecting this limitation is, 
 by borrowing money upon an annuity, to exist 
 only during the limited period. When this 
 mode is adopted, we pay for the money bor- 
 rowed a temporary interest, exceeding, per- 
 haps, by a fifth or a sixth, that to which we 
 should be liable if we agreed to pay the 
 interest for ever. This excess necessarily 
 obliges us to appropriate, if it exist, or to 
 create by taxation, if it do not exist, so 
 much of surplus revenue. And there is in 
 
 * Essay, p. 5. t p. 7. J p. 12.
 
 14 
 
 this case no question ; the whole money must 
 be raised, or we are bankrupts ; but there is 
 no reason for raising any further surplus with 
 a view to redemption. The sinking fund is 
 inherent in the original annuity. 
 
 I would here stop to ask your lordship, 
 whether, if it were practicable, without loss, 
 to raise all our loans upon such terminable 
 annuities, you would think it unadvisable so 
 to raise them ? I am really not aware, how 
 you would answer this question; but I am 
 sure that you perceive at once, that an an- 
 swer in the affirmative, implies an adherence 
 to my position, that we ought to subject our- 
 selves to additional taxation, in order to 
 lighten the burden upon posterity. 
 
 I would almost venture further to ask you, 
 whether it would not have been beneficial to 
 England, if there could have existed, during 
 the last century, a fundamental and irrepeal- 
 able law, limiting the power of parliament in 
 its mortgages of the revenue ?
 
 15 
 
 However, no such constitutional limitation 
 does or can exist ; and there are, we know, 
 practical difficulties in the way of borrowing 
 upon terminable annuities: the lenders are 
 unwilling to take such annuities, at their 
 proportionate value to perpetuities. In bor- 
 rowing, therefore, upon them, we not only 
 incur an additional charge, as before stated, 
 for the sake of redemption, but we also pay 
 for this unwillingness of the lenders. 
 
 It is not to our present purpose to inquire, 
 whether there has not been sometimes a too 
 ready acquiescence in this unwillingness ; I 
 pass then to the other mode, by which the 
 limitation of the mortgage is to be effected. 
 
 This mode consists, in borrowing upon a 
 perpetual annuity ; setting apart, in addition 
 to the interest, so much of revenue as will 
 redeem the annuity within the period limited 
 The manner in which this additional revenue 
 is applied, is indifferent, provided that it so 
 operates as to set free, at the end of the pe-
 
 16 
 
 riod, revenue equal to the interest of the 
 loan. It may be applied in the purchase, in 
 the market, of the particular securities which 
 occasion the appropriation ; in the purchase 
 of any other annuities of equal amount ; or 
 in any other mode whereby the charge which 
 will remain upon the resources of the state 
 at the expiration of the period, is proportion- 
 ably diminished. 
 
 It is unquestionably true, that the ad- 
 ditional revenue destined for this purpose, 
 ought to be a clear surplus, beyond all charge 
 for the interest of debts, and all other per- 
 manent charges upon the revenue ; and it is 
 also true that it ought to be a surplus beyond 
 the amount of the ordinary expenses of the 
 state existing at the time, even though those 
 expenses are not in their legal form perma- 
 nent ; the appropriation would be otherwise 
 evasive and nugatory. 
 
 So far, then, I concur in your lordship's 
 first position. And yet, I do not admit as a
 
 17 
 
 necessary consequence of this position, that 
 the appropriation is always absurd or ineffi- 
 cacious, when there may happen to be, in 
 one or more of the years in which it endures, 
 a deficiency of revenue, occasioning a new 
 debt. 
 
 My difference from your lordship upon 
 this point, is a necessary consequence of my 
 principle of a sinking fund. The surplus 
 from which that fund is to be supplied may 
 cease for a time, and the condition which has 
 been prescribed, as to the duration of charge, 
 may, nevertheless, be strictly preserved. This 
 happens when (as in the year 1827, to which 
 you refer*) a deficiency occurs, which there 
 is good reason for supposing temporary ; an 
 anticipation then takes place of the resources 
 of the next, or next two years immediately 
 following. No permanent charge is, in this 
 case, created; if the deficiency still con- 
 tinues, the principle would assuredly require 
 
 * Page 10.
 
 18 
 
 that it should be supplied by the creation of 
 a new revenue. The principle is in either 
 case maintained. In my opinion, we ought 
 always to keep up an average revenue, ex- 
 ceeding in amount every permanent and or- 
 dinary charge ; so as to meet the accidental 
 occurrence of a deficiency : but if this provi- 
 sion has not been made, the temporary defici- 
 ency must be met by a temporary expedient ; 
 and every thing then proceeds as before. 
 
 Perhaps, you may suggest that, even 
 according to my principle, the object would 
 have been equally well effected, if we had 
 suffered the appropriation to be suspended, 
 until a returning surplus had supplied it, and 
 replaced the fund in the condition to which 
 an uninterrupted appropriation would have 
 brought it. I confidently aver, that this 
 mode would have been, in every respect, more 
 inconvenient, and would have led to greater 
 complexity of account, than that of issuing 
 Exchequer bills. If, indeed, your lordship had
 
 19 
 
 not specifically mentioned the measure of 
 1827, 1 should scarcely have ascribed to that 
 occasional measure, the strong and contemp- 
 tuous expressions which you have directed 
 against " borrowed sinking funds." 
 
 Your observations, I will presume, are ra- 
 ther applied to the systematic existence of a 
 sinking fund, continually supplied by borrow- 
 ing ; or, what you deem the same thing, the 
 continued existence of a sinking fund, while 
 the revenue falls short of the expenditure 
 and the deficiency is supplied by loans; so 
 that stock is sold and bought by government 
 at the same time ; and you thence urge the 
 impossibility of keeping up a real sinking fund 
 in time of war, when there is a constant and 
 certain deficiency of income. 
 
 I have already admitted, that the surplus 
 constituting a sinking fund, ought to be a 
 surplus, beyond the ordinary expenditure. 
 I have thus conceded to your Lordship all 
 that you object to sinking funds, systema- 
 
 c 2
 
 20 
 
 tically supported by loans in time of peace. 
 The sinking fund ought in such a case to be 
 either restored to its due amount by taxa- 
 tion, or avowedly reduced to the amount of 
 existing surplus. It can scarcely be neces- 
 sary to argue, that the state ought, in com- 
 mon prudence, and, with a view to its power 
 of conducting any war which may arise, to 
 apply some surplus, or at least to make no 
 addition to its debt. At all events in time of 
 settled peace, the finances ought to be, and 
 may be, placed upon a regular and almost 
 certain basis. The legislature has an oppor- 
 tunity of fixing the scale of its expenditure, 
 its taxation, and of the surplus, if any, which 
 it will apply to the reduction of debt. It 
 may determine, and act upon, the principle, 
 whereby the apportionment of the burden of 
 taxation between present and future times 
 is to be fixed ; and the reason, sometimes 
 urged for maintaining a nominal sinking 
 fund, the preservation of a dormant principle
 
 21 
 
 to be hereafter restored to activity, has no 
 force at such a period. 
 
 I am prepared to admit, further, that an 
 adherence to the name, and forms of the 
 sinking fund, is equally useless and absurd 
 in war, unless the financial arrangements, 
 including that sinking fund, proceed upon 
 a plain and intelligible principle, to which 
 there is at once the possibility and the 
 rigid determination to adhere. You, my 
 Lord, while you deny, with forcible argu- 
 ments, the utility of attempting this ad- 
 herence, refer to past history in proof of the 
 hopelessness of success. We may give, you 
 say, " a visionary permanence to the sinking 
 " fund by law, its useless forms may be con- 
 " tinned, in vain semblance of that which 
 " once was powerful and active, but its vital 
 " spirit we cannot so preserve *." 
 
 Now, my Lord, I am not satisfied of our 
 inability to preserve, at all times, an active 
 
 * Essay, p. 13.
 
 22 
 
 and salutary principle of finance, founded 
 upon the scheme of which the sinking fund 
 is a part ; I believe that the failures which 
 you relate, as I submit, with much exaggera- 
 tion, originated in the neglect, now sanc- 
 tioned by your Lordship's great authority, of 
 fundamental principles ; I do not despair of 
 an attempt to re-invigorate those principles. 
 In support of this essential difference of 
 opinion, I must now follow your Lordship 
 through your history of the sinking fund. 
 
 §4. 
 The system under which a perpetual charge 
 is laid upon the country, whenever a defi- 
 cient revenue is supplied by a loan, boasts 
 of rather less antiquity than we commonly 
 suppose. During the reigns of William and 
 Anne, considerable sums were borrowed ; 
 but the annuities created were in general 
 annuities for terms of years, or for lives ; 
 " the principal being to be sunk at the end
 
 23 
 
 ** of the term granted, which might be looked 
 " upon as a sinking fund attending these 
 " particular debts *." The exceptions were, 
 the debts to the great companies, and the 
 banker's debt, which, perhaps, as it arose 
 from the fraud of ancestors, it was thought 
 fair to throw in part upon posterity. In 
 most other cases, the duties which con- 
 stituted the fund, whereon each particular 
 loan was charged, were chargeable with the 
 principal as well as the interest of that parti- 
 cular debt. In 1716, the surpluses of all 
 the particular funds, and of other more 
 general funds, into which some of them had 
 been united, were carried, together with 
 some savings effected by the reduction of 
 interest, to a new " Sinking Fund ;" which 
 fund was made applicable to the payment of 
 debts existing on the 25th December, 1716, 
 " and for none other use, intent, or purpose 
 " whatsoever • j •," And it was so applied, with- 
 
 * Tindal, \\x. 131. t Act 5 Geo. I. cap. 3. sect. 06.
 
 24 
 
 out any systematic exception (there were, I 
 believe, some silent encroachments,) during 
 the reign of George L, and the first six 
 years of George II., notwithstanding that 
 within the same period, other debts equal to 
 much more than the half of those redeemed, 
 were paid off by this fund. In 1733, Sir 
 Robert Walpole took half a million from the 
 fund. 
 
 This measure your lordship ascribes to the 
 sagacity of Walpole who, "outrunning the 
 " wisdom of his contemporaries,'' discovered 
 " the contradiction of increasing debt in the 
 " very moment of professing to reduce it*/' 
 Your lordship is much too good an historian 
 not to have observed the facility with which 
 motives, good or bad, are ascribed to the 
 heroes of history; I must humbly submit 
 that you have furnished a notable instance of 
 the practice. Your argument stood in no 
 need of Walpole's authority ; but there is 
 
 * Essay, p. 16, 17.
 
 25 
 
 really not any ground for believing that he 
 acted upon any higher motive than that which 
 he professed, the desire to relieve the landed 
 interest by voting the land tax at one shill- 
 ing instead of two. He showed reasonable 
 grounds for his suggestion, but did not hint 
 at that which you now imagine for him. He 
 denied peculiar sacredness of character to the 
 measure of 1716; he argued that circum- 
 stances were so much altered, that pubHc 
 creditors were now more afraid of being paid 
 off, than of losing their principal ; that the 
 landed gentlemen desired and deserved relief*. 
 Of a loan, there was no question. Walpole, 
 indeed, so far from adopting the objection 
 urged against the sinking fund, as operating 
 at a time when new debts were incurred, had, 
 a few years before, laid before the king a re- 
 presentation from the House of Commons, in 
 which that objection was over-ruled -f, 
 
 * Pari. Hist, viii., 1200, 1, 5, 6. 
 
 t Representation of the Conitnons to tlie Kinfi, April 8, 1728. 
 Pari. Hist, viii., p. 651.
 
 26 
 
 Walpole was, I suspect, right in his Hghter 
 estimation of the measure of 1716 ; it was an 
 arrangement of finance, not establishing any 
 new principle, but simply consolidating what 
 had been done, upon a similar principle, in 
 variety and detail : this minister, however, 
 had, himself, recently countenanced the no- 
 tion of the inalienabihty of the fund, when he 
 advised George II/s answer to the Commons' 
 Representation *. 
 
 Historical illustrations, if used at all, should 
 be accurate and complete ; otherwise, this 
 inquiry concerning Walpole is of no great 
 importance ; but I gladly seize the opportu- 
 nity which your reference to the debates of 
 1733 affords me of exhibiting, not in Walpole, 
 but in his opponents, some indications of the 
 principle for which it is my great object to 
 
 * Pari. Hist. viii. 666. — " The provision made for gradually 
 " discharging the National Debt, is now become so certain and 
 " considerable, that nothing but some unforeseen event can alter or 
 " diminish it, which gives us the fairest prospect of seeing the 
 " old debts discharged without any necessity of incurring new."
 
 27 
 
 contend. I care not whether it was through 
 the superior sagacity of Sir John Barnard *, 
 and Sir WilUam Wyndham f, or simply from 
 that excitement of party which invokes every 
 argument that can be devised ; but they did 
 urge the just and correct reason against the 
 unrestrained accumulation of debt, when they 
 argued in favour of the redemption, not for the 
 benefit of the creditors, but rather for the 
 sake of their ov/n children, and, more parti- 
 cularly, of the future owners of their lands. 
 
 These arguments were unsuccessful in 
 1733 ; they will probably fail in 1828 : but 
 I thank you for the opportunity of citing high 
 parliamentary authority, in support of one of 
 my favourite positions. 
 
 I cannot concur with your lordship, in as- 
 cribing to the deliberate judgment of " some 
 of our best and wisest statesmen," the absence, 
 for the next forty years, of any systematic 
 plan for the reduction of debt. It is indeed 
 
 * p. 1206. t P. 1209.
 
 28 
 
 true that successive ministers " did not show 
 " much solicitude to increase the taxation of 
 " their country for the purpose of providing it 
 " with a surplus ; and that their reductions of 
 '* debt were principally, though not wholly, 
 " effected by the falling in of annuities, and 
 " by the diminutions successively made in the 
 " rate of interest on the public securities, by 
 " tenders of repayment*." In other words, 
 they took the advantage afforded to them by 
 the provident limitations of their forefathers ; 
 they readily availed themselves of any op- 
 portunity which the state of the public secu- 
 rities furnished, for relieving themselves from 
 the burden of taxes ; and they borrowed 
 without scruple, and without any definite 
 limitation, all that they wanted in war, some- 
 times too in peace ; taking little heed of the 
 future, making no provision for the redemp- 
 tion of debt, and, in the last instance, the 
 American war, providing very insufficiently 
 
 * Essay, p. 17, IB.
 
 29 
 
 even for its interest. Is this the example 
 which you recommend for imitation ? 
 
 It did not require the fanciful calculations 
 of Dr. Price, to convince the just and prudent 
 minister of 1786, that this system, or rather 
 these practices, of finance, were not worthy 
 of his country, or of his fame. 
 
 I will not exaggerate Mr. Pitt's merit in the 
 restoration of the finances after the American 
 war ; his measures were highly judicious, 
 and greatly assisted the elastic tendency 
 to recover from distress, which this free 
 country has always developed. My object 
 is to explain the system of finance which 
 Mr. Pitt adopted, so soon as these co-ope- 
 rating causes had produced a surplus of re- 
 venue. I am sorry to say, that even your 
 lordship stands in need of this explanation ; 
 still more, those, who are familiar only with 
 the complicated transactions of later years.
 
 30 
 
 §5. 
 Mr. Pitt, in applying to the existing debt, 
 his fund of redemption, which he fixed at one 
 miUion, could find no rule either in law or in 
 history, for its apportionment between one 
 period or generation, and another. It was ob- 
 vious, that unless a considerable burden were 
 borne by the people then existing, no mate- 
 rial reduction could be effected. But it was 
 neither reasonable, nor necessary, that the 
 burden should be continued, without any relief, 
 until the whole debt should be extinguished. 
 Your lordship considers the measure of limi- 
 tation, as " a wise precaution, showing an 
 " early and just apprehension of the evils 
 " since felt from an opposite policy*." As 
 indefinite accumulation has at no subsequent 
 time been our policy, I know not to what 
 period you refer. 
 
 I attempt not to define the exact motives 
 
 * Preface, p. ix.
 
 31 
 
 of Mr. Pitt*s decision, but he appears to have 
 determined that the fund should operate 
 without producing any direct rehef, during 
 the period which is usually assigned to a 
 human generation. He did not fix the num- 
 ber of years, but he calculated the amount 
 which the fund would reach in about twenty- 
 eight years. Within this period, the savings 
 effected by the annual application of the 
 fund, were to be applied, together with the 
 original fund, to the reduction of debt. After- 
 wards, the fund, as it would then stand, was 
 to be applied to the reduction of debt ; the 
 annual savings were to be disposable for cur- 
 rent services, for the repeal of taxes, or 
 otherwise as parliament might direct. Ex- 
 pressing the same thing in other words, for 
 the sake of a brevity which is quite intelli- 
 gible, I might say that, during the first period, 
 the fund was to accumulate at compound in- 
 terest ; during the second, at simple interest. 
 " The application," as j^ou truly observe,
 
 32 
 
 " of compound interest to the institution of 
 " a sinking fund, consists in adding to the 
 " income of the sinking fund the annuities 
 " which that fund successively redeems/' — 
 " A system of simple interest leaves them 
 " applicable to the repeal of taxation, or to 
 *' the exigency of any other service*.'* 
 
 All this, my lord, is as simple as it is just ; 
 neither Mr. Pitt, nor any other sensible man, 
 ever viewed the operation of compound in- 
 terest in any other light. I have no doubt, 
 but that much of the nonsense to which you 
 allude, as to the magic of compound interest, 
 has been talked in provincial towns ; but its 
 refutation really did not deserve a whole 
 section of your Essay ! 
 
 But you object to the term " interest,'^ as 
 applied to the annuity saved to the state by 
 the purchase of its own debtf . Assuming 
 that it was desirable to secure the appropri- 
 ation, I cannot agree with your lordship in 
 
 * Essay, ]). 51. t P- ^^-
 
 33 
 
 deeming this a perfectly useless fiction. As- 
 suredly, an account might have been kept of 
 the savings effected, and a direction might 
 have been given to add an equal amount to 
 the sum annually paid to the commissioners. 
 It was believed, that by making the issue of 
 these amounts quite a matter of course with 
 the ofiicers of the exchequer and the bank, 
 without any intervention of parliament, or 
 even of the treasury, the strict appropriation 
 would be more effectually secured. I am 
 satisfied that this effect was produced, or 
 materially aided by this cause. For more 
 than a quarter of a century the fund ope- 
 rated without encroachment. We are not 
 now considering the advantage derived from 
 the appropriation, but the efficacy of the 
 devices for securing it. I cannot but be- 
 lieve, that the alienation of the sinking fund, 
 and especially the appropriation of the an- 
 nual savings to any other purpose, was made 
 much more difficult to the minds of parlia-
 
 34 
 
 ments and ministers, than it would have been 
 under another system. Indeed, much that is 
 said, as to the delusion practised under the 
 system of the sinking fund, furnishes proof 
 of this position. " The nation'' did not see 
 that it " was the true owner of these annu- 
 ities;" and, therefore, left them in the hands 
 of the commissioners. But I leave this, 
 which is, in truth, a merely formal part of 
 our inquiry. It may be possible to have, and 
 strictly to appropriate, a sinking fund, with- 
 out the machinery which has become so 
 offensive. 
 
 I have stated, that in former wars, inade- 
 quate provision had been made for the charge 
 occasioned by new loans. To ensure suffi- 
 ciency in future, was an important provision 
 of Mr. Pitt's system of finance. This it was 
 impossible to effect prospectively ; the pro- 
 vision must necessarily be made by the par- 
 liament of the time : it was only by requiring 
 full and distinct accounts,first of the revenues 
 applicable to the existing charge ; and, se-
 
 condly, of the specific revenue raised for the 
 purpose of defraying each new charge as it 
 might be created, that he could in any de- 
 gree ensure the adequacy of the revenue, and 
 the reahty of the surplus. Any deficiency 
 would thus instantly become apparent, and 
 it was assuredly a part of the system that it 
 should be immediately supplied. It was also 
 Mr. Pitt's object, and his endeavour, to pro- 
 vide, if possible, by sums raised either within 
 the year, or within a period of a few years, for 
 extraordinary expenses, occasioned by arma- 
 ments or other political measures ; upon this 
 principle he acted for the few years which 
 intervened between the first establishment of 
 the sinking fund, and the measure of 1792, 
 to which I now request your lordship's atten- 
 tion. 
 
 This measure is founded upon the doctrine 
 which I have maintained, as to indefinite 
 mortgages of the resources of the state. It 
 fixes a limit, beyond which no mortgage is 
 
 I) 2
 
 3a 
 
 to extend. It authorizes the creation of an 
 annuity for any period not exceeding forty- 
 five years, without any fund of redemption ; 
 but requires that provision shall be made, 
 for redeeming within that period, any an- 
 nuity for a longer term, or any perpetual an- 
 nuity, which may be created on account of 
 any new debt. If no provision for this pur- 
 pose be made by parliament, it directs the 
 appropriation of a sinking fund, of one per 
 cent., which is calculated to effect the re- 
 demption within the period limited. This 
 appropriated fund is part of the additional 
 charge attending a new loan, for which a se- 
 parate and sufficient revenue is, according to 
 Mr. Pitt's system, to be provided. 
 
 The period of forty -five years, was arbitra- 
 rily chosen ; probably because it was the esti- 
 mated period for the extinction of debt by 
 a sinking fund, equal to one hundredth part 
 of the capital. A longer or a shorter period 
 would have been equally reasonable; but
 
 37 
 
 it was essential to the principle to fix some 
 limit, which should not be transgressed. 
 
 You will observe, that according to this 
 system, there would be no new financial 
 arrangement at the end of a war, unless the 
 peace establishment should go beyond its 
 antecedent rate: — taxes imposed for carry- 
 ing on the war, would cease ; taxes laid on 
 in consequence of the loans, would remain, 
 including within themselves the power of 
 extinction within a period of moderate 
 extent. 
 
 This then, my Lord, was the simple and 
 intelligible system of Mr. Pitt ; and I would 
 almost venture again to ask your Lordship, 
 whether if, instead of a sinking fund, a posi- 
 tive limitation could have been prescribed, 
 for the term of annuities charged upon the 
 revenues, the system would not have been, 
 even in your view, prudent, just, and prac- 
 ticable.
 
 38 
 
 And I would also ask you whether it 
 would not have been, even with the sinking 
 fund, omitting, if you please, the machinery, 
 a system in all respects expedient in time of 
 peace. 
 
 I would ask you, still further, whether, even 
 if it were admitted, and known before-hand 
 that, in war, the plan of reduction must be 
 suspended, it would not be advisable to esta- 
 blish and maintain this whole system in 
 time of peace : the system being, as I 
 will again state it still more briefly, always 
 to maintain a revenue sufficient for all per- 
 manent charges and ordinary expenses, with 
 a moderate surplus applied to the payment 
 of old debts ; and not to anticipate future 
 revenue for more than forty-five years. 
 
 §6. 
 I NOW advert to the alleged " inefficacy of 
 " sinking funds operating in war." At the
 
 39 
 
 first introduction of the plan of 1786, Mr. 
 Pitt had not perceived any anomaly in the 
 process of borrowing and paying debt at 
 the same time. Perhaps, indeed, he had not 
 contemplated the case. Mr. Fox saw the 
 difficulty, and Mr. Pitt readily adopted his 
 suggested remedy. This was the clause, so 
 often mentioned of late years, for enabling 
 the state, in time of war, to avail itself of the 
 amount of the sinking fund, without departing 
 from the plan. Mr. Fox's clause authorized 
 the commissioners to place themselves in the 
 situation of the loan contractors. Instead of 
 old stock in exchange for their money, they 
 were to receive a portion of the new stock, 
 created as the consideration for the loan. 
 Under this clause, as applied to the sinking 
 fund of 1786, the effect would have been 
 this ; the loan of the year, instead of the old 
 debt, would have been lessened by the 
 amount of the sinking fund in that year ; the 
 total debt at the end of the year, and the
 
 40 
 
 income of the sinking fund, would have re- 
 mained on the same scale, as if the purchases 
 of the sinking fund had proceeded, and the 
 whole sum required had been raised by loan. 
 A simple suspension of the purchases of the 
 sinking fund, would have had the same effect 
 upon the debt ; but the annual income of the 
 fund would not then have been increased, 
 by a sum equal to the interest thereupon. 
 The clause, therefore, was simply a part 
 of the machinery, for securing to the fund 
 its growing income, without a special pro- 
 vision by parliament. In either case, there 
 would have been an increased debt, with a 
 permanent charge, without any provision for 
 the redemption of the excess. 
 
 But before a war occurred, so as to call 
 this clause into possible operation, the act 
 of 1792 had passed, establishing a new prin- 
 ciple, namely the limitation of forty-five 
 years. Under this act the sinking fund, when 
 applied upon the principle of Mr. Fox's clause
 
 41 
 
 to the service of the year, receives not only 
 the interest of the stock newly created and 
 transferred to it, but a nevv^ annual payment 
 of one per cent, upon that stock, as well as 
 upon the stock really created and sold to the 
 contractors. The effect, therefore, is to leave 
 the debt at the same amount at which it 
 would have stood, if the whole loan had been 
 borrowed of the contractors ; that is, greater, 
 by the amount of that loan, than it was at 
 the commencement of the year ; but the por- 
 tion of this new debt nominally transferred 
 to the commissioners, is attended, like all 
 the other portions of it, with a sinking fund, 
 calculated for its redemption in forty-five 
 years. 
 
 If the sinking fund had been simply sus- 
 pended, it would have lost, as before, its 
 growing income ; and there would have been 
 an equal increase of debt, without any pro- 
 vision for redemption. 
 
 The sinking fund then, during war, is still,
 
 42 
 
 whether Mr. Foxs clause be acted upon, 
 or the purchases proceed, and the loan is 
 increased by their amount, a mere piece of 
 machinery, for preserving the principle ; and 
 in the latter case it certainly may be termed, 
 without inaccuracy, a borrowed sinking fund. 
 
 But I beg your lordship to observe^ that 
 " the preservation of the principle," is not 
 simply the record of a dormant regulation, 
 not to be enforced until after the war. It is 
 an essential part of the system that the re- 
 venue shall be kept to the full amount of the 
 interest of the debt, whether in the hands of 
 the commissioners or of the stockholders ; and 
 that an additional revenue shall be created, 
 consisting of real surplus beyond ordinary 
 expenditure, sufficient for the redemption of 
 the increased debt, in whatever form the in- 
 crease occurs : so that the due proportion of 
 the burden of this debt shall be borne by 
 those who incur it. 
 
 Now, all this, I admit, might possibly be
 
 4^ 
 
 effected, without precisely those formalities 
 which the sinking fund requires ; whether it 
 would be done with more clearness and sim- 
 plicity in the public accounts, I have some 
 doubt ; but I am tenacious not of the form, 
 but of the principle. If I can be assured 
 " that forty-five years shall be the utmost 
 *' limit of time for which the revenues of the 
 " country shall be mortgaged, and that the 
 " provision made for preserving that limit 
 ** shall not be set aside for any temporary 
 *' purpose *," I care not in what mode this 
 great principle is enforced. 
 
 But it is said that the machinery is expen- 
 sive. There is always, your lordship observes, 
 a profit to the contractor, and, consequently, 
 a loss to the state, when the government goes 
 into the market to purchase and to sell simi- 
 lar and equivalent securities. This observa- 
 
 * View of the State of the Nation, &c., by T. P. Courtenay, 
 Esq., 1811, p. 30.
 
 44 
 
 tion, I presume, you apply only to the prac- 
 tice of the late war, when the purchases of 
 the commissioners went on, at the same time, 
 with the loans, and not to a period in which 
 Mr. Fox's clause is permitted to operate. A 
 refutation of your opinion is therefore super- 
 fluous, with a view to the defence of the sys- 
 tem of which that clause is a part. But it is 
 not certain that the double process has occa- 
 sioned a loss. 
 
 When Mr. Pitt, how much against his 
 wishes and expectations, no man knows better 
 than your lordship, was led into the war of 
 1793, and required to raise money by loan, it 
 was his intention, carried so far as to be an- 
 nounced in his budget speech *, to make use 
 of the sinking fund in virtue of the clause. 
 But he was persuaded, and he and all other 
 ministers acted upon the persuasion through- 
 out the war, that the cessation of the pur- 
 
 * Pari. Hist, xxx-, p. 562—3.
 
 45 
 
 chases would lower the market price of the 
 stock which he offered for the loan, more than 
 the diminution of the amount of loan would 
 raise it ; and this was, up to a very late 
 period, the opinion of all the monied men 
 whom Mr. Vansittart consulted, with the sin- 
 gle, but certainly very important, exception 
 of Mr. Ricardo. The question is incapable 
 of demonstration. I am, myself, inclined, with 
 Mr. Grenfell, to the opinion of Ricardo ; but 
 the opposite opinion is by no means absurd. 
 There is nothing fanciful in the supposition, 
 that if a horse dealer, having been in the 
 habit of buying fifty horses annually, at a fair, 
 and paying a good price for them, were sud- 
 denly to discontinue the purchase, and to 
 bring one hundred horses to the same fair 
 for sale, his absence as a purchaser would 
 depreciate the price of horses generally at 
 that fair, more than a reduction of the 
 number, offered for sale, by one half, would
 
 46 
 
 raise it. But I do not press this point, be- 
 cause, when arguing for the sinking fund pro- 
 spectively, I may presume that the sale and 
 purchase of stock by government w^ill not 
 again proceed simultaneously. 
 
 The discontinuance of the double process 
 does not necessarily imply the discontinu- 
 ance of the w^hole system ; not only the 
 diversion of all the revenues, composing the 
 sinking fund, to the current service, but also 
 the failure to make any provision for the 
 redemption of nev^ debt. By this failure, 
 those v^ho borrow and use the money, throw 
 off from themselves the whole weight of the 
 debt; instead of bearing, as under the plan 
 of the sinking fund, a proportion of it, deter- 
 mined by a previous and permanent rule ; 
 which rule requires us to bear, in the first 
 and every year of forty-five, one equal forty- 
 fifth part of the taxation occasioned by ex- 
 traordinary expenses.
 
 47 
 
 Now, my Lord, the point upon which I am 
 most anxious to explain myself to your lord- 
 ship is, that this rule involves, not a mere 
 question of machinery, but a principle of 
 action ; I might almost say, a question, not 
 of finance, but of equity ! The rule, in its 
 detail, is arbitrary, and a matter of political 
 arrangement ; in its principle, it concerns the 
 fair dealing of man with man. 
 
 To conclude upon this part of the subject, 
 " the inefficacy of sinking funds operating in 
 " war:" — I am still inclined to think that the 
 sinking fund, with all its machinery, may 
 usefully be left to operate in time of war, 
 notwithstanding that new loans are raised ; 
 but I should deem myself quite successful in 
 my argument, if I could establish with your 
 lordship, and with those by whom the ques- 
 tion must be decided, this one great point: — 
 that when we supply the deficiency of our 
 own contributions by anticipations of future 
 revenue, we are to limit the duration of our
 
 48 
 
 mortgage, and bear, during its continuance, 
 our equal share of the burden. This may be 
 done, notwithstanding that the machinery of 
 the sinking fund be entirely stopped. 
 
 §7. 
 
 In considering your first chapter, I have ne- 
 cessarily made many of the remarks which 
 occur on the second, wherein you treat of 
 " The operation and results of our present 
 " sinking fund." If, indeed, I have succeeded 
 in my bold attempt to impute to your lord- 
 ship a misapprehension of the character of 
 the fund, I have already shown the irrele- 
 vancy, to our present argument, of the four 
 propositions which you maintain in this part 
 of your Essay. 
 
 You state, as preliminaries, that " the two 
 " great objects of the fund are, the increase 
 " of the national wealth, and the reduction 
 «« of the national incumbrances* ; and that, 
 
 * Essay, p. 24.
 
 49 
 
 *' vain and valueless is all which it has ever 
 " done, and all vvrhich it ever could do, for 
 " the advantage of the public * ;" — I answ^er 
 thus. An immediate reduction of incum- 
 brances, (w^ith which, as you elsewhere -f 
 justly say, an increase of wealth is synony- 
 mous) is not the object of the fund. But 
 notwithstanding several legislative deviations 
 from the original plan, and, perhaps, some 
 errors in practice, it has answered that which 
 was its object — lessening, by sacrifices made, 
 in other words, by taxes borne, at an ear- 
 lier period, the incumbrances sustained by the 
 country at a later time. This position re- 
 quires no detail of calculation, nor is it 
 affected by any of those which have been 
 made, (with how much accuracy matters not 
 here) to show that, in the whole course of its 
 existence, the fund has even occasioned a 
 financial loss. It is now enough to refer to 
 the material assistance derived by the public 
 
 * Essay, p. 20. t p. 31. 
 
 E
 
 50 
 
 finances in 1813, and subsequent years, from 
 the fund, as modified by Mr. Vansittart. 
 
 Of this use of the sinking fund, you are 
 aware, for you affirm in your first proposi- 
 tion, that " all the direct benefit of which 
 " this establishment can, on the most favour- 
 *' able supposition, have been productive, 
 " consists in its having, from time to time, 
 " placed at the free disposal of the com- 
 " munity, certain portions of annual tax- 
 " ation previously appropriated to the inter- 
 " ests of our public debt*." But secondly, 
 " That all the means by which it has actually 
 " produced this effect have been supplied to 
 *^ it by surplus taxation, levied in excess of 
 " the current expenditure of the state, and 
 " therefore, imposed or continued solely for 
 " this especial purpose.'' 
 
 In these two propositions I concur; they 
 are, in truth, the very ground-work of my 
 argument ; the object whereof has been to 
 
 * EsKjiy, p. 20.
 
 51 
 
 demonstrate the propriety of leaving this 
 surplus taxation, for the purpose of setting 
 free those portions of taxation previously 
 appropriated. The difference between us 
 arises from your lordship's disregard of this 
 essential circumstance, that the operations 
 described in these two respective proposi- 
 tions, are necessarily separated in point of 
 time. Taxes, for instance, paid in 1800, set 
 free revenue in 1813. 
 
 I do not affirm that the burden and the 
 relief have been adjusted exactly according to 
 the principles which I have stated ; nor is that 
 a necessary subject of inquiry here. It is 
 enough that taxes imposed and paid at one 
 period have produced relief from taxation at 
 another. 
 
 §8. 
 
 I HAVE read more than once the latter part 
 of your observations in support of your first 
 position, without satisfying myself of the 
 
 E 2
 
 52 
 
 object for which they are placed there. You 
 state very correctly, that " our public debt,'' 
 that is, all that we can be required to pay, 
 " consists not in capital, but in annuities*;" 
 that what is called capital '* serves only to 
 *' express the price at which the state may, 
 " at its own convenience, redeem its engage- 
 " mentsf." The only deduction from these 
 acknowledged truths which I find in the 
 chapter is, that no "undue advantage has 
 " accrued to the public creditor, merely from 
 " the needless complication of the form 
 ** which has been given to our loans J;" 
 namely, the form of stock, sometimes greatly 
 exceeding in nominal capital, the money lent. 
 I do not know what is meant by " undue 
 advantage." In a bargain fairly made no- 
 thing can be " undue ;" but if it is meant, 
 that the amount of this nominal capital is a 
 matter of indifference, either to the state or 
 to the loan contractor, I have again the mis- 
 
 * Essay, p. 29. t p. 31. . + p. 32.
 
 53 
 
 fortune to dissent. It is either by the pur- 
 chase of this nominal capital, at the market 
 price, or by an offer to pay off at par, that 
 the state redeems a part of the annuities 
 which it owes. So much of nominal capital at 
 a lower rate of interest per cent, as will yield 
 a given annuity, has a higher marketable 
 value than a smaller capital, which, bearing 
 a higher rate of interest, will yield a similar 
 annuity. The former, therefore, is more 
 popular, so much sO;, that a loan can seldom 
 be procured in the latter, without a consider- 
 able sacrifice of interest. On the other hand, 
 the state is exposed to the probability of 
 having much more to pay for redeeming a 
 similar annuity when funded in stock of the 
 first mentioned description. The question in 
 these cases is, how much heavier a charge 
 for interest is it prudent to incur, for the sake 
 of obtaining money in return for the smaller 
 nominal capital ? The amount of the nominal 
 capital can only be a matter of indifference,
 
 54 
 
 if the state never contemplates the reduction 
 of the annuities which it pays, either by pur- 
 chasing the capital, or reducing the interest. 
 There is assuredly a difficulty in bringing 
 into one account capital bearing different 
 rates of interest, nor can any such account 
 be framed for any useful purpose. But really 
 this discussion is out of place. 
 
 §9. 
 
 The observations whereby ybur second pro- 
 position is supported, are pervaded by the 
 misconception as to times and persons which 
 I have already explained. " For every por- 
 " tion of previously appropriated wealth 
 " which our sinking fund has placed at the 
 " disposal of the community, it has" not 
 " withdrawn from the same community a 
 *' corresponding portion of wealth previously 
 ** free and unappropriated*/^ It withdrew 
 it from their predecessors. When you ask, 
 
 * Essay, p, 36,
 
 55 
 
 " In what respect is it a more reasonable or 
 " more real operation to^ reduce taxation by 
 " taxing, than to pay debt by borrowing*?'* 
 the point of your epigram is at once blunted 
 by the observation, that the father, in the 
 case supposed, taxes himself now, in order 
 that the debt which he incurs, may not sub- 
 ject the son to accumulated taxation here- 
 after. 
 
 § 10. 
 
 You carry with you the same misapprehen- 
 sion, through your third proposition ; " The 
 " reductions of debt thus effected are mere 
 " exchanges of equivalents f." And there are 
 in this section, striking instances of the im- 
 putation of weak and exaggerated represen- 
 tations, to the advocates of the system which 
 you condemn. 
 
 A purchase of stock in the market is, as- 
 suredly, as all fair purchases are, an exchange 
 of equivalents. In the case before us, the 
 
 * Essay, p. 37. t il>.
 
 56 
 
 cost of the purchase is the result of " super- 
 " added taxation." Is this truth now known 
 for the first time? The only question is, 
 whether it be prudent, at a certain present 
 expense, or expense continued through a 
 certain period, to redeem an annuity charged 
 upon us and our heirs for ever. This ques- 
 tion was once resolved in the affirmative, 
 and the act followed the decision. Some 
 " millions" have been " removed from our 
 *' incumbrances/' To produce this effect, 
 corresponding incumbrances had been for- 
 merly sustained. All this I freely admit to 
 your lordship, if admission can be L;;pplied to 
 " an universal and obvious truism." 
 
 I also concur with your Lordship, in trying 
 these transactions, " by a reference to similar 
 " transactions in private life." The case is, 
 exactly that of a landed proprietor, who re- 
 deems a mortgage, for the sake of enlarging 
 the disposable income of his heir. He pays for 
 the annuity redeemed, its equivalent value in
 
 57 
 
 ready money, and to make this money dispo- 
 sable, he has taxed himself, by the " wealth 
 " withdrawn from direct enjoyment.*" It is 
 possible, if his affection for his son, or a con- 
 sciousness of having incumbered the estate 
 a little too much through his own extrava- 
 gance, render him very highly desirous of 
 liberating the inheritance, that he may even 
 borrow the money, on a life annuity, or an ' 
 insurance of his life. No doubt, if, instead 
 of redeeming the annuity, he had saved the 
 equivalent in a sum of money to be be- 
 queathed to his heir, the effect would be the 
 same. In neither case, is it pretended that 
 the " purchase is" to him, " a matter of 
 " gain." He suffers the privation ; his son 
 derives the equivalent benefit. Whether 
 England was in 1786, or at any other period, 
 or is now, under a like obligation with the 
 landed proprietor, is indifferent in reference 
 to the present object, which is simply to 
 illustrate the reasonableness of redeeming a 
 
 * Essay, p. 42.
 
 58 
 
 perpetual charge, by an equivalent sacrifice, 
 even though the transaction produce no pro- 
 fit to the purchaser himself. 
 
 Your final remark, under this head, is 
 an objection to the systematic and " invio- 
 <« lable maintenance of a sinking fund, pre- 
 « scribed to itself by a nation, by law, for its 
 " own supposed advantage *." 
 
 I submit, that if the appropriation be 
 founded upon a principle, it ought to be sys- 
 tematic, and ought, therefore, to be subjected 
 to such sanctions, necessarily liable to be 
 superseded by a new law, as the legislature 
 can provide. Perhaps, if the advantage ex- 
 pected came only to those who from time 
 to time act upon the appropriation, legal 
 sanctions might be more burdensome than 
 useful : but I am certain that, in private life, 
 convenience and comfort are very much con- 
 sulted, by the systematic appropriation of a 
 particular fund or series of receipts, to any 
 distant object which, even without any posi- 
 
 * Essay, p. 47.
 
 59 
 
 tive obligation, an individual is desirous to 
 attain. I do not find one observation, in your 
 section upon the operation of compound in- 
 terest*, which our previous discussion has 
 not anticipated. It certainly enunciates no 
 propositions which I desire to controvert. I 
 admit that Dr. Price was, if the terms be not 
 contradictoiy, an arithmetical enthusiast ; 
 and that compound interest " consists in add- 
 ** ing to the income of the sinking fund, the 
 " annuities which that fund successively re- 
 " deems." It is in that character alone that 
 its application is suggested. 
 
 § 11. 
 
 In your third chapterf , wherein you treat " of 
 ** the attempted permanence and repeated 
 " interruption of the system," you state too 
 broadly the necessity of '* long and unvaried 
 " accumulation." Much benefit may arise 
 from a sinking fund, even though its authors 
 
 * Essay, p. 47. t p- -i^-
 
 60 
 
 should be a little too sanguine, or too strict 
 in their anticipations of permanent and un- 
 qualified operation. I cannot admit that the 
 history of Mr. Pitt's sinking fund proves 
 either the inefficacy of his measure, or the 
 hopelessness of any attempt to re-invigorate 
 a sinking fund. 
 
 If, indeed, the attempt be " to provide for 
 " the true interests of posterity, much better 
 " than posterity itself*," it is likely enough 
 to be defeated; but, here again, I must re- 
 mind your Lordship that, in maintaining a 
 sinking fund, we do not simply recommend 
 to our successors a course of conduct bene- 
 ficial to them, or rather to their successors, 
 but we commence that course ourselves ; 
 and the benefit is felt, by those who come 
 after us, whether they follow in the same 
 track or not. If they are less provident, or 
 less just to their posterity, their disregard of 
 our example will cast no censure, or work 
 any justification, retrospectively, for us. 
 
 * Essay, p. 59.
 
 61 
 
 But your Lordship knows that in using 
 the terms " we'^ and " posterity^' I can draw 
 no accurate line of distinction between the 
 two. The most lengthened operations of 
 our sinking fund, would not exceed the period 
 during which, not unfrequently, the same 
 man has a voice in parliament, and it may 
 have no inconsiderable operation within a 
 period much shorter ; so short, as to render 
 its maintenance a matter of consideration for 
 statesmen who look not beyond the events 
 
 in which they are themselves to share. 
 
 .1 
 
 § 12. 
 I ADMIT, that *'the expected benefits of a sink- 
 " ing fund at compound interest depend," for 
 their permanence and extent, " on its unva- 
 " ried accumulation," but I deny that those 
 benefits are annihilated by the suspension of 
 that accumulation, or by its cessation before 
 the period originally planned. Let me apply 
 these remarks to your second and third posi-
 
 62 
 
 tions on " the provisions adopted for giving 
 " permanence to the sinking fund of 1786*;'* 
 and " the actual failure of these endeavoursf." 
 I have nothing to object to your descrip- 
 tion of these provisions; I have already 
 sufficiently noticed your criticisms upon their 
 technicalities. Assuredly, these were adopted 
 by Mr. Pitt, " in the hope," in my opinion 
 not entirely "groundless," " of their contri- 
 " buting to give permanence to the systemj." 
 And it is somewhat remarkable that Mr. Fox, 
 who had not that taste for financial details 
 which belonged to the minister, appears fully 
 to have joined in this hope : the only amend- 
 ment which he proposed was, the introduc- 
 tion of a new fiction. When you describe it 
 as the aim of these fictions, *' to induce the 
 '* British parliament to act in after times, 
 " in opposition to its own deUberate judg- 
 " ment of what might best promote the public 
 " happiness," and aver that " if they failed of 
 
 * Essay, p. 60. t p. 65. I p. 62.
 
 63 
 
 " this, they did nothing* :" you repeat your 
 error as to the relative bearings of the sink- 
 ing fund upon the present and the future ; 
 and you forget that the "pubHc happiness," 
 as well as the convenience of the government, 
 must at any particular moment, almost neces- 
 sarily be promoted by the diversion of the 
 fund. Surely, knowing the temptation to be 
 strong to depart, for a temporary purpose, 
 from a system of permanent advantage, Mr. 
 Pitt did wisely in throwing the object of 
 temptation as much as possible into shade. 
 Whether similar devices would have the same 
 effect now, I have much doubt ; but I be- 
 lieve that they did tend greatly to the end 
 desired. 
 
 § 13. 
 
 But truly, my Lord, there has not been the 
 complete failure which you imagine ; at least, 
 that failure is not demonstrated by the prc- 
 
 * Essay, p. 64-5.
 
 64 
 
 sent circumstances of the sinking fund. I 
 wish, with your lordship, to dwell rather upon 
 principles than upon measures ; but I assure 
 your lordship that, without something more 
 particular than the brief history which you 
 give, we cannot illustrate the principle upon 
 which the question now at issue must be 
 decided. The question is, whether we shall 
 now, in time of peace, adopt any systematic 
 plan for reducing our national debt, or pre- 
 venting its future growth. There is not even, 
 necessarily, now a question, whether our plan 
 shall embrace any period of war which may 
 occur. It is surely not enough for the deci- 
 sion of this question to say that, in a similar 
 time of peace, more than forty years ago, a 
 like plan was adopted, of which, now, scarcely 
 a trace remains ; without adverting at least, 
 to this one little circumstance of detail, that 
 within seven years from the institution of the 
 fund, commenced a war of more than twenty 
 years' duration. Even according to your
 
 65 
 
 lordship, if I correctly understand you, every 
 one of the "causes of this failure'' is to be 
 ascribed to *' that long and perilous contest." 
 How then do they demonstrate the impolicy 
 of the institution during peace ? 
 
 But your Essay does not trace, with exact- 
 ness, the operation of these causes ; in avoid- 
 ing details, it somewhat confounds occur- 
 rences. It is impossible to make good use 
 of the materials of our decision, without a 
 methodical arrangement of facts, as well as 
 of principles : I invite your lordship to accom- 
 pany me while I attempt this arrangement. 
 
 The sinking fund of 1786, operated with- 
 out disturbance, and without counteraction by 
 war, until the year 1793. In that interval, 
 political events had occasioned some extra- 
 ordinary expenses ; for these, provision was 
 made by the prudent minister of that day, by 
 occasional taxation *. 
 
 The productiveness of the revenue induced 
 
 * Rose's Examination, 1792, p. 43. 
 
 F
 
 66 
 
 Mr. Pitt in 1792, when he instituted the new 
 sinking fund, appropriated to each future 
 loan, to make a special grant to the old fund, 
 of one year's clear surplus *. And the fu- 
 ture benefit of this surplus he proposed to 
 divide, giving one half to the fund, and, with 
 the other, repealing taxes. It is singular that 
 Mr. Fox f, the leader of an opposition, pos- 
 sessing great interest in the land, and pre- 
 tending to peculiar sympathy with the people, 
 reproached Mr. Pitt with an unworthy thirst 
 after popularity, because he did not give the 
 whole of the surplus to the fund ! In my 
 opinion, Mr. Pitt's was the wiser decision, 
 especially as the appropriation of one moiety 
 to the redemption of debt was not an absolute, 
 but an annual grant ; so that while, up to a 
 certain point, settled upon a fixed principle, 
 the income of the fund was inalienable ; be- 
 yond that point, it was available in the event 
 
 * £ 400,000. Pari. Hist, xxix., p. 824. 
 t Pasre 844.
 
 67 
 
 of an accidental deficiency. In the instance 
 before us, the amount was small, and the war 
 soon destroyed the surplus ; but the proce- 
 dure is well worthy of imitation. 
 
 The amount of the sinking fund, at the 
 commencement of the war, was more than 
 one million, six hundred thousand pounds ; 
 consisting, in part, of the grant of parliament, 
 of the interest, in part, saved by the redemp- 
 tion of debt ; but composed, in all its parts, 
 of a real surplus of revenue ; about six hun- 
 dred thousand pounds of that surplus were 
 the result of the operation of the fund itself; 
 or, if you please, for it is in this place exactly 
 the same, of the nation's annual savings. 
 
 Here was an available sum, of capital, to 
 lessen the amount of the annual loan ; or, of 
 income, whereout the charge of a loan might 
 be provided. The amount was small, but 
 with reference either to the amount of the 
 ■ debt, or to the scale of the expenditure, by 
 no means inconsiderable. As the period du- 
 
 F 2
 
 68 
 
 ring which the taxes, composing this fund, 
 had been levied, was one of unusual prospe- 
 rity, there is no pretence for imputing to 
 them a severity of pressure. I confidently 
 submit that through this, the short, but only 
 period of continued peace, the sinking fund 
 had completely succeeded. 
 
 Nay, my Lord, I will even venture to ask 
 you, whether, if you could now go back to 
 1793, or rather to that period of 1792, up to 
 which you retained the hope of peace ; ima- 
 gining yourself and the nation to have been as 
 copiously watered as in these latter years, 
 " from the pure stream of science*," would 
 you stand up among your peers, the heredi- 
 tary possessors of lands and honours, and pro- 
 pose the abrogation of the sinking fund ? 
 
 Your first chapter would have given me the 
 hope of an affirmative answer; but in that now 
 before me, after enumerating the causes of 
 failure during war, not at this present moment 
 
 * Essay, p. 50.
 
 69 
 
 a question between us, you have wrought 
 yourself (forgive the expression) into a train 
 of reasoning, not only against borrowed sink- 
 ing funds, and against all systematic plans 
 of redemption, even by a real surplus, but 
 almost against payment of debt in any mode 
 whatever. 
 
 Your arguments, if I see them clearly 
 through the metaphors which occasionally 
 dazzle me, appear to be these : — first, you 
 say that an accumulating fund exacts a pre- 
 sent sacrifice, not only of the taxes which 
 compose the fixed allowance, but of those 
 which defray the purchased, but still conti- 
 nued interests ; and that " for this great, im- 
 " mediate, and increasing evil," the only re- 
 turn offered is, " the hope of a speculative 
 " good, deferred to some indefinite but distant 
 ** period ; and even in its ultimate effect, pro- 
 " ductive of a very questionable and equivo- 
 " cal advantage*." Your deduction is, that 
 
 * Essay, p. 70.
 
 70 
 
 " the rulers of any community in the most 
 " prosperous condition of its finances, ought 
 " to apply themselves to the direct interests 
 " of those whose happiness is their primary 
 " and especial charge ;" in other words, re- 
 peal taxes to the utmost, without any regard 
 to the future. 
 
 I submit, that in these passages, there 
 are glaring errors, evincing an inaccurate 
 observation of the system which you con- 
 demn. How can it be said that the accu- 
 mulation of the sinking fund is an increasing 
 evil ? It is true that the amount of taxes, 
 applicable to the fund, and, therefore, dis- 
 posable, if the fund be abolished, increases in 
 every successive year ; but it is not true that 
 the amount of taxes of which the sinking fund 
 prevents the repeal, increases continually, 
 or increases at all. If the sinking fund of 
 1786 had never been created, taxes to the 
 amount of twelve hundred thousand pounds 
 annually might, at some time between 1786
 
 71 
 
 and 1793, have been repealed. And if the 
 fund, having been formed, had been abo- 
 lished or suspended at any time within 
 the same period, there might have been re- 
 pealed such an additional amount as was 
 equal to the redeemed interest ; ultimately, 
 more than four hundred thousand pounds. 
 And this continually growing power of repeal- 
 ing taxes your lordship represents as the in- 
 creasing evil of the sinking fund, forgetting 
 that, without that fund, the whole of this 
 amount of four hundred thousand pounds of 
 taxes, must have been borne by the country 
 for all time to come ! An increasing power 
 of effecting a good, you style an increasing 
 evil, because it is not immediately enjoyed. 
 
 Again, the good, you say, is to be enjoyed 
 at some " indefinite, but distant period." The 
 period is not indefinite, and it is not neces- 
 sarily remote. I will not here re-argue the 
 propriety of assigning a limit to our debt. 
 I will only remind you that the definition of
 
 72 
 
 the period, (subject only to variations of 
 price) is the very essence of the system ; and 
 that if at any time within that limit the state 
 is minded to anticipate the period, it may 
 secure a share of the advantage which was 
 ultimately to be enjoyed, proportioned to the 
 duration of its forbearance. 
 
 But you add that this contemplated advan- 
 tage, available, as you say, at a distant period, 
 available, as I say, at any period of the ope- 
 ration of a sinking fund, is, '^ as we have seen, 
 " very questionable and equivocal *." 
 
 My Lord, I have looked back, and I cannot 
 find the passage in which you treat the re- 
 peal of taxes, and of that advantage we now 
 speak, as other than a great and certain good ; 
 I look forward, and I come at once upon a 
 passage in which the repeal of taxes is stated 
 as so much the great and advantageous object, 
 that it ought not, on any consideration, not 
 even for the sake of extending its operation.
 
 73 
 
 to be postponed by any state which has the 
 power of effecting it. 
 
 You will probably admit that you have 
 been led too far by the vehemence of argu- 
 ment, when you question even the eventual 
 advantage to flow from the sinking fund. 
 But, you say, in reference to benefits to be 
 realized hereafter, that " an earlier, although 
 " more gradual, repeal of taxes would spread 
 " its benefits in a thousand fertilising chan- 
 " nels, over the wide field of social industry ; 
 " and never could its absence be compen- 
 " sated by any forced direction given, after a 
 " dreary vacancy, to the produce of the same 
 " sources, pent up till it bursts these artificial 
 " barriers *." 
 
 I am not sure that I have caught the 
 meaning contained in this metaphorical pas- 
 sage. The question is, between repealing, 
 at once, an amount of taxes equal to an ex- 
 isting surplus of annual revenue, and letting 
 
 * Pase 71.
 
 74 
 
 that surplus operate annually in the diminu- 
 tion of charge ; and then, at some future 
 period, whether previously fixed or not, is of 
 no importance here, repealing taxes equal to 
 the surplus and saving. The first alternative 
 w^hich your metaphor contemplates, is an 
 earlier, but it is not a gradual repeal. That 
 epithet is calculated to mislead us. Your 
 suggestion really is to disperse, at once, 
 among the community, the whole amount 
 which is not wanted at the exchequer; in 
 the hope, as I presume, that the increase of 
 wealth thus occasioned, will either augment, 
 at a future period, the produce of existing 
 taxes, or furnish resources for additional tax- 
 ation. It is only under this construction that 
 your reasoning can have any practical bear- 
 ing upon the question. 
 
 I am well aware of the distrust, with which 
 an argument in palliation of the effect of 
 taxes is received, especially when it proceeds 
 from an official man ; but I cannot do justice
 
 • 75 
 
 to the question between us, without avowing 
 the opinion, that the effect of taxes, upon the 
 wealth of a nation, is usually much over- 
 rated. Taxation varies the distribution of 
 wealth ; it circulates it in different channels ; 
 but I know not the principle on which it is 
 maintained that, in the channels into which 
 it is thus circulated, it conduces less to the 
 general prosperity. 
 
 But whatever be the effect of taxes upon 
 the national wealth, they assuredly occasion 
 much individual discomfort, and almost every 
 man rejoices at their reduction. And upon 
 two points there is scarcely a difference of 
 opinion. First, that the effect of a repeal of 
 taxes, that is, of taxes upon consumption, 
 which comprise the greater part of English 
 revenue, is not always felt by the community 
 at large, in due proportion to the diminution 
 of public income. And this observation is 
 more strikingly just, when applied to the re- 
 duction only, not the abrogation of a parti-
 
 76 
 
 cular tax. Secondly, the re-imposition of an 
 old, or the imposition of a new tax, is felt 
 much more severely, both by consumers and 
 traders, than the continuance of one which 
 exists. 
 
 It follows, that where there is any proba- 
 bility, — and when is there not? — that poli- 
 tical or financial occurrences will require, at 
 no very distant ^period, an augmentation of 
 revenue, a government which possesses a sur- 
 plus will consult the convenience and happi- 
 ness of its subjects most, by so disposing it 
 as to avert the probability of renewed taxa- 
 tion. I therefore confidently submit, that, 
 without any regard to the interests of the 
 next generation, still less of distant posterity, 
 there is wisdom, and kind consideration for 
 the people, in applying a surplus, or a part 
 of it, to a sinking fund. I say, or a part of 
 it, because it is no inconsiderable circum- 
 stance that, within a period of moderate 
 duration, a moiety applied to the sinking
 
 77 
 
 fund will effect as much direct relief, as the 
 whole dispersed at once. 
 
 If then, my Lord, the expected effect of 
 your fertilising channels is, not the actual 
 augmentation of revenue, but the enlarge- 
 ment of resources to be drawn hereafter from 
 the people by fresh taxation, I am satisfied 
 that, even if your speculation be correct, you 
 estimate wrongly its operation upon the 
 public happiness. 
 
 I am well aware that the reduction of duty 
 often increases the consumption of the par- 
 ticular article relieved, and even of others ; 
 to the great increase of individual comfort, 
 and sometimes without loss of revenue ; this 
 truth ought always to be in the mind of a 
 minister of finance. If the diminution of 
 duty be compensated by the increased con- 
 sumption, it is a mere financial arrangement, 
 not a question of surplus. It may certainly 
 sometimes be prudent to postpone the appro- 
 priation of surplus, in order to give time for
 
 78 
 
 the trial of the experiment, in any particular 
 direction. If you giveaway your actual sur- 
 plus, and your experiment then fails, you are 
 without resource, except in fresh taxation ; if 
 you apply it to a sinking fund, you have in 
 your hands the means of repairing the loss. 
 According to my principle, I should certainly 
 be unwilling to make this use of a sinking 
 fund, especially in time of peace ; it is pos- 
 sible to preserve at once the principle and 
 the immediate benefit ; but all that I would 
 now urge upon your Lordship is, that if 
 we look to the possibility of war occurring 
 in our own times, nay, if we look even be- 
 yond one single year, we shall disregard 
 your Lordship's counsel to cast away the 
 surplus which reviving prosperity may afford 
 to us. 
 
 To return now to the history of actual 
 occurrences ; I contend that Mr. Pitt's sink- 
 ing fund, so long as peace continued, pro- 
 duced an unequivocal and substantial good.
 
 79 
 
 The extent of the advantage was limited, by 
 the return of war ; an event so completely 
 unexpected, that, in the very year preceding, 
 our military force had been reduced. De- 
 tailed figures are not necessary to show how 
 much the benefit would have been enlarged 
 if peace had continued ; I am satisfied that 
 if it had lasted only to the end of the cen- 
 tury, not a man in England would now doubt 
 of the wisdom of Mr. Pitt's system, or listen 
 to Lord Grenville's exhortation to renounce it. 
 
 § 14. 
 
 But I now, at your Lordship's invitation, 
 consider the actual operation of the system 
 during the far different circumstances pro- 
 duced by war. Under these, you say, " it 
 " compelled us to heap loans upon loans, and 
 " taxes upon taxes, in a series of unlimited 
 " accumulation ;" — " it increased the defi- 
 " ciency of the revenue, by the full amount 
 " to which its operations were carried." —
 
 80 
 
 '* Its whole amount, all its fixed allowances, 
 *' all the redeemed annuities, and all the 
 " pretended accumulations of interest by 
 " which they are increased, served only to 
 " swell the long schedule of taxation." — " In 
 " addition to the war loans, we had sinking 
 " fund loans, rapidly increasing, and ulti- 
 " mately of very large amount." — " To the 
 " new charge of interest created by the for- 
 " mer, a further and similar charge was 
 " superadded by the latter." — " To neither 
 " of these new services were the annuities to 
 <* be redeemed by this increasing fund at all 
 " available ; both were to be met always by 
 " fresh taxes *." 
 
 No wonder indeed, if the ills of which you 
 give this long catalogue, convinced parlia- 
 ment that the system had failed, and led to 
 its ultimate suspension ! 
 
 But your representation of facts, my lord, 
 I am compelled to observe, is, in some parts, 
 
 ♦ Essay, pp. 72, 3, 4.
 
 81 
 
 greatly exaggerated, in others, wholly in- 
 correct. 
 
 In order to estimate the effect of the sink- 
 4 ing fund, we must consider what would have 
 been the operations of finance if your lord- 
 ship had, in 1786, outrun the wisdom of your 
 contemporaries, over-ruled the prejudices of 
 Mr. Pitt, and persuaded him to follow the 
 advice which you now give. Let us see, 
 what would have been the variations from 
 the actual state of the national account on 
 one side and the other. I will go no further 
 at present than the year 1802, because in 
 that year the first war terminated, and the 
 first alteration was made in Mr. Pitt's sink- 
 ing fund ; and in the course of the subse- 
 quent war, the fund underwent a second, and 
 still more material alteration. 
 
 If, then, there had been no sinking fund, 
 the surplus of twelve hundred thousand 
 pounds would have been dispersed, by the 
 repeal of taxes ; by that amount the revenue
 
 82 
 
 applicable to the permanent charges of the 
 state, in technical language, the income of 
 the consolidated fund*, would have been di- 
 minished; — on the other hand, the charge 
 upon that fund would have been diminished 
 by the amount of the fixed allowance to the 
 sinking fund of 1786 ; so far, then, the ac- 
 count is not affected by the system of 1786 ; 
 — the deficiency was not increased, nor any 
 necessity created for an additional loan: 
 taxes certainly were continued; no fresh 
 taxes imposed. 
 
 But under the act of 1792, a fixed allow- 
 ance of one per cent, upon the capital of 
 every new loan was added to the sinking- 
 fund, whereby the charge upon the consoli- 
 dated fund was annually increased ; to defray 
 this charge, which progressively increased 
 from about sixty thousand pounds to two 
 millions and a half annually, new and sufR- 
 
 * To be strictly accurate, I must observe that ,£200,000 of 
 this fixed allowance formed a part of the annual supply ; but as 
 it was invariably voted, the distinction is merely technical.
 
 83 
 
 cient taxes were imposed. The deficiency, 
 and the amount of the loans, were not directly 
 affected by this part of the operation, any 
 more than by the former. 
 
 In addition to these fixed allowances, the 
 sinking fund received the several amounts 
 of the annuity redeemed ; that is, of interest 
 upon the stock purchased by the sinking 
 fund. For these amounts no new charge 
 was laid upon the consolidated fund; they 
 were the result of the operations of the 
 sinking fund itself, but for that institution, 
 they would have remained the property of 
 individuals. Through this part, therefore, of 
 the operation again, the national account 
 was not affected ; the deficiency was not aug- 
 mented, no additional loan was required, nor 
 was any tax either imposed or continued- 
 
 The result of the whole is, that if we had 
 had no sinking fund in the war of 1793, we 
 should have had at our disposal, the surplus 
 of twelve hundred thousand pounds, provided 
 
 G 2
 
 84 
 
 that we chose to revive, and again impose, the 
 repealed taxes, to that amount; and, suppos- 
 ing also that w^e had determined to impose in 
 every year taxes to the amount of the one 
 per cent., we should have had those several 
 amounts disposable, either to defray the 
 charge of loans, or for current services. If 
 they had been applied to current ser- 
 vices, the loan of each year might have 
 been diminished; that of 1793, by sixty 
 thousand pounds ; that of 1801, by two mil- 
 lions and a half ; those of the other years by 
 various intermediate sums. 
 
 To this extent you are correct, in ascrib- 
 ing to the sinking fund the origination of 
 loans ; it did not divert or appropriate to 
 itself a single amount of capital raised by 
 loan, or of income raised by previous tax- 
 ation ; but it did occasion the maintenance, 
 and the creation, of revenues, which might 
 have been revived, or created, with a view 
 of diminishing the loans. You forget,
 
 85 
 
 that for every addition thus occasioned to 
 the loans, a former amount of debt was re- 
 deemed, so that although the sum annually 
 borrowed was increased, no addition was 
 made to the debt. 
 
 I know, my Lord, how widely this state- 
 ment differs from some which have been 
 over and over again made in parliament, and 
 supported by a formidable array of figures ; 
 as well as from your lordship's more pointed 
 and forcible statement. It is, however, ex- 
 actly conformably in substance, though it 
 differs in expression, with that of Dr. Hamil- 
 ton, whom your lordship, like some others, 
 mistakingly supposes to have placed in a 
 new light, the operation of the sinking fund. 
 
 Again then, my Lord, I take my stand with 
 Mr. Pitt, and I confidently submit that he 
 had a right, in 1802, to look back with pride 
 at the working of his system. 
 
 He had adhered to it in all its parts. 
 
 He had maintained at more than its origi-
 
 86 
 
 nal amount, the revenue which existed before 
 the war ; he had made an adequate provi- 
 sion for all the new charges which the war 
 had occasioned. He had made provision for 
 the redemption within the limited period of 
 forty-five years from the origin of each loan, 
 of the whole debt which he had created ; he 
 had borne the share in this redemption which 
 that limitation prescribed; and he had les- 
 sened by the millions, which his sinking- 
 fund had purchased before the war, as well 
 as by war taxes, unknown to his immediate 
 predecessors, the amount to which the debt 
 would otherwise have increased. 
 
 Had peace been then maintained, upon the 
 scale of expense of the former peace, inde- 
 pendently of any permanent charge arising 
 out of the war, there would have been a clear 
 surplus of revenue, over and above the sink- 
 ing fund. That fund amounted to five millions 
 eight hundred thousand pounds. If it had 
 been deemed advisable, at that moment, to
 
 8T 
 
 put an end to the fund, in order that that large 
 annual revenue might be disposable, that 
 very measure would have been a proof, not 
 of the failure but of the beneficial operation 
 of the plan. This considerable income was, 
 no doubt, the result of taxation, and taxation 
 might, by other modes of proceeding, have 
 raised a similar revenue ; but by none, I will 
 venture to say, of such easy and inoffensive 
 operation upon the people. Indeed, the 
 hitherto easy pressure of the system was 
 pretty clearly demonstrated, by the imposi- 
 tion of extensive and productive taxes in the 
 succeeding years. 
 
 I must here observe, that it is possible that 
 an additional revenue might have been neces- 
 sary, even though the war had not been re- 
 newed ; this necessity is rfeferrible to a cir- 
 cumstance, for which Mr. Pitt's system had 
 not, and could not have, specially provided ; 
 the tendency of the ordinary expenditure, 
 during a war, to exceed that which preceded
 
 88 
 
 the war. It cannot now be ascertained whe- 
 ther the increased revenue would have met 
 this new charge ; according to the estimates 
 of the period, it would have been more than 
 adequate. It is obvious that a sinking fund, 
 or any system which requires the imposition 
 of taxes during war, beyond the amount re- 
 quired as interest on the loans, affords a ready 
 method of meeting this increased expendi- 
 ture; if, contrary to the fact of 1802, other 
 means are wanting. 
 
 But I will again pause to ask your lord- 
 ship, whether, if you could now go back to 
 the peace of Amiens, either with or without 
 a more favourable opinion of its duration 
 than that which you entertained, and which 
 the event justified, you would, on reviewing 
 its operation both in peace and in war, 
 counsel, at that period of peace, the abro- 
 gation of the sinking fund, or its diversion 
 from the object of its institution?
 
 89 
 
 § 15. 
 
 I MUST now call your attention to a modi- 
 fication, which the sinking fund did undergo 
 in 1802, which has occasioned much of the 
 prevalent misconception of its nature. 
 
 We have already seen that Mr. Pitt's 
 sinking fund of 1786 was to operate, for 
 one period at compound interest, afterwards 
 at simple interest, until the whole of the old 
 debt should be redeemed. The several 
 smaller sinking funds created under the act of 
 1792, were to operate at compound interest, 
 each by itself, until its particular loan should 
 be discharged. 
 
 In 1802, the old sinking fund had ap- 
 proached, within six or seven years, the 
 period at which it would operate at simple 
 interest ; from that time the finances would 
 have derived an annual progressive relief of 
 about two hundred thousand pounds, for 
 about thirty years. The relief occasioned 
 by the separate sinking funds was computed
 
 90 
 
 to commence in about twenty years ; from 
 which period it would operate very irregu- 
 larly, but very extensively, through a period 
 of rather more than thirty years. 
 
 These calculations are subject to much 
 variation ; but the truth is, that a mistake of 
 even ten years or more, is of no importance. 
 That which I wish to impress upon your 
 lordship is, how much you are mistaken in 
 speaking of Mr. Pitt's fund as " never to be 
 " made available to any present uses of the 
 " state, — no, not in its utmost necessities, 
 " but continually to be augmented for the 
 " benefit of some remote posterity*." 
 
 Mr. Addington, in 1802, certainly with the 
 full concurrence of Mr. Pitt, repealed all the 
 provisions whereby any relief was to be de- 
 rived from any part of the sinking fund, until 
 the whole existing debt should be discharged, 
 a transaction estimated to be completed in 
 about forty-three years. By thus appro- 
 priating to the fund prospectively, large 
 
 * Essay, p. 75.
 
 91 
 
 amounts of revenue which would otherwise 
 have been available to the state, he accele- 
 rated the period in which the total debt 
 would be extinguished, and assuredly did 
 not infringe the principle of the sinking fund, 
 in reference to the limitation of the national 
 mortgage ; but, by greatly deferring the 
 period at which the fund would begin to 
 operate, visibly and intelligibly, to the relief 
 of the people, so as to authorise the repeal 
 of taxes during peace, or the abstinence from 
 fresh taxation, if it should occur during war, 
 he did as much, practically, to bring the sys- 
 tem into discredit, as if he had invaded or 
 diverted it. May I be permitted to add, that 
 I held and expressed this opinion at the 
 time * ? I never formed one which experience 
 more amply justified. 
 
 * " Observations on the Present State of the Finances, 1803." 
 I take this opportunity of mentioning, in reference to this and other 
 parts of my letter, that I have purposely omitted several details, 
 which would be necessary to a complete history of finance, but 
 have no important bearing upon the present question.
 
 92 
 
 § 16. 
 
 The war recommenced in 1803 ; the old 
 sinking fund proceeded, and as the act of 
 1802, had not affected future loans, new sink- 
 ing funds of one per cent, were created. 
 The amount of the loans, however, was much 
 diminished by the very judicious and ener- 
 getic resolution of Mr. Addington, (acting, I 
 believe I may say, under the advice, and 
 certainly with the assistance, of Mr. Vansit- 
 tart*,) a resolution adopted and extended by 
 Mr. Pitt, and by your Lordship, to raise a 
 large proportion of the supplies within each 
 year. This system proceeded without mo- 
 
 * I perform a very agreeable duty, in bearing testimony to 
 the judgment and vigour of the measures whereby Mr. Vansit- 
 tart, now Lord Bexley, augmented, on this, and on other occa- 
 sions, the revenue of the state ; and I am more particularly 
 desirous of adverting to the present measure of raising a large 
 sum within the year by war taxes, because I did express an ap- 
 prehension, that he proceeded too far. I am now satisfied that, 
 although (as usually happens) the revenue was not at once aug- 
 mented to the extent of the increased taxation, the measure of 
 1803 was judicious and successful.
 
 93 
 
 dification for the first four years of the war. 
 I shall not dwell upon the proceedmgs of 
 1807, because I am determined to avoid per- 
 sonal argument ; it is enough to say that, in 
 that year, a portion of the war taxes was mort- 
 gaged for about fourteen years, a measure 
 strictly within the principle of 1792 ; and 
 that in the following years, other portions 
 were made permanent by Mr. Perceval, and 
 charged with the interest, and corresponding 
 sinking fund, of new loans. It is quite unfair, 
 in my opinion, to object to these measures, 
 as encroachments on the sinking fund*, or 
 departures from its system. They were, in 
 fact, modifications, occasioned by the in- 
 creasing pressure of the war, of measures 
 which were an improvement upon that 
 system. 
 
 § 17. 
 
 But in 1813, a second alteration was made in 
 
 * See Mr, Ricardo's article in the Encyclopedia Britannica, 
 cited in the Essay, p. 66.
 
 94 
 
 the sinking fund, which, though very intelU- 
 gible in its first principle, being very full of 
 details, has tended, if I may so express my- 
 self, greatly to mystify the subject; and I 
 am satisfied that your lordship has not care- 
 fully considered it. 
 
 Its avowed and leading object was to cor- 
 rect the error of 1802, by restoring to the 
 sinking fund, its principle of gradual relief. 
 There were, in my opinion, several objec- 
 tionable points in the mode in which this 
 object was effected: two I will particularly 
 mention. First, the remedy was applied 
 to a part which was not affected by the dis- 
 ease ; in my opinion, if the correction had 
 been applied only to the sinking fund of 
 1802, the measure would have strengthened 
 instead of impairing, as I am convinced it 
 has, the principle of the sinking fund. Se- 
 condly, the principle of self-operation was 
 destroyed, by leaving parliament to fix, 
 from time to time, the amount of the
 
 95 
 
 relief which (always under the limitation 
 which the new, or revived, principle esta- 
 blished) the country should derive from the 
 fund. According to the old principle, the 
 revenue set free should no longer have been 
 issued by the commissioners, and would have 
 occasioned an immediate diminution of charge 
 upon the consolidated fund, and consequent 
 increase of the surplus. 
 
 The necessity of the interference of par- 
 liament in every instance, gave to each the 
 character of an encroachment upon the sink- 
 ing fund, which has led others as well as your 
 Lordship, into error. Disapproving for these 
 and other reasons, of the measure of 1813, 
 I cannot think you justified in deeming it a 
 violent breach of the barriers * of the institu- 
 tion, and an evidence of the failure of the 
 whole plan. Your remark that " too much 
 was attempted -f ," is just when applied to the 
 measure of 1802 ; but it is not just as to the 
 
 * Essay, p. 6-1 . t P- 74.
 
 96 
 
 original system ; which the plan of 1813 pro- 
 fessed to revive, by restoring to the establish- 
 ment that which, though certainly overlooked 
 by your lordship, was truly, " of its very 
 " essence," a principle of gradual relief. 
 
 Now, my Lord, I must again invite you to 
 look back, and review the operation of the 
 sinking fund, up to the period which we are 
 now considering, the first at which it was so 
 relaxed, as to afford present relief. 
 
 The sinking fund now amounted to thirteen 
 millions ; of which rather more than six mil- 
 lions and a half consisted of fixed allowances ; 
 the remainder of the redeemed interest. Cer- 
 tainly, although the sinking fund had never 
 existed, an amount of taxes gradually rising 
 from twelve hundred thousand pounds, to 
 thirteen millions, might have been applied to 
 the current service. And if those sums had 
 been raised in war taxes, they would have 
 constituted a fund, whereon the interest of 
 loans might have been charged, just as they
 
 97 
 
 were charged after the year 1813 upon the 
 sinking fund. The great benefit which the 
 parliament and people of 1813 derived from 
 the sinking fund, consisted in the obligation 
 which its existence had imposed upon pre- 
 ceding parliaments to create the surplus re- 
 venue, instead of borrowing the amount upon 
 a perpetuity*. Actual, arithmetical gain, 
 there was assuredly none ; financial and poli- 
 tical convenience, in my opinion, much. 
 
 I cannot allow that, in 1813, the institu- 
 tion could be justly styled inefficient ; or one 
 which had consulted only the interests of re- 
 mote posterity. 
 
 Between 1813 and 1822, Mr. Vansittart's 
 measure placed at the disposal of parliament, 
 an annual income of nearly ten millions -f . 
 
 * " The sinking: fund has had a real effect in calHnj? forth ex- 
 " ertions which, although they might have been made as well 
 " and as effectually, would not have been made, unless to follow 
 " out the line which that system required."— " If the sinking 
 •• fund had not been in view, it is likely that taxes would have 
 " been imposed for the interest only." — Hamilton, p. 153. 
 
 t Commons' Journals, LXXVII. 792.
 
 98 
 
 During the latter years of the war, when the 
 great and successful efforts were made for 
 accomplishing that for which the country had 
 fought so long and so bravely, there were 
 raised upon this annual fund, the greater por- 
 tion of the immense sums, which those efforts 
 required. For the present purpose, it is no 
 matter whether this was effected by a restora- 
 tion, or by a subversion, of Mr. Pitt's principle. 
 
 Further loans were raised in the same way, 
 during the following years of peace ; and 
 thus the income of the sinking fund, within 
 nine years, stood in the place of ten millions 
 of new taxes. 
 
 If, then, the sinking fund be considered as 
 having expired under Mr. Vansittart's opera- 
 tions, it will be allowed to have made one of 
 those vigorous efforts, which sometimes im- 
 mediately precede death. For a testimony 
 of its living merits, let me refer you to one who 
 witnessed, with no ordinary powers of obser- 
 vation, its existence and its decease. " An 
 " efficient sinking fund, in the opinion of
 
 99 
 
 " many gentlemen who sat near him, could 
 " not exist at the same period that we were 
 " increasing our debt. In that position he 
 " did not coincide. He thought, for instance, 
 " that when Mr. Pitt first established a sink- 
 " ing fund, and although, during a consider- 
 " able portion of his subsequent life, the 
 " country was engaged in foreign wars, by 
 " the enormous expense of which the debt 
 " was increased in a far greater propor- 
 " tion than the sinking fund paid it off; yet 
 " that, in effect, we then always had a sink- 
 " ing fund. Of every loan that was borrowed 
 " to meet those vast expenses, Mr. Pitt pro- 
 " vided for the interest, and reserved a fund 
 " of one per cent, for the extinction. Un- 
 *' doubtedly, an incredible weight was added 
 *' to the debt by the protracted war that en- 
 " sued ; but what would have been the situa- 
 " tion of the country, had she sooner eflfected 
 *' a peace ? All those loans which had been 
 ** borrowed in war time, would have been 
 
 H 2
 
 100 
 
 " provided for, and there would have been 
 " left an efficient sinking fund. Had this 
 ** system been adhered to during the whole 
 " progress of the war, he would have been 
 " the last man to raise his voice against the 
 ** sinking fund *." These are the words of 
 Ricardo ; and I might rest upon them alone 
 an argument for restoring the sinking fund. 
 
 § 18. 
 
 After war had been terminated, and its ex- 
 penses defrayed, it certainly did behove par- 
 liament to replace the finances upon the safe 
 and plain ground on which the war had found 
 them ; and I admit that this process might 
 have been sooner and more judiciously con- 
 ducted. Of the steps taken towards this con- 
 clusion a slight sketch is sufficient. 
 
 Nothing permanent was attempted, until 
 the year 1819. The object was, after fully 
 discharging all expenses of the war, and re- 
 
 * Pari. Deb., New Series, VIII. 316.
 
 101 
 
 ducing the floating debt to a convenient size, 
 to secure a revenue sufficient, according to 
 its average produce, to cover all permanent 
 and ordinary expenses, including a provision 
 for the redemption of the funded debt. A 
 strict adherence to the law of the sinking 
 fund, even as it was modified and relaxed in 
 1813, would have required a great temporary- 
 increase of taxes ; great, because the nominal 
 amount of the sinking fund was even then 
 fifteen millions and a half, and the estimated 
 surplus of revenue not more than two ; tem- 
 porary, because the operation of the law of 
 1813, would have afforded considerable and 
 periodical relief. This taxation would not 
 have been required, if the taxes which ex- 
 isted at the end of the war, had been con- 
 tinued ; for there had already been a repeal 
 of taxes to the amount of nearly nineteen 
 millions* ; composed, no doubt, principally 
 of taxes specially destined for the war ex- 
 penditure. 
 
 * Mr. Robinson's Budj^et speech, 18-26, Appendix IV.
 
 102 
 
 It was determined to have a real surplus 
 of five millions *, v\^ith vi^hich view three mil- 
 lions of new taxes were imposed. No altera- 
 tion was made in the law of the sinking fund ; 
 its nominal amount continued far to exceed 
 the balance of free revenue, and there was 
 now, as I conceive, a manifest departure from 
 the principles of Mr. Pitt, and from those 
 which I have humbly submitted as essential 
 to a sinking fund in time of peace ; from this 
 period, and until the year 1823, the operose 
 transactions of the sinking fund were justly 
 exposed to criticism and ridicule. The ma- 
 chinery was now inefficient, even for se- 
 curing an appropriation, or preserving a prin- 
 
 * " Resolved, That to provide for the exigencies of the 
 " public service, to make such progressive reduction of the Na- 
 " tional Debt as may adequately support public credit, and to 
 " afford to the country a prospect of future relief from a part of 
 " its present burdens, it is absolutely necessary that there should 
 " be a clear surplus of the income of the country, beyond the 
 " expenditure, of not less than five millions ; and that with a 
 " view to the attainment of this important object, it is expedient 
 " now to increase the income of the country, by the imposition 
 " of taxes, to the amount of three millions per annum." — Com- 
 mom'' Journah. LXXIV. 509.
 
 103 
 
 ciple. Nevertheless it was not until the year 
 1823*, that parliament reduced the nominal 
 sinking fund, to the level of the actual or in- 
 tended surplus. In the interval, Mr. Fox's 
 clause v^as brought into operation, so that 
 
 * *' Your committee cannot quit this part of the subject re- 
 " ferred to them, without calUng the attention of the House to 
 " the advantages which would be derived, not only in respect of 
 " a simphfication of accounts, but also in respect to considera- 
 " tions of still more importance, from a review of the present 
 "■ system upon which the application of the sinking fiind is con- 
 " ducted. 
 
 " It might not be expedient, during the continuance of the 
 " war, and until the experience of several years of peace had 
 " placed the revenue and expenditure of the country, upon a 
 " footing not likely materially to be varied, to attempt a revisal 
 " of the administration of the system, adopted for the reduction 
 " of the National Debt ; but it seems now advisable, that the sum 
 " appropriated for that purpose, should be limited to the amount 
 " really intended to be applied to the discharge of debt, and 
 " which can be afforded from an actual excess of revenue above 
 " the expenditure of the country. 
 
 " The opinion of the House upon this subject may be con- 
 " sidered as expressed in their resolution of the 8th June, 1819; 
 " and your committee submit, that, at an early period in the en- 
 " suing session, measures should be proposed for reducing the 
 " amount of the nominal sinking fund, upon the principles of the 
 " said resolution, and for discontinuing the practice of applying 
 " any part of it to the public service, in the form now become 
 " customary, of an annual loan." — Report from the Hdvct Coin- 
 millec on Public Accounts, July 31, 1822, p, 10.
 
 104 
 
 the more considerable portion of the fund 
 was lent to the public for current expenses : 
 the greater part of the interest and sinking 
 fund being charged upon the fund itself, 
 under the act of 1813, 
 
 But even the surplus of five millions has 
 not been constantly realized, since the deter- 
 mination of 1819. This deficiency is ov^^ing 
 to the great reduction of taxes ; amounting, 
 nearly, to eleven millions and a half, while 
 the decrease of charge by the reduction of 
 the interest on the five and four per cent, 
 stocks, is under two millions. Although, 
 therefore, the five millions have been regu- 
 larly paid to the commissioners, they have 
 not been the result of a permanent surplus, 
 but have been obtained, in part, through 
 casual receipts ; and, since 1823, by what is 
 whimsically called " the deadweight arrange- 
 ment," to which, as being intimately con- 
 nected with the principle of the sinking 
 fund, and being very little understood, I must 
 request your Lordship's attention.
 
 105 
 
 If the sinking fund had continued on its 
 original plan, or on the plan of 1813, the 
 arrangement would, in my opinion, have been 
 both justifiable and expedient. We all ad- 
 mit that, for the extraordinary expenses of a 
 war, we may reasonably borrow ; your lord- 
 ship says, on a perpetuity, Mr. Pitt said, on 
 an annuity of forty-five years. Now, the 
 charges which are the object of this arrange- 
 ment, arise strictly and truly out of the war, 
 although, from their nature, being pensions 
 arid allowances enduring for the lives of indi- 
 viduals, they are not paid at once, but con- 
 stitute, so long as they endure, an annual 
 charge (or dead weight) quite unconnected 
 with the current expenses of the state. If 
 they could have been discharged at once, in 
 single payments, which might, perhaps, have 
 amounted to twenty or thirty millions, I ap- 
 prehend that there would not have been 
 in practice, and certainly not in principle, 
 any objection to raising that sum by loan
 
 106 
 
 charged upon the permanent revenue, with 
 the required sinking fund, for discharging it 
 in forty-five years. 
 
 As this could not easily be done, the 
 revenues of forty-five coming years are 
 charged v^^ith such an annuity, as will spread 
 equally over that whole period, the autho- 
 rised limit of a national mortgage, the whole 
 expense of these war payments ; which 
 would otherwise press very unequally and 
 severely on the earlier years. By the sale of 
 that annuity, those unequal annual sums are 
 to be raised, while the pressure upon the 
 public is equal in every year. 
 
 This equalization is not less reasonable in 
 itself, than it is consistent with the principle 
 for which I have humbly contended ; but it 
 is quite inconsistent with the resolution of 
 1819, discarding, or at least suspending, the 
 principle of forty-five years, and affirming 
 the necessity of " a clear surplus of the 
 " income of the country beyond the ex-
 
 107 
 
 " penditure, of not less than five mil- 
 lions*." 
 
 If our sinking fund now stood upon a prin- 
 cijple, we might justify the " dead weight ;" 
 but while it rests upon a specific surplus^ it 
 becomes delusive, to the extent in which it 
 consists of any thing but surplus. 
 
 Moreover, in our haste to repeal taxes, we 
 have adopted two principles, both, as I sub- 
 mit, erroneous. We have included in the 
 account of income and expenditure whereon 
 our balance is struck, every sort of receipt 
 and disbursement, however uncertain or occa- 
 sional ; and we have considered as permanent 
 surplus, which we might freely give away 
 by reducing the taxes, every actual or ex- 
 pected exceeding of revenue, without making 
 any allowance for erroneous estimates, or for 
 fluctuations of produce. 
 
 I am far from disputing, indeed I have 
 elsewhere maintained, the propriety of re- 
 
 * Resolutions of the House of Commons, of 8tli June, 1819.
 
 108 
 
 ducing taxes, as an experiment of the effect 
 of reduction upon the produce of the re- 
 mainder ; but as we are now upon the causes 
 of the failure of the sinking fund, I cannot 
 omit these, to which the present defalcation 
 is correctly to be traced. 
 
 § 19. 
 
 I HAVE submitted to your Lordship this 
 history of the sinking fund, in the hope of 
 convincing you that you have misconceived 
 both the degree and the causes of the im- 
 puted failure, and that you draw an unau- 
 thorised conclusion from the failure which is 
 admitted. 
 
 The institution was formed, forty-two 
 years ago. This period consisted, of six 
 years of peace ; twenty-four years of war ; 
 then twelve years of peace. Its operation 
 in the first period was necessarily upon a 
 small scale ; but not even your lordship will 
 impute to it a failure.
 
 109 
 
 The question now being, whether to re- 
 establish the institution during peace, I might 
 fairly disregard, in the determination of that 
 question, the whole following period of war ; 
 but I have endeavoured to show that its ope- 
 ration, even during the war, was not without 
 advantage ; and that the objection to it is ap- 
 plicable, only, to a mistaken choice between 
 two modes of using it, equally parts of the 
 system. This mistake, if it be one, might be 
 avoided by a recourse to Mr. Fox's clause. 
 
 Your charge of failure, upon the present 
 period of peace, it is impossible to repel : 
 but it is a failure occasioned by external 
 violence, not inherent disease. 
 
 The violent measures were, the systematic 
 reduction of the fund to five millions ; and, 
 the destruction of the surplus, whereout that 
 provision was to come. 
 
 The first of these, may or may not have 
 been judicious. It is not altogether impro- 
 bable, that if the gradual operation of the
 
 110 
 
 plan of 1813, in affording relief, had been 
 sufficiently understood, and impressed upon 
 parliament, it might have been found expe- 
 dient, at the expense of a continued pressure, 
 to persevere in it; borrowing money for 
 every expense in any degree connected with 
 the war ; and maintaining our taxation, until 
 released by the operation of the sinking fund, 
 at the scale of the ordinary peace expendi- 
 ture, enlarged as it has been by the events 
 of passed years. 
 
 But surely, my Lord, it is not just to im- 
 pute failure to the sinking fund, because, 
 after a war of unexampled effort and profu- 
 sion, succeeding a very short period of peace, 
 it was not found possible to adhere strictly 
 to a system planned in contemplation of an 
 alternation of peace and war more conform- 
 able to experience. The sinking fund of 1819, 
 it is admitted, was not calculated to redeem 
 the debt in forty -five years from that period ; 
 still less from the respective periods of its
 
 HI 
 
 origin. But the amount bore to the existing 
 debt, a greater proportion than did the sink- 
 ing fund of 1786; and it was to accumulate 
 without check, until it should reach the point 
 from which the redemption within the pre- 
 scribed period would be effected. 
 
 With all my partiality for the sinking fund, 
 I cannot regard a relaxation in this degree, 
 whether it were one produced by necessity, 
 or by a view of expediency, not quite enough 
 regardful of the future, as a decisive indica- 
 tion of weakness or impracticability in the 
 system. When you consider that it was 
 accompanied by the imposition of three mil- 
 lions of taxes, it ought rather to be regarded 
 as a proof of the determination of parliament, 
 at that recent period, to persevere in the 
 system of Mr. Pitt. 
 
 There has, then, been no complete failure, 
 until now, when, through the too liberal re- 
 peal of taxes, the surplus has disappeared. 
 It may be true that the diminution of the
 
 112 
 
 fund has been the consequence of attempting 
 too much, more indeed than Mr. Pitt con- 
 templated. The " ultimate suspension," as 
 you style the present state of the fund, is the 
 consequence of over-sanguine anticipations of 
 financial prosperity. Nor can these results 
 be deemed a " decisive experiment" which 
 ought to " lead to the total abandonment of 
 " the system." 
 
 One word more, before I quit this long 
 section of the Essay. I believe that I have 
 already disposed of all the passages, wherein 
 you allude to " increasing loans," and 
 " extraordinary taxation ;" except one re- 
 markable passage with which you conclude, 
 by lamenting that means had not been found 
 for carrying on the war with more vigour 
 and effect, by sparing to us those additional 
 loans, or additional taxes, by an earlier dis- 
 continuance of the system. Your lordship 
 herein correctly ascribes to the system its 
 power of giving, at any moment, such
 
 113 
 
 effectual support as, I have shown, the late 
 fund did afford us, in a period of the greatest 
 exertion. Let it even be granted that the 
 aid will be most efficacious, if sought at the 
 first moment of war, why do you counsel 
 us against collecting, in time of peace, mate- 
 rials so important to the vigorous prosecution 
 of the contest. 
 
 §20. 
 
 In your *' conclusion," you dispose of four 
 various heads of advantage, as those which 
 are ascribed to a sinking fund by its different 
 upholders. 
 
 1. Some, you say, recommend the system 
 as " a resource in unforeseen emergencies.'* 
 On this you originally observed, that " a 
 " disposable surplus has its own advantages 
 '* and disadvantages *, but, in both, it essen- 
 *' tially differs from a sinking fund. The one 
 
 * The passage is altered in the second edition, and the di.sad- 
 vantaj^e is explained. It consists in the surplus, "beginning- iu 
 " needless taxation, and, probably, leading to needless cxpendi- 
 " lure." Page 80.
 
 114 
 
 " is appropriated, the other free." The one, 
 therefore, you infer, cannot answer the pur- 
 pose of the other. 
 
 In my view, the advantage here ascribed 
 to the sinking fund is incidental only ; it 
 certainly was not, and, upon my principle, it 
 ought not to be, an original object of the in- 
 stitution ; yet it furnishes of itself a sufficient 
 reason for maintaining it in peace. The 
 " appropriation " of a fund having this origin, 
 would be " the unforeseen emergency ;" 
 but a sinking fund, the most strictly appro- 
 priated to redemption of debt, in any other 
 form than a specific pledge to the stock- 
 holder, is always within the power of parlia- 
 ment ; and its liability to be used on an 
 emergency, may fairly be claimed as one of 
 its recommendations. 
 
 2. To raise and uphold the price of stocks, 
 may have been an advantage ascribed to the 
 institution by a fundholder. To a statesman 
 it is none, except under any particular cir-
 
 115 
 
 cumstances, in which a high price of the 
 funds assists a financial operation ; this may 
 be, (for we will put loans out of the question) 
 a reduction of the interest of the debt. The 
 effect is not desired, for the benefit of any 
 one set of proprietors, (which would be highly 
 unjust) but for the benefit of all who pay 
 taxes. Considering this as a merely inciden- 
 tal and occasional advantage of a sinking fund, 
 I shall not argue against your opinion of its 
 inefficacy. I beUeve that the purchases of 
 the commissioners have a great efiect upon 
 the price, which is not materially counter- 
 acted by any consequent diversion of capital 
 to other investment. 
 
 3. Your third supposed advantage is thus 
 described — "The compulsory accumulation 
 " of national wealth and its diversion from 
 " unprofitable expenditure into productive 
 " capital." As stated by Ricardo, from whom 
 you cite it, this beneficial effect resolves 
 itself into relief from taxation. Through the 
 
 I 2
 
 116 
 
 sinking fund, he says*, we repeal taxes; 
 taxes are generally paid out of revenue, 
 which would otherwise be expended, and 
 which thus come to be employed in increasing 
 the annual produce of our land and labour. 
 
 This is not my view of the effect of the 
 repeal of taxes. I subscribe to your Lord- 
 ship's doctrine, that our object is " not the 
 " multiplication of wealth, but the multipli- 
 *' cation of that social happiness which is 
 " derived from wealth, and which consists 
 " essentially in its use." Most assuredly ; 
 and there is an addition to the happiness and 
 comfort of every man who finds that he has 
 the "free use" of a part of his income 
 hitherto due to the government, or that, with 
 the same income, he may enlarge his con- 
 sumption, hitherto straitened by what was, 
 in effect, a sumptuary law. In relief from 
 direct or indirect taxation, he experiences 
 one or other of these substantial benefits ; for 
 
 * Supplement to the Encyclopedia Britannica. " Funding 
 System.'' Pac^e 421.
 
 117 
 
 the effect which this plan for enlarging, not 
 " narrowing his enjoyments," produces upon 
 the national wealth, he cares nothing. 
 
 I, too, my Lord, in arguing for a sinking 
 fund, disclaim all speculative and circuitous 
 advantages ; I discard all notions of " forced 
 "accumulation and compulsory saving*;" nor, 
 indeed, is any thing like them to be found in 
 the authority which you quote. I concur in 
 your view of " the proper aim of legislation ;" 
 but I would not that the parliament of the day 
 should diminish, by burdensome anticipa- 
 tions, the power of all future legislatures to 
 pursue the course which you recommend. 
 
 4. I do not perceive the absurdity which 
 your Lordship imputes to are commendation 
 of the sinking fund, as giving confidence at 
 home and abroad. I know not how accu- 
 rately an enemy will estimate our power, 
 when there is a question of war between us ; 
 but it is obvious that we assert our rights 
 with more confidence, when we know that 
 
 * Essay, p. 82.
 
 118 
 
 we possess, not " unreal " wealth, but the 
 facility of maintaining, without additional 
 taxes, fifty thousand additional soldiers, or 
 of realising many millions of money. Un- 
 doubtedly, this is the effect, not of a sinking 
 fund peculiarly, but of a surplus revenue ; I 
 submit that experience limited, but decisive, 
 has taught us that a sinking fund is the easiest 
 and surest mode of preserving this surplus, 
 and, in that sense, it gives us confidence in 
 our foreign and domestic policy. 
 
 § 21. 
 
 I HAVE examined, with a boldness for which 
 I again apologise sincerely, the reasonings 
 whereupon you counsel the abandonment of 
 the sinking fund. I have now to solicit your 
 attention to the details of the advice of an 
 opposite tendency, which, upon the grounds 
 which I have stated, I would humbly offer to 
 the country. 
 
 Those grounds are, first, the injustice and
 
 119 
 
 improvidence of an indefinite charge upon 
 the revenues ; and, secondly, the expediency 
 of husbanding our resources, for a time of 
 war*. 
 
 Your Lordship will observe, that neither of 
 these reasons leads, of necessity, to the esta- 
 blishment of a sinking fund, to operate during 
 war. The latter almost necessarily excludes 
 such operation; the former is quite con- 
 sistent with a determination to pursue, so 
 long as we have peace, the system, then to 
 be suspended. 
 
 My advice is, that we revive the sinking 
 fund, consisting of clear yearly surplus ; that 
 we retain, even if we cannot at once strictly 
 act upon it, the limitation of forty- five years; 
 and that that limitation should be maintained 
 in war as well as in peace. 
 
 * Dr. Hamilton's third gjeneral principle is this: — "The 
 " amount of the revenue, raised in time of peace, ought to be 
 " greater than the expense of a peace establishment, and the 
 '* overplus applied to the discharge of debts contracted in former 
 " wars, or reserved as a resource for the expenses of future 
 " wars." Page 7.
 
 120 
 
 A clear yearly surplus is the balance of 
 the average produce of the revenue, over and 
 above the average of the ordinary expendi- 
 ture. Our permanent income ought to be 
 estimated, upon an average, comprising years 
 of various production ; and our estimate of 
 expenditure ought to allow for contingencies. 
 In some years, there will be a balance of in- 
 come, in others, a slight deficiency ; but, if 
 we intend to have a real fund of redemption, 
 we must provide a surplus beyond the ave- 
 rage balance of income and expenditure. 
 
 However desirable it may be to restore the 
 limitation of forty-five years, I do not think 
 that parliament can prudently, or consistently 
 with recent proceedings, call upon the people 
 for a larger surplus than that which was deli- 
 berately fixed by the House of Commons in 
 1819 ; and which is now, by law, the amount 
 of the sinking fund. I know not to what ex- 
 tent any expected reductions of expenditure 
 will assist in effecting this surplus ; still less
 
 121 
 
 can I estimate the improvement, of which 
 there are visible symptoms, in the existing 
 revenue. I fear that neitlier of these causes 
 will afford the surplus, without a restoration 
 of a small portion of the thirty millions of 
 taxes, which have been repealed in the pre- 
 sent period of peace ; and I am aware that 
 taxes may possibly be required to the extent 
 of the whole five millions *. 
 
 For reasons already given, I here presume 
 that no further portion of the dead weight 
 annuity is sold ; indeed, as we do not at this 
 moment act upon the principle, by which 
 alone that arrangement is justified, it would 
 be better to reduce our actual sinking fund, 
 than to supply it by means of the annuity. 
 
 I do not insist upon the immediate impo- 
 sition of five millions of taxes ; we may fairly 
 take two years in the operation, during which 
 we may watch the progress of the revenue, 
 
 * In the )ear 1827, there was no real surphis ; the deficiency, 
 which J estimate at about nine luindred ihoiisand ])ouiuIs, we 
 may fairly expect to supply by improved revenue.
 
 122 
 
 and ascertain the amount required, and the 
 readiest sources for supplying it. That there 
 will be any difficulty in obtaining the sur- 
 plus, experience forbids me to doubt; it 
 might be procured by addition to the present 
 taxes upon consumption and expenditure, or 
 by the levy of an income tax, to the amount 
 of double the sum required, accompanying a 
 great reduction of those taxes upon consump- 
 tion and expenditure which are much less 
 conformable to the true principles of taxation, 
 and interfere much more with production and 
 the employment of labour. 
 
 The next question regards the limitation 
 under which this sinking fund is to be applied. 
 
 By the act of 1823 *, it is to accumulate 
 at compound interest, until it shall amount to 
 one hundredth part of the debt -f ; that is, 
 
 * 4 Geo. IV. c. 19. 
 
 t The funded debt, and the unfunded, if unprovided for. I 
 think that no part of the unfunded debt, which, though not spe- 
 cifically provided for, is a charge upon the revenues of the next, 
 or soon following years, ought to be included among the objects 
 of the sinking fund.
 
 123 
 
 until it shall constitute a fund, capable of re- 
 deeming the debt within forty-five years from 
 that time, it would appear, the fixed allow- 
 ance of five millions will continue strictly 
 appropriated ; but the redeemed interest may 
 be applied, in the spirit of the act of 1813, " as 
 " parliament may from time to time direct." 
 
 This enactment appears to recognise the 
 limitation of forty-five years, but with an 
 important variation from the original prin- 
 ciple ; it should seem that the period might 
 be continually renewed, and the principle 
 satisfied, if there exist, from time to time, a 
 fund suflUcient for the redemption of the debt 
 within forty-five years, if applied at com- 
 pound interest throughout the period. Now 
 I do not say that this is altogether contrary 
 to the principle of 1792 ; and it certainly is 
 not contrary to the practice of individuals, 
 which I have invoked in support of that prin- 
 ciple. 
 
 If we were always at peace, and were con-
 
 124 
 
 tinually to renew our incumbrance at the 
 same amount as that which would be re- 
 deemed, this mode of applying the principle 
 would keep down the debt, at its existing 
 amount ; but it would be a most improvi- 
 dent scheme for us, who are always liable to 
 war ; and would be quite inconsistent with 
 Mr. Pitt's system, which requires the equali- 
 zation of the permanent income, with the 
 ordinary expenditure, and the maintenance of 
 a clear surplus for redeeming debt. 
 
 To your Lordship, however, this supposed 
 system of loans in peace ought to be accept- 
 able ; for the arguments founded on the ab- 
 surdity of our concern for the interests of 
 posterity, would clearly justify us in borrow- 
 ing, at all times, as much money as we can 
 possibly raise, for any purpose whatever, 
 upon perpetual, still more certainly upon 
 terminable, annuities. 
 
 We ought, as I suggest, so to manage our 
 one per cent sinking fund, as lo place our-
 
 125 
 
 selves, as nearly as possible, in the situation 
 of having borrowed, in war, upon annuities 
 of forty-five years ; and of not borrowing at 
 all in time of peace. 
 
 On these grounds, as well as because I ob- 
 ject to the parliamentary discretion borrowed 
 from the act of 1813, I disapprove of the 
 provisions of the existing sinking fund act ; 
 and conceive that if the proportion of one in 
 the hundred be preserved, it ought to be used 
 for its original purposeof redeeming, in forty- 
 five years, the debt to which each fund is 
 appropriated; this can only be effected by 
 an unchecked operation at compound in- 
 terest. 
 
 Do I then propose that our sinking fund 
 of five millions should so accumulate? I 
 answer no. And my reason is this ; we are 
 now, perhaps, in respect of the existing debt, 
 in the situation in which Mr. Pitt stood in 
 1786; and in creating, or restoring, a fund of 
 redemption, we may fairly fix a period at 
 which it shall begin to work actual relief
 
 126 
 
 from taxation. The unchecked accumulation 
 of the fund, would postpone this relief sixty 
 or seventy years, and then effect it to an 
 amount much too large for one operation. 
 
 These several considerations induce me to 
 wish that the fund had been made to operate 
 at compound interest, till it should arrive at 
 eight, or I should prefer, ten millions, and 
 then to operate, as was intended of Mr. Pitt's 
 four millions, at simple interest ; effecting in 
 every year, subsequent to the attainment of 
 that point, an additional relief from taxes. 
 
 Yet as the amount to which the present 
 law requires the accumulation will probably 
 be upwards of seven millions, it may be as 
 well to leave the law as it stands ; hoping 
 that the future parliament, which shall be 
 called upon to act upon the discretion vested 
 in it, or perhaps a little sooner, will, of itself, 
 adopt a definite rule of relief. If I were to 
 suggest a rule, I think that it would be this ; 
 — that from that period, one half of the sum 
 -r-nnqllv savcd by the operation of th^ ^^^^^
 
 127 
 
 should, as now, be again carried to the fund, 
 and the other half set free. 
 
 The present law makes no new or special 
 provision for war. Mr. Fox's clause remains 
 in force, and the rule of 1813, which requires 
 in some cases, a sinking fund, greater than 
 one per cent.* on new loans is retained. 
 
 Though I do not see the necessity of this 
 larger fund I am decidedly of opinion that, 
 here again, it is advisable to leave the act as 
 it stands. It will probably be revised at the 
 commencement of a new war; I will only 
 express my hope, that if, as is extremely pro- 
 bable, the operation of the fund should be 
 altogether suspended in time of war, we shall 
 still not depart from the rule which requires 
 the imposition of taxes to the amount of one 
 hundredth part of every new loan. This rule 
 may be obeyed, and the principle of 1792 
 substantially maintained, without any double 
 process, or any of the machinery of the sink- 
 
 * 53 Geo. III. c. 35, s. 5.
 
 128 
 
 ing fund. I hope and trust that we shall 
 never conduct another war without raising a 
 large portion of the supplies within the year. 
 A part of the additional taxes levied for this 
 purpose should be added to the permanent 
 revenue, the surplus of which is, in the ordi- 
 nary course, applied to current services. 
 The produce would, during war, reduce the 
 amount of the annual loans, and thus operate 
 upon the amount of the debt in the same 
 proportion as if it were carried to a sinking 
 fund*. In peace it would be applied to the 
 sinking fund. 
 
 I have said that the one per cent sinking 
 funds, being a substitute for terminable an- 
 nuities, ought as much as possible to be 
 assimilated to them. A very ingenious but 
 eccentric connexion of your lordship's, the 
 late Lord Stanhope, made a suggestion in 
 1786f , for securing the unvaried appropri- 
 
 * See a similar sug-^estion in Dr Hamilton's book, p, 154. 
 t Pari. Hist. xxvi. 17.
 
 129 
 
 ation of the fund, which would have effectu- 
 ally answered this purpose, and may be 
 adopted with much advantage now. He pro- 
 posed to make the sinking fund a part of the 
 engagement with the stockholder, from 
 which there could be no departure without 
 a breach of faith. By this he intended, not 
 only to secure the inalienability of the 
 fund, but to purchase the stockholder's* 
 consent to easier terms of redemption. 
 There are two modes in which a variation of 
 this suggestion might be applied, during the 
 present period; we might purchase by the 
 application of a part of the fund, the consent 
 of the three per cent, stockholders to the 
 conversion of their stock into a smaller capi- 
 tal at a higher rate of interest ; or we might 
 
 * As this is the first time of mentioning the stockholder, I 
 take the opportunity of expressing my satisfaction at your lord- 
 ship's concurrence (evident from your omission of the topic) in 
 the rejection of all claim on the part of the stockholder to any 
 sinking fund, except in the one case of the 3^ per cents., in 
 which there is a specific legal pledge. The general pledge is 
 rather to the land.
 
 130 
 
 facilitate that which is the most desirable 
 of all the results, the conversion of the per- 
 manent, into terminable annuities, the differ- 
 ence being paid out of the sinking fund. I 
 will not now pursue this topic into all the 
 varieties of which it admits, although it is 
 intimately connected with the present dis- 
 cussion, inasmuch as it refers to an effectual 
 mode of " giving permanence to the sinking 
 " fund." 
 
 It must be admitted that this mode of 
 appropriating a sinking fund, excludes the 
 possibility of making any other use of it, and 
 is, therefore, inconsistent with the second 
 object of the institution, the collection of the 
 means of carrying on future wars ; those at 
 least which may occur, as wars almost cer- 
 tainly will, within our period of limitation. 
 Indirectly, however, our efforts in war would 
 be greatly assisted by the provident and 
 effectual reduction of our permanent debt; 
 and, although, if we have a fund at our dis-
 
 131 
 
 posal, it may be wise to use it in war, I am 
 satisfied that we ought not to be deterred, 
 by the hope of accumulating that fund, from 
 taking the most effectual measures for reliev- 
 ing the country from the perpetual charge, 
 which we ourselves and our predecessors have 
 imposed upon it. 
 
 I have only one word more as to the ma- 
 nagement of our finances. If we make effec- 
 tual provision for our expenses, the revenue 
 will still fluctuate ; there may be occasional 
 deficiencies, occasional surplusses : the former 
 would cause a temporary augmentation, the 
 latter a diminution of the floating debt ; and 
 I hope that it will not be until a surplus has 
 endured for at least three years, that we 
 shall again disperse resources which it is 
 difficult and painful to recal. If there should 
 be any doubt of the permanence of the sur- 
 plus, and the reduction of the floating debt 
 should be thought unadvisable, Mr. Pitt's 
 practice in 1792 should be followed ; a part, 
 
 k ■>
 
 132 
 
 at least, of the occasional surplus should be 
 granted for that time, not specially appropri- 
 ated, to the sinking fund ; this would be no 
 grant to " remote posterity," as by accelerat- 
 ing the attainment of the maximum, we should 
 bring nearer to us the period, not very distant 
 now, according to my suggestion, of direct 
 and copious relief. 
 
 My Lord, I have now completed my en- 
 deavour to lay before the public the facts and 
 principles upon which they are to decide the 
 great question at issue. 
 
 I deceive myself if I have not urged rea- 
 sons, of no inconsiderable weight, in favour 
 of the principle of limiting our charge upon 
 posterity ; and I am still more confident that 
 I have shown good grounds for rejecting your 
 Lordship's counsel, which would lead us alto- 
 gether to disregard our debts, and not even, 
 in this time of peace, to think of reducing 
 them ; for this advice, I submit, you cannot 
 cite the opinion of statesman, philosopher, or
 
 133 
 
 economist, or the example of any sober man. 
 Foreign countries will fail you ; Russia and 
 France have sinking funds ; and the wary 
 and provident government of the North Ame- 
 rican States, have recently* re-inforced their 
 sinking fund, to operate unchecked during 
 peace, but to be disposable by congress dur- 
 ing war. 
 
 Your advice my Lord, forgive me for saying 
 it, is really one of those excesses into which 
 orators are sometimes misled by the intoxi- 
 cation of argument ; and it is well worthy to 
 be classed with those boasts of heaven-born 
 genius, and magical power, which you impute 
 to us, the advocates of the policy which you 
 reject. 
 
 Our error you ascribe to " the love of sys- 
 tem.'' My Lord, although I utterly discard 
 all arguments (if arguments they can be), 
 founded upon a change of your lordship's 
 
 * See in Cohen's Compendium of Finance, p. 177, an abstraq 
 of the American Act of 1817.
 
 134 
 
 opinion upon the application of a principle ; 
 I own that I see with unmeasured surprise. 
 Lord Grenville the contemner of a systematic 
 policy. I have always been taught to expect 
 from you, indeed I have heard, if I remember 
 well, not unfrequently from your lips, an in- 
 dignant and contemptuous reprobation of 
 occasional devices for carrying on the public 
 affairs : those who were the more peculiar 
 admirers of your Lordship, would boast of 
 your superiority in this respect to your friend 
 and fellow-counsellor ; and would sometimes 
 reproach him with too ready a submission to 
 political circumstances, while your Lordship 
 assumed and pursued a statesman-like and 
 undeviating rule of action. 
 
 I never could accede to the imputation 
 upon Mr. Pitt, who, according to my humble 
 observation, combined with more of judicious 
 discrimination than any statesman of the time, 
 an adherence to right and chosen principles, 
 with a prompt estimate of passing occur-
 
 135 
 
 Fences ; and never, in the moment of the obe- 
 dience to occasional considerations, which 
 his eventful times required, lost sight of 
 his more approved policy. 
 
 Yet, in your Lordship, there always ap- 
 peared a still more tenacious and formal ad- 
 herence to system, and a reference, in all your 
 opinions, (how impressively enforced upon 
 your auditors, my youthful recollections well 
 attest,) to the permanent welfare of your 
 country. No man could trace a more an- 
 cient interest in the soil of England; no 
 man's counsels carried that interest further 
 into the time to come. 
 
 And, now, it is by Lord Grenville that we 
 are taught to ridicule systems, and to disre- 
 gard future generations ; to satisfy our own 
 wants from year to year as we can, leaving 
 to annual consideration the settlement of our 
 most important concerns, and not caring how 
 we may affect or embarrass our posterity. 
 I earnestly hope, that the Lords and Com-
 
 136 
 
 mons of this day will deem otherwise of their 
 duties as statesmen ; and that if the still re- 
 maining consequences of the late struggle, 
 have left us too weak to sustain the vi- 
 gorous counsels of Pitt, we may still adhere 
 to the resolution suggested by the practical 
 wisdom of Castlereagh, and enforced by the 
 eloquence of Canning. 
 
 I have the honour to be, with great respect, 
 My Lord, 
 
 Your Lordship's 
 Most obedient and humble servant, 
 Thomas Peregrine Courtenay. 
 
 London, April SOth, 1828.
 
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