THE UNIVERSITY OF ILLINOIS LIBRARY •332 "BS7 5 M.15 ^^ Jy^^a-i^^^^y/^^^-y/oyj^^-^^^^c-y^c^^^ .^j^-^^e. J^^x^y-^ ,^,i^^^ (J l^y/^C^ ^^.tt^-'^^f^^ ^:k^c^^-'^^^^^>^ y ^ ^y^=''^,^f^^cz.*rJ '»*r^s.^ REFLECTIONS FINANCIAL SYSTEM Great Sptain, AND ARTICULARLY ON THE SINKING FUND. asirttttn in iFrana IN THE SUMMER OF 1812. BY WALTER BOYD, ESQ, Hontion : PRINTED FOR J. HATCUARD, rOOKSELLER TO THE QUEEN, urPOSITE ALB AN \'^ PICC^blLLY. ISJ5. J. Brettell, Printer, Rupert Street, Haymarktt, lioadon. "vHT^ PREFACE. The following little tract was written in the neigh- bourhood of Paris, during the summer of 1812, when Bonaparte's successes in the Russian terri- tories seemed to leave to Great Britain no altematiTe but a long succession of years of warfare. To none of all her numerous subjects was this prospect so truly distressing as to the Author of this tract. He was then passing the tenth year of his detention in France, under circumstances more calculated to drive him to despair, than to lead him to look for consolation in any endeavour to be useful to his country. For in this long warfare, what expecta- tion could he reasonably form, but that of a con- tinuation of captivity ? Stifling, however, the sense of his personal suflTer- ings, and elevating, as well as circumstances per- mitted, bis mind to the importance of the subject, be employed his time, during several months, in establishing a chain of reasoning, from assumed dfita (for such only he possessed), tending to shew the utility, and even the necessity, of some change in the management of the sinking fund, in order to derive from thence part of the permanent taxes^ 359346 VI which an indefinite prolongation of the war would necessarily' require. His intention was to send his manuscript to Eng- land as soon as a safe opportunity for that purpose should be found ; but at a time when the conveyance of a single letter was very uncertain, it became diffi- cult in the extreme to firid the nreans of transmitting in safety, a packet of fifty folio pages. Before, therefore, any proper opportunity of sending it to England had oftered, he learned, with a degree of pleasure and surprise^' which it would be difficult to describe, that Mr. Vansittart had submitted to the House of Commons a Plan for a Modification of the Sinking Fund. The accounts of it, as given in the Paris papers, were not very intelligible ; but it was sufficient to know that the subject had been taken up by that right honourable gentleman, to be perfectly persuaded that it would be as clearly and satisfac- torily stated, as its objects would be found conducive to the public good. It appeared a very curious coincidence, that the same subject should thus have occupied, at the same time, the attention of two persons, residing in dif- ferent countries, totally unconnected with each other, and placed almost at the two extremities of the scale of rank, fortune, and situation. This coincidence seemed to give to the doctrine inculcated by each, with such inequahty of talent and iuform>ation, but with so much similarity of purpose, a sanction to which truth only appears to be entitled. Vll These considerations, joined to the opinion of the intimate friend to whom the manuscript was trans- mitted " that, it would be read with interest, on '' account of the circumstances under which it was written," will, it is hoped, be a sutiicient apolog:)(^for now recalling the attention of the public to a subject which may be considered, as in some degree, gone by. The sinking fund, modified by Mr. Vansittart's plan, and brought back to the principles of the Act of 1792, holds out to the public creditor every rea- sonable security, while it assures to the country a gradual relief from taxation. Thus secured, on the one hand, against all encroachments beyond the limits fixed by law, and, on the other, against excess of accumulation, it becomes the permanent bulwark of British finance. The sacrifices which a war of unexampled dura- tion and expense has required of this country have indeed been immense; and they have been borne with a magnanimity which is above all praise. The same spirit which dictated this ready acquiescence in every financial measure, while the vvar lasted, will, doubtless, prompt an equal con) pliance with those mea- sures which the consequences ofthe war may still render necessary. The same high-mindtd people, who slirunk not from a war-expenditure on the most extended scale that ever the world saw, will bear without a murmur, those burthens which still may be necessary for the complete discharge of the debts of every description which that war may have lelt unprovided VIll for. What these burthens may bc^ it is not for one, now almost a stranger in his own country, to say ; but he is confident that, whatever they may be, they will be supported with all the readiness which Britons have ever displayed in doing what their duty required to be done. Superior to all refinements of distinction between one species of taxes and another, they will prefer those, of whatever denomination, against which the fewest objections really exist, and particularly those which experience has demonstrated to be the most productive, and the least oppressive, to the great body of the people. Above the weakness of a quarrel of words about war and peace taxes, they will think only of the contributions which the public exigencies may require ; and, knowing that these must be fur- nished, they will chearfully acquiesce in the legisla- tive measures by which they may be established. After having viewed, for so many years, at a dis- tance, and through the distorting medium of hostile prints, but with confidence unshaken, and hope un- impaired, the finances of this country, it is matter of great exultation to the Author of this tract to find all that he hoped, and wished, and believed, on this sub- ject, surpassed by what he has seen. Maddox Street, London, I9th December, 1814. REFLECTIONS ON THE Financial System of Great Britain j &c. &c. J.F there be a subject which circumstances seem to have placed more effectually than any other out of the reach of the author of tlie following pages, it is precisely that of which he is going to treat. In order to write even a para- graph in a newspaper on finance, it is necessar}'^ that the author should be possessed of certain data, certain authentic documents upon which his reasonings may rest. To pretend, therefore, to write in a foreign country upon the finances of Great Britain, after an absence of ten years from that country, and without any authentic documents whatever, may appear to be a high degree of presumption. It is not, however, from an overweening opinion of his own abilities, or from any hope of acquiring the smallest portion of ap- plause, that he ventures, with so many disadvantages against him, to communicate his reflections on the financial •ystem of Great Britain. Far from supposing that his ideas will be adopted, he aims only at the inferior gratification of perhaps drawing the attention of others, better itifbrmed and more capable than himself, to a subject of vast im- portance to his country. If such should be tiie efiecc of his reflections, crude and imperfect as tliey necessarily must be, he may then, to a certain degree, and in a very limited sense, apply to himself the words of a great poet of antiquity: — fiingar vice cotis, acutum Reddere quae ferrum valet, exovs ipsa secandi. The finances of Great Britain have long been a subject of controversy among the writers on political economy. They have long been the theme of despondency among the gloomy and discontented at home, and of much unfounded invective abroad. There is, perhaps, no subject less un- derstood in foreign countries than the English system of linance ; a system which enables the country to command the use of funds of inconceivable magnitude, which in- crease with the occasions that call them forth. It is not wonderful that such a system should be incomprehensible to the subjects of other countries, where the chief elements which compose it cannot possibly exist. But as it is not for foreign countries, but for England itself, that the present reflections are intended, it is not necessary to enter into explanations, which, to Englishmen, would be superfluous. The author has already said that he is possessed of no authentic documents; but he knows the principles upon which the public debts are contracted, and the provision for their redemption is founded ; and he has occasionally learned, though generally through channels little entitled to confidence, and never with much accuracy, the various financial operations which have taken place during the last ten years. Information so imperfect is altogether inade- quate for furnishing an accurate view of the present situa- tion of the finances of the kingdom; but the reasoning which an assumed statement (however different from the real one) authorizes, may, perhaps, be fully as useful as that to which the most accurate ofticial statement could lead. 3 With these preliminaiy observations, he will at once set out with supposing, what he does not conceive to be very far distant from truth, that the total annual charge of the public funded debt is now to the annual fund for its redemption as three to one; and, in order to be more easily understood, he will call the interest . .£.24,000,000 and the sinking fund 1.2,000,000 making thus the total annual charge . . £.S6,000,0(X) which, if continued until the total extinction of the debt, must endure for the space of twenty-two years and a half, supposing the sinking fund to be improved annually at five per cent. ; for a little more than twenty-eight years, if only improved at four per cent. ; and for eighteen years and ten months, if improved at six per cent. ; compound interest*. Comparing this assumed statement with the real state of the debt at the creation of the sinking fund in 178G, we shall find tbat the annual million then established for extinguishing the then existing interest of o£'.7,83 1,838 was to the total charge of o£'.8,83 1,838 as 1 to 8.831,838 and consequently would have required to redeem the interest, if improved annually at five per cent, very nearly forty- five years. If, therefore, the annual charge of the public * The sinking fund beiii^ improved quarterly, the following calculations shew the difference betyveeq an annual and a quarterly improvement of that fund, according to the assumption of its bting one half the amount of th» interest. Anniuil Improvement. Quarterli/ Improvement. Difference, Years. Montht. Dajs. Years. Months. Ua>ii. Y. M. *d At 3 per cent. .37 2 — 36 9 2 — 4 03 At 4 per cent. .28 1 9 — 27 7 6 — 6 "3 At b per cenU .12 6 6 — 22 1 9-0 4 g? At 6 per cent. . 18 10 7 —. IS 3 U — 4 26 But it was not supposed necessary, on the present occasion, to calculate on a quarterly improvtment. debt has, in the course of twenty-six years, been more than quadrupled, the provision for its redemption has been augmented twelvefold. If the country bear at present four times the burthen which it then bore, there is the consolation of knowing that it will not have to bear it for so long a time. If the country in 17B6, looked with well- founded confidence to the annual million (exclusive of the other eventual funds that were to be applied to the same purpose), for the extinction of the public debt, bearing an interest of j€. 7,831,838, it may now look with increased confidence to an annual fund of twelve millions for ex- tinguishing the present debt, bearing, or supposed to bear, an interest of twenty-four millions. But, unfortunately, the present burthens must, in all probability, be followed by new ones. The annual charge of the public debt has not yet, it is to be feared, reached its maximum. New loans must be made, and new burthens laid upon the people; and thus the final redemption of the public debt seems to become every year more distant. — Let us examine this point. Suppose that, by the continuation of the war, it should be found necessary to borrow yearly, for five years to come, twenty millions of money in a three per cent, fund at 60 : these loans would add to the present debt a nominal capital of -f.l66,666,666|, bearing interest at three per cent, and consequently require annually for interest .£.5,000,000 and one per cent, of the nominal capital for a sinking fund \fiQQfiQ6^ making thus an additional annual chaTge of £.Q,QQQfiQQ\ But the present assumed sinking fund of twelve millions, if improved annually, at the same rate of interest, five per cent, would, in the same period, redeem an interest of .£.3,315,372, and the sinking fund progressively esta-? blishcd for the new loans would, in the same period, redeem 5 an interest of cf.267,303y: consequently the present assumed sinking fund of twelve millions would, at the end of five years, be c£. 15,315,372 and the present unredeemed interest of twenty- four millions would be reduced to . . . 20,684,628 making the present annual charge . . . c^. 36,000,000 The charge for tiie new loans would then be, for interest c£. 4,732,696 sinking fund 1,933,970 6,666,66Q Total charge . . . c£\ 42,666,666 And this total charge would then stand thus : interest cf.25,4 17,324 sinking fund 17,249,342 of. 42,666,666 which establishes the proportion between the total charge and the sinking fund at S.47352 to 1. The present as- sumed sinking fund would, at five per cent, redeem the present debt in twenty-two years and a half. The sinking fund, at the end of five years, would redeem the then existing debt in less than nineteen years. Thus the grand object of the final redemption of the debt, although some- what retarded by the new loans, would nevertheless still continue to make a gradual progress towards its accom- plishment. Should the duration of the war be unfortunately extended to another period of five years, and fresh loans to the same amount again be necessary, these loans would create a further addition to the annual charge of the public debt of c£. 6,666,666, and consequently the tcrtal charge, at the end of this second period of five years, would be i'. 49,333,333. But, in the same period of five years, the sinking fund 6 of cf. 17,249,342, improved at five per cent, would redeem of interest of. 4,765,658 and the sinking fund for the new loans would redeem 267,303 c£. 5,032,961 M miSimiiSm^mmm The interest which was . o^". 25,4 17,324 augmented by the loans . . . 5,000,000 of. 30,417,324 and dimmishcd by the purchases 5,032,961 Would then be £. 25,384,36S The shiking fund which was c£. 1 7,249,342 augmented by the interest re- deemed . . . •. . . . 5,032,961 and by the sinking fund for the new loans 1,666,666| would then be ^.23,948,970 <£. 49,333,333 and the total charge of c£. 49,333,333, would be to the sinking fund of i". 23,948,970, as 2.06 to 1. In other words, the sinking fund would then be only six per cent, of its amount less than the interest, and the period of redemption of the whole debt, at five per cent, interest, would then be less than fifteen years. Thus there would be borrowed two hundred millions of money, in a period of ten years, and yet the final redemption of the public debt, notwithstanding this large addition, would still be gradually advancing towards its accomplishment. We have seen that the present assumed sinking fund of twelve millions would, if annually improved at five per cent, compound interest, redeem the present assumed interest of twenty -four millions in twenty-two years and a 7 half. We see, by the above statements, that, after addlnsj to the annual charge <£. 13,335,333, the sinking fund, at the end of ten years, would redeem the total debt Ukmi existing, in less than fifteen years, from whence it follows that the progress of the redemption of the public debt would not, by these new loans of two hundred millions of money, be retarded more than two years and a half. But supposing the annual sum to be borrowed, during the period of ten years upon which we have been calcu- lating, should cost six per cent, interest, what would the consequence be ? The loans, if made in a three per cent, stock at 50, would create a new nominal capital of £. 400,000,000, and require for interest . £. 1 '2,000,000 and one per cent, of the nominal capital for a sinking fund 4,000,000 £. l(i,000,000 which added to the present assumed charge of 56,000,000 would make the total charge .... ef. .52,000,000 But, at the end of these ten years, the sinking fund attached to each loan would, at the same rate of six per cent, have redeemed of interest .... £.\,5SS,G35 which deducted from the new interest of . . 12,000,000 would leave of new interest unredeemed . c£. 10,41 1,347 and the new sinking fund of . £. 4,000,000 augmented by the interest re- deemed 1,588,633 would then be 5,.588,65:1 making the total charge for the new loans £. lO,000,O^Xj During the same period of ten years tlie present as- sumed sinkinir fund of twelve miihons would, at the ^aine 8 raf.e of six per cent, redeem of interest . . <£. 9,490,164 which deducted from the present assumed in- terest of 24,000,000 would leave of the present interest unre- deemed o£'. 14,509,836 and the present assumed sinking fund of c£. 12,000,000 augmented by the interest re- deemed , . 9,490,164 would then be 21,490,164 making the present assumed charge , . o£'.S6,000,000 While the total charge for old and new debt would tgtaiid thus : interest ^.24,921,183 sinking fund 27,078,817 of.52,000,000 Thus the proportion between the total charge and the sinking fund would be as 1.92032 to 1. We have already seen that, upon ihe supposition of bonowing at five per cent, the proportion would be as 2.06 to 1 : consequently there would be a greater progress in the reduction of the debt in the former than in the latter case; because, in the first, a sinking fund of c£.27,078,817 would, at six per cent , redeem an interest of c£.24,92 1,1 83 in eleven years and seven months ; while, in the latter case, a fund of cf .23,948,989, to redeem, at six per cent, an inte- rest of of .25,384,344 would require nearly twelve years and five months. Thus, the public debt, although augmented in its annual charge, might, in respect of the augmentation of the sink- ing fund, be considered as actually diminished, by bor- rowing at six instead of five per cent. ; at the expense, however, of an additional burthen upon the country of £.2,666,066. It may be said, in answer to this reasoning, that the making of new loans is necessarily attended with consider- able expense, and that it is not to he expected that the sinking fund can be employed at the precise rate at which the loans may be made. To the first part of this objection the answer is easy. The charges of making new loans have always been considered, and, in such a stateinent as the present, must, of necessity, be considered as being comprehended in the general expenses of the year. In reply to the latter part of the objection, it is only neces- sary to say, that, neither the interest of the loans, nor that at which the sinking fund may be improved, can, properly speaking, ever be supposed really to exist, without varia- tion, for ten years together, at five per cent, six per cent, four per cent, or any other rate; but the rates supposed are perfectly sufficient to demonstrate the necessary con- sequences of the financial S3'stera of the country, and to impress upon the public mind the consolatory truth, that, if circumstances require the accumulation of fresh debt, that debt, though unavoidably attended with fresh burthens, still will be making considerable progress towards its ex- tinction. If it were supposed that the sinking fund could only be improved at 5^ per cent, while the loans were to bear six per cent, this would make a difference, against the preced- ing calculations, of c£.573,564 yearly produce of the sinking fund at the end often years; and would be equivalent to an annual sum, during these ten years, of j£.327,83l, cal- culating interest at 5| per cent. In this point of view, the sinking fund, at the end of ten years, instead of being of.GTjOTSjSl?, would only be .£'.26,505,253, and the proportion between the total charge of .^.52,000,000 and the sinking fund of j£.2G,505,253 c 10 would be as 1.96187 to 1; and consequently, even after this large allowance for the difference between borrowing and buying up, the sinking fund would still sooner redeem the debt than that which would have existed by borrowing at five per cent. It is not with (he view of giving a pre- ference to a high rate of interest that this comparative statement has been made; but in order to shew, that when circumstances call for a high rate, and consequently heavy burthens, there is attached to this cruel necessit}' the con- solation that they must necessarily be of shorter duration. This cursory view of the effects of the present financial system, seems to authorize the opinion, that the institution of the sinking fund is the most splendid and ingenious monument that ever was erected, in any age or country, to national honour and public faith. As such, it is entitled to, and doubtless will ever experience from the legislature, that sacred respect which it so justly deserves. No man feels this respect in a higher degree than the Author of the present Reflections; but he does not conceive that this respect will be diminished by considering the subject in some points of view in which he has not hitherto seen it placed. The annual charge of the public funded debt (here as- sumed as being thirty-six millions) with the augmentation, upon which we have reckoned in the space of ten years, must, according to one of the preceding hypothetical state- ments, at the end of these ten years, amount to fifty-two millions of permanent expenditure, which must continue until the provisions of the act of 1802 liberate that portion of the charge which existed at the time of passing that act. Without any recollection of the amount of that portion of the charge, and consequently without the means of estimating the period of its redemption, it may suffice for the purpose of the present view of the subject, to suppose this liberation as not likely to be effected much within the space of twenty years. n Now it seems to be a question, well deserving the serious consideration of public men, whether a perseve- rance in the present system, which burthens the country >vith the whole charge of the public funded debt and with all the additions to it, during a period of twenty years, at the end of which time a very considerable part of it is to cease, be preferable to such a present modification of the sinking fund as may have the effect of gradual /jy relieving the subject of taxes, as they have been, and may be, gradually imposed. This seems the more desirable, as the burthen of taxes must bear severely on the community, if the necessity of imposing new ones should continue many years longer. The powers of the country may certainly still be stretched much beyond the extent of their present burthen ; but tax- ation, like every other thing, must have its limits, and care ought to be taken that these limits should still be kept at a distance. The financial system of Great Britain turns on three grand hinges : taxation, loans, and the sinking fund. It is the business of statesmen to take care that no one of these should be carried to too great an extent. It is above all necessary that the first, as the root of the other two, should not be loaded above measure. There is something in the idea of an indefinite increase of taxes upon which the mind cannot rest with entire satisfaction, however strong the conviction may be of the existence of a similar indefinite increase of the powers of the country to pay them. The principle upon which the sinking fund is founded, presents the highest possible security to the public creditors, in so far as it requires that all the present burthens, as well as those that shall in future be imposed for paying the interest and providing for the redemption of the public debt, shall continue to be borne until the whole debt be redeemed in the manner prescribed by the act of 1802. This principle/which does so much honour to the country, is, from its very excellence, attended with some inconveniences which must necessarily have the effect of defeating, to a certain degree, the object of its institution. For supposing the present debt to have reached the utmost extent to which the present war can carry it, and that ten years of peace were to take place, these ten years of peace would not surely allow the sinking fund to be improved at a higher rate than four per cent. Of course at the end of these ten years, the interest unre- deemed would be of. 1 8,237,072, and the sinking fund would be o£. 17,762,928; but the public charge would still be thirty-six millions. Now supposing that, at the end of these ten years, a new war were to break out, new loans would again be necessary, and the new burthens to which they would give rise, would be added to those already existing. If we carry our supposition even so far as to imagine the unredeemed interest reduced to six millions, and the sinking fund to be raised to thirty millions, still the burthen of the whole thirty-six millions must, agreeably to the present constitution of the sinking fund, be paid annually until the remaining six millions be bought up ; and although this might then be accomplished in little more than three years, yet if a war were then to break out, and fresh loans were necessary, the whole thirty-six millions^ together with all the new burthens, must still continue to be borne. It may be said that the sinking fund having risen to such a height, Parliament would naturally intro- dufce some change, in order to reduce so disproportioned a burthen upon the public. No doubt it would, and thus from the very nature of things it seems to follow, that some modification of the sinking fund must one day become necessary. Now, instead of waiting until such modifica- tion proceed from some such strong motive bs that just 13 alluded to, it seems to be much more expedient to adopt now such resolutions as shall have the eftect of rendering all future modifications unnecessary. What originally gave rise to the present sinking fund was the opinion of an ingenious writer who, believing a public debt to be destructive of the interests of the people, imagined a scheme for rendering its influence less hurtful, and for finally acccnplishing its extinction. But the illustrious statesman who first adapted to the finances of a great country, the luminous theory of Doctor Price, pro- bably embraced a wider range of ideas than ever the Doctor had indulged, with regard to the use to which that theory might be applied. Mr. Pitt's penetrating mind probably even then foresaw that the sinking fund would not only be an excellent scheme for redeeming the public debt, but that, in the hands of the government of a free people, it might become an instrument which would, at all times, give them an indisputable financial superiority over every other country. It is rather in this last point of view, than in the humbler, though certainly not less im- portant one, of the redemption of the whole of the public debt, that the sinking fund ought to be considered. The financial system of England, of which the sinking fund is a most important branch, is an instrument of public de- fence, which no other country ever did, or probably ever, can, possess ; and therefore the great object of public men ought to be, not so much the total redemption of the public debt, as the preservation of the whole financial system in a proper degree of strength and activity. With these principles, and these views, the Author has turned in his mind various Schemes by which the sinking fund may be maintained in a suitable degree of strength, while the country may avoid, in part at least, the pressure of taxation which the present constitution of the sinking fund must necessarily bring upon it ; and by which the 14 relief of the subject may be perfectly compatible with all that is due to the public creditor. These various Schemes he submits to the consideration of his countrymen, with all the diffidence natural to a man writing on so intricate and important a subject, with so few of the necessary lights to direct him, and under such disadvantages of every kind as would have deterred him from the attempt, had he not hoped to find in the applica- tion, which such a task necessarily required, a powerful antidote to the painful feelings inseparable from his si- tuation. FIRST SCHEME. Let it be resolved, that the sinking fund, as it now exists, together with all such additions as shall be made to it by the funding of new debt, or otherwise, shall con- tinue to operate, without any change whatever, for five years; and that, at the end of that period, accounts shall be made out, and laid before Parliament, of the additions made to the annual charge for interest and for the sinking fund, and of the interest redeemed within that period; of the interest then remaining unredeemed, and of the amount of the sinking fund; and that the then existing sinking fund shall be reduced to the same proportion to the then unredeemed interest which the sinking fund now bears to the present unredeemed interest, and the surplus trans- ferred to a separate account, in the name, and under the direction of the commissioners for the reduction of the national debt, to whom the issues for this separate account shall continue to be made, and by whom they shall be employed in the purchase of stock, as they would have been employed, had they remained part of the principal sinking fund, subject, however, to such appropriations as Parliament may direct to be made of the income of this sepaiate fund. 15 Applying the principle of this resolution to the first preceding statement, in which we supposed twenty mil- lions to be borrowed annually, during five years, at five per cent, and the unredeemed interest, at the end of that period, to be o£. 25,417,324 and the sinking fund to be ..... 17,249,342 it follows of course that an unredeemed interest of c£. 25 ,4 17,324, would only require for a sinking fund the half of its amount iM2,708,662 and the sinking fund being 17,249,342 tHere would be a surplus of <£. 4,540,680 Now suppose this annual sum, issuing out of the per- manent taxes, to be appropriated by Parliament to supply the place of new taxes, by five annual portions of c£. 908,136, the whole of that sum would be exhausted at the end of that period; but there would remain a new- permanent income of c£. 526,258, which would be derived from the purchases of stock during the intervals, before the different appropriations could take place. By this mode of reduction, the inconvenience of withdrawing from the sinking fund so large an amount of permanent in- come at once, would, in a great degree, be avoided ; and by leaving the income acquired by the purchases of the separate fund, as part of the unredeemed interest, another inconvenience would be avoided, namely, that of sub- jecting that income to a fresh reduction, by swelling the sinking fund and diminishing the interest, at the next statement, by which the sura to be reduced for the saving of c£.526,258 would, in fact, be o£^. 789,388, that is to say, 1| of its amount. Applying the same principle to the next period of five years, in which we supposed the same loan of twenty millions a year to take place, we shall find that the annual 16 charge, as fixed at the end of the preceding five years, for interest unredeemed <£. 25,41 7,324 sinking fund 12,708,662 separate fund ; 4,540,680 together of . 42,666,666 would be augmented by the interest of the new loans of twenty miUions a year . . . . . . . c£. 5,000,000 and by the sinking fund attached to them ....... 1 ,666,666 £. 6,666,666 deduct the taxes derived from the separate fund .... 4,540,630 J 2,125,986 and ^hat the total annual charge would then be o£'..44,792,652 •which would stand thus at the end of these five years : the interest which was . . 0^.25,417,324 augmented by the new loans 5,000,000 and diminished by the interest redeemed by the sinking fund of c£. 12,708,662 . . of.3,511,154 and by the new sinking fund for the loans 267,303 -o£:.30,4 17,324 3,778,457 would then be of". 26,638,86^ and the sinking fund which was 06". 12,708,662 augmented by the fund for the new loans 1,666,666 and by the interest redeemed . 3,778,457 would then be 18,153,785 making the total charge £. 44,792,652 17 Now an unredeemed interest of £. 26,638,867, re- quiring only a sinking fund of iialf its amount o£. 13,3 19,433 and the sinking fund being 18,153,785 there would be a surplus of £. 4,834,352 which, transferred to the separate fund, would admit of five annual appropriations of .=£'.966,8705 and in the fol- lowing five years, supposing the same annual loan of twent}' millions to take place, the total charge for interest, sinking fund, and separate fund . . . „£". 44,792,6 j2 would be augmented by the interest of the new loans £. 5,000,000 and the sinking fund attached to them 1,666,666 cf. 6,666,666 deduct the taxes derived from the sepaiate fund .... 4,834,352 ] ,83g,3T4 making the total annual charge . • » . <£. 46,624,966 which would stand thus : the interest which was . . «£. 26,638,867 augmented by the interest of the new loans 5,000,000 £.S 1 ,638,867 diminished, by the interest redeemed by the sinking fund of c£. 13,3 19,433, e£.3,679,906 and by the interest redeemed by the fund attached to the new loans 267,303 ■ 3,947,209 would then be ; <£. 27,69 1,65B and the sinking fund which was .£.13,319,433 augmented by the fund for the new loans }, 666,666 and by the interest redeemed 3,947,209 would then be ", '. '. T 1 8,933,308 making the total charge £. 46,624,066 ft 18 . Now an unredeemed interest of c£. 27,691,058, requiring only a sinking fund of iialf its amount . £. 13,845,8£9 and the sinking fund being 18,933,308 there would be a surplus of £. 5,087,479 which, transferred to the separate fund, would admit of five annual appropriations of of. 1,01 7,495 ; and in the five fol- lowing years, supposing the same annual loan of twenty millions to take place, the total charge for interest, sinking fund, and separate fund £. 46,624,966 would be augmented by the interest and sink- ing fund for the uew loans £.6,666,6d() deduct the taxes derived fronx the separate fund .... 5,OS7,479 1,579,187 making the total annual charge .... of. 48,204,1 53 which at the end of these five years would stand thus : the interest which was . . c£. 27, 69 1,058 augmented by the new loans , 5,000,000 of.32,69 1,658 diminished, by the interest redeemed by the sinking fund of £. 13,845,829, cf.3,825,339 and by the sinking fund of the new loans 267,303 4,092,642 would then be . . . .'. . . . . of . 28,599,0 1(> and the sinking-fund which was cf. 13,845,829 augmented by the fund for the new loans 1,666,666 and by the interest redeemed . 4,092,642 would then be . . T 19,605,137 of. 48,204, 153 19 An unredeemed interest of of. 28,509,01 (5, requiring only a sinking fund of half its amount" . . . of. 1 4/299,508 and the sinking fund heing ..... 19,^05^137 there would he a surplus of <£.5,oi)'),(JQ.{) which, transferred to the separate fund, would admit of five annual appropriations of c£.], 0(51, 125. Now let us consider the effects of the mode of appro- priation by portions of twent}^ per cent, per annum of the permanent income withdrawn from the sinking fund. The interest redeemed, but considered as unredeemed, during the first five years after the supposed commence- ment of the Scheme we have already stated, at o£'.526,258 the interest redeemed in the second period of five years would be 705,694 the interest redeemed in the tliird period of five years would be 929,999 making in all cf. 2, 1 6 1,951 Now, if from the unredeemed interest of ^'.28,599,016 we deduct the above sum of 2, l6l,951 the unredeemed interest will be ... . <£, 26,437,065 and if to the sinking fund of £. 14,299,508 we add the above sum of in- terest redeemed .... 2,161,951 the sinking fund will be 16,461,459 o£'.42,898,524 Consequently, the sinking fund will be fifteen per cent, more, in proportion to the unredeemed interest, than the present assumed sinking fund is in proportion to the present assumed unredeemed interest; and the fund of i,'. 16,46 1,459 would redeem the interest of ct'.26,437,065 m less than nineteen years and eight months, reckoning 20 interest at five per cent. We began by assuming that the present total charge of the public funded debt was to the sinking fund as three to one; and that the sinking fund, improved at five per cent, vi'ould redeem the interest in twenty-two years and a half. The calculations which we have just made, shew^ that after a period of twenty years, in which we have supposed four hundred millions of money to be borrowed, creating an additional charge of ^.26,666,666, and making, with the present assumed charge of c£\36,000,000, a total charge of cf. 62,666,666 ; t£. 19,768,1 40 of permanentincomemay be withdrawn from the sinking fund, and yet that there ma}^ still be left such a fund for the extinction of the interest, then remaining unredeemed, as shall establish the proportion between the total charge and the 'sinking fund at 2.606 to 1: which fixes the period of redemption, at five per cent, at nineteen years and eight months. Consequently, after all these Jarge deductions from the sinking fund, it would still have been making a certain progress towards the great object of its institution, as the period of redemption would then be two years and ten months shorter than, according to our assumption, it is at present. SECOND SCHEME. The preceding Scheme might be rendered more ana- lagous to the spirit which seems to have dictated the various resolutions of the legislature, relative to the sink- ing fund, if Parliament were to resolve that, at the end of every five years, the sinking fund should only be reduced to the same proportion to the total charge which it now bears. The following calculations will shew the effects of this change in the principle of reduction. At the end of the first period of five years, the total 21 charge of the public funded debt, agreeably to the assump- tion upon which we proceeded, was . . jG. 42,666,006 To maintain, therefore, the proportion assumed as now existing between the total charge and the sinking fund, of three to one, there ought to be left a sinking fund equal to one-third of the charge, which would be <£.14,222,'2^22 and the sinking fund, at the end of five years, being 17,249,342 there would only be a surplus of . . . of .3,027, 120 Now, supposing this sum to be carried to the separate ac- count, and the same to be appropriated, by five equal por- tions of o£'. 605,424, during the five subsequent years; and supposing also the same annual loan to take place, the total charge of £.42,006,666 would be augmented by the interest and sink- ing fund for the new loans . £.6,666,666 deduct the taxes derived from the sepaiate fund 3,027,120 3,639,546 making the total charge o£'.46,306,212 Which, at the end of that period, would stand thus : the interest, which was . . c£.25,4l 7,324 augmented by the loans , . . 5,00(J,0(X) o£.30,4I7,324 and diminished by the interest redeemed 4,196,641 would be . . . of:. 26,220,683 the sinking fund which was . i^. 1 4,222,222 augmented by its own purchases 3,929,338 by those of the new sinking fund . 267,303 and by the now sinking fund itself 1,066,666 20,085,529 ot'.46,306,212 The third part of the charge of i". 46,306,2 12 being i". 15,435,404 and the sinking fund being 20,085,529 there wowld be a surplus of .£.4,650,125 which, transferred to the separate fund, would admit of five annual appropriations of =£.930,025, during the five subsequent years, in which, supposing the same annual loan of twenty millions to take place, the total charge of 0^.46,306,212 would be augmented by the new loans £.6fi66fi66 deduct the taxes derived from the separate fund .... 4,650,125 2,016,541 making the total charge <£.48,322,753 which, at the end of that period, would stand thus : the interest, which was . : <£.26,220,683 augmented b}-^ the loans .... c£5,000,000 and diminished by the purchases 4,531,812 468,188 would then be c£.26,688,87! The sinking fund, which was £*. 15,435,404 augmented by its own purchases 4,204,509 by the fund for the new loans . 1,666,666 and b}' its purchases .... 267,303 would then be <£.2 1,633,882 c£.48,322,753 93 The third part of the charge of o£'.48,32C,753 being . c£. 16,107,584 and the sinking fund being G1,G33,882 there would be a surplus of £.5,5'2G,Q.9S which, transferred to the separate fund, would admit of five annual appropriations, during the subsequent five years, of c£l, 105,259, towards the taxes necessary during that period. The total charge of . .£48,322,753 would, in the course of the five subsequent years, supposing always the annual loan of twenty millions to take place, be augmented by the interest and sinking fund for the new loans £.6,666,666 deducting the taxes derived from the separate fund . . . 5,526,298 1, 140,3 r8 making a total charge of at'.49,463, 1 2 1 which, at the end of that period, would stand thus : the interest which was . . cf.26,688,87-1 augmented b}' the loans . . . .£.5,000,000 and diminished by the purchases . 4,717,522 282,478 would then be c£.26,97 1 »349 The sinking fund, which was £. 16, 107,584 augmented by its own purchases 4,450,219 by the fund for the new loans 1,666,666 and by its purchases .... 267,303 would then be £.22,491,772 making the total charge .£'.49,463,121 The third part of this charge being . . . <£.16,487,707 and the sinking fund being 22,491,772 there would be a surplus of c£.6,004,065 which, transferred to the separate fund, would admit of five annual appropriations, in aid of taxes, of .£.1,200,813. Having thus carried this statement to the same length as that of the First Scheme, it remains now to bring to ac- count the permanent income acquired by the separate fund, during the intervals before the appropriations could take place, and which would, at the end of the three periods of five years each, amount to .£.1,898,994 if, therefore, from the unredeemed interest of 26,971,249 we deduct that sum, the unredeemed interest will be £.25,072,255 and if to the sinking fund of £. 16,487,^73 we add that sum 1,898,994 the sinking fund will be . 18,386,667 £.43,458,922 Consequently the sinking fund, after withdrawing from it £.19,207,608 of permanent income, would still be up- wards of forty-six per cent, more in proportion to the un- redeemed interest, than the present assumed sinking fund is to the present assumed unredeemed interest ; and as the proportion between the total charge and the sinking fund would be as 2.36S61 to 1, the period of redemption at five per cent, would be seventeen years, seven months and a half. We have already seen that the period of redemption of the present assumed interest of twenty-four millions, by the assumed sinking fund of twelve millions is, at five per cent, twenty-two years and a half. The period of redemp- tion of the interest of £.25,072,255 by the sinking fund of c£. 18,386,667, being seventeen years, seven months and A 25 half, it follows of course tliat, notwithstanding the immerise sum of permanent income withdrawn from the sinking fund ; its progress would still have been so considerable as to have shortened the period of redemption very nearly five years. Having thus estimated the effects of these two Schemes, by which the sinking fund may be safely rendered pro- ductive of relief to the country from the pressure of taxa- tion, it ma}' be proper to compare with their results the state of the public debt, at the end of twenty years, if no change whatever take place in the operatioti of the sinking fund^ and upon the supposition that loans, at the rate of twenty millions a-year, were to be funded in a three per cent, stock at 60, as supposed in the preceding statements. The unredeemed interest now assumed as existing i'.24,000,000 would be augmented by the interest of £.666,656,666^ three per cents 20,000,000 .£.44,000,000 the assumed sinking fund of £. 1 2,000,000 would be augmented by the hundredth part of the nomi- nal capital created .... 6,666,600 making the total charge £.02,006,666 which would stand thus : the interest as above stated . .£.44,000,000 diminished by the purchases 24,745,891 would be . '. . <£. 19,254, 109 the sinking fund .... £,16,660,666 augmented by the purchases . 24,745,891 would be ...;.... . . . . 43,4 1V57 making the total charge .l'.r)2,rj()G,(){>G / 26 and the proportion of the total charge to the sinking fund would be as 1.44351 to 1, thus making the period of re- demption at five per cent, seven years and 'a half. By the last of the two Schemes proposed, which is the most favourable to the speedy extinction of the debt, the period of redemption, at the end of twenty years, would, as we have seen, be seventeen years, seven months and a half; and thus there is a decided preference due to the sinking fund, as it now exists, in so much as it presents the prospect of completing the redemption of the debt sooner by ten years, than the best of the two new modes could accomplish it. But the burthen to be borne by the country for carrying into effect the speedier redemption of the debt would, in the course of twenty years, be constantly increasing from thirty-six millions to £.6%666,666 while the burthens to be borne, by the other mode, would only be augmented from thirty-six millions to 43,458,922 difference c£. 19,207,744 Without entering into the examination of the possibility of such a sinking fund as c£.43,412,557 operating upon a debt of c£.lJ.),254,109 of interest, existing for a single day as an improveable fund at five per cent.; without esti- mating the value, in ready money, of an expenditure of «£,'.C2,(jG6,66(J for seven years and a half, and that of an expenditure of c£ .43,47 8,262 for seventeen years an^ a half (which, it is humbly presumed, would be foreign to the real question which ought to engage the attention of public men on such an occasion), the author willingly leaves the decision to the good sense, public spirit, and honourable feelings of Englishmen, whether upon the ■^hole, the general interests of the community would be 27 most promoted by a perseverance in the present system, or by the adoption of one or other of the Scliemes pro- posed, or some other modification, calculated to keep down, as much as 'may be deemed consistent with the prosperity of the financial s^'stem of the country, the accumulation of newj taxes. In deciding this question, although they will certainly never lose sight of the pre- cious advantages to be derived from the effects of com- pound interest in the reduction of the public debt, yet it is to be hoped that they will not be solely governed by that consideration. r. Ignorant, as the author is, liow the public mind may relish any change in the management of the sinking fund, and desirous, above all things, that what may be deemed most conducive to the general interest and comfort of the country may, on this, as on all other occasions, be adopted ; he will now add to the suppositions he has already made, that of a case which seems highly probable. The two new Schemes proposed may be thought too wide a deviation from the principles laid down for the conduct of the sinking fund ; and many very enlightened men, though approving a mo- dification of that fund, may, however, consider that the degree to which it has been proposed to carry it, may be attended with disagreeable consequences. If such should be also the opinion of those who arc more immecHately to decide upon such a question, it is probable that every suff'rage may be united in favour of the following modifi- cation of the First Scheme, as being in strict conformity with the respect hitherto observed for the sinking fund. 28 THIRD SCHEME. Let the FirstScheme be adopted, but with this important difFerence, that the permanent income withdrawn from the sinking fund shall be annually funded, and the like amount annually issued by government to replace the same to that fund. By this change, the measure proposed would, in fact, have no other effect upon the ultimate object of the sinking fund than any other addition to the public debt must necessarily have. Let it be supposed then, that the sums annually withdrawn from the sinking fund were to be replaced to that fund by annual loans in a three per cent, stock at 60, with the accustomed proportion of sinking fund attached to each ; and that the charge arising from these loans were to be defrayed by the public, it is evident that the sinking fund would thus remain in uninterrupted possession of its whole income, notwithstanding the annual appropriation of those parts of it, in aid of taxes, which might be transferred to the separate fund. Applying this principle to the annual income of jf. 4,540,680, supposed to be transferred, at the end of five years, to the separate fund, and to be appropriated by annual portions during the five subsequent years, of .-£.908,136 each, the loans, during these five subsequent years, for replacing to the fund the income withdrawn, from it, would amount to .£.13,622 ,040, creating a capital in three per cents, of o£.22,70S,400, and bearing interest i:.681,10!| and requiring a sinking fund of 227,034 making an additional charge of . . . . . c£ .908,136 29 During the course of thcss five years there would br redeemed of the new interest by the sinking fund attached to each loan .£/27,81i} therefore the interest of i so Avbich, at the end of five years, would stand thus : the unredeemed interest which was £. 653,253 augmented by the loans . . 1,860,323 £.Q,5\S,575 diminished by the interest redeemed l60,757 would then be £.%35Q.,8lS the sinking fund for the addi- tional loans, which was . . o£.254,883 augmented by its own purchases 70,149 by the new fund for the loans 620,107 and by its purchases .... 90,338 would then be 1,035,747 making the total charge ^3,388,565 and the separate fund ' composed, as above stated, of £.5,795,181, augmented by o£.4,834,352, would, in tire course of these five years, have redeemed of interest c£.2,936,738, and consequently would then amount to .£.13,566,271, viz. permanent income c£.4, 19 1,239 annual income 9,375,032 i:. 13,566,271 In the course of the next five years, the loans for replac- ing to the sinking fund the income withdrawn from it, would amount to c£.62, 137,575, creating a capital in three per cents, of o€. 103,562,625, bearing interest c£.3,106,878 and requiring a sinking fund of ... . 1,035,626 of.4, 142,504 which added to the former charge of . . . 3,388,565 would make the total charge c£.7 ,531,069 31 which, at the end of these five years, would stand thus : the unredeemed interest, which was . . . o£' .2,352,8 18 augmented by the loans . . c£'.3, 106,878 and diminished by the purchases 442,059 2,G64,219 would then be e separate fund .... 9,344,915 would then be 26,158,455 £.50,429,593 S2 and the proportion of the total charge to the sinking fund would be as 1.92785 to 1; consequently the period of redemption, at five per cent, would be thirteen years, five months and a half. Such would be the effect of this measure, conducted upon the established principles observed by the public towards the sinking fund. Certain portions of permanent income would have been withdrawn from that fund.; but the actual issues to it would not have been diminished, and its progress towards the object of its institution would liave been retarded by these additional loans only in the same degree as it would have been retarded by similar additions to the public debt for any other purpose, and without touching, in any respect, the income of the sinking fund. As these loans, however, would have chiefly for object to maintain, unimpaired, the income of the sinking fund, in order not to obstruct its progress in the ex- tinction of the public debt, it may not be unimportant to consider by what means these loans may be dispensed with altogether, while the public may avoid the same sum of permanent taxes, and yet the progress of the extinction of the public debt may be equally promoted. This may be effected in the following manner: Let the whole annual expense which the proposed ad- ditional loans would occasion to the public for interest, and the sinking fund, attached to each of them, be paid annually to the sinking fund, or (which is more simple) be retained by the separate fund, and not only the same but a greater effect would be produced in the extinction of the public debt than would be produced If the loans were to take place, and the income of the sinking fund were thereby to be constantly maintained unimpaired, for the fund formed by the interest and sinking fund which would be necessary for these loans, if they were to take place, must, if improved at five per cent, have precisely S3 the same effect upon the general state of the sinking fund (with no additional interest to buy up), which a sinking fund equal to the amount of any annuity improved at five per cent, must necessarily have upon such annuity, that is to say, that of annihilating such annuity in the space of fourteen years, two months and a half. The object of the fund proposed being to put the sinking fund in the same situation in which it would be placed, if its income were to be constantly kept up by these additional loans ; to produce that effect, it is necessary that the interest and sinking fund of these imaginary loans, improved at five per cent, should leave the general sinking fund and the general interest exactly the same, as they would be, if the Joans were actually to take place. Now this effect would be produced by the proposed fund in the space of fourteen years, two months and a half; and consequently, at the end of fifteen years, the interest remaining unredeemed must be less, and the amount of the sinking fund greater than they would be if the additional loans were actually to take place, by o£'.359,16B, which is the interest of the proposed fund, amounting, at the end of fourteen years, to «£'.9,577,291, for the remainder of the year, or nine months and a half. By the preceding calculation we have seen that, by the intervention of loans for maintaining the income of the sinking fund, the unredeemed interest, at the end of fifteen years, from the adoption of the Scheme, would be ^.24,C71,138 By the operation of the fund proposed, in order to render the loans unnecessary, the un- redeemed interest would be reduced to . . 23,911,970 consequently there would be more interest re- deemed in the latter case than in the former c£.359,l68 34 The permanent income of the sinking fund which, by the intervention of loans, was found at the end of fifteen years to be ^.26,159,455 would, by the substitution of the proposed fund, acquire an addition of 359,168 of.26,5 17,623 while the unredeemed interest would be . . 23,911,970 total charge ^£..30,429,593 making the proportion of the total charge to the sinking fund as 1.90173 to J, and the period of redemption, at five per cent, thirteen years and two months. Supposing this state of things realised, at the end of fifteen years from the adoption of the Scheme, or of twenty years from the present time, it may surely be pre- sumed that nobody would then think it necessary to carry on, for a longer time, the measure of compensating to the sinking fund the income withdrawn from it. With a fund exceeding the amount of the redeemable interest by c£. 2,605,653, it would certainly be the unanimous opinion of Parliament and of tlie public, that no further compen- sation would be necessary either for the former reduction, or for the one then to be entered upon of c£'.5,305,629, of which, although then deducted from the general charge, the public would only enjoy the advantage in the five fol- lowing years. Thus far the. several Schemes proposed for deriving relief from the pressure of taxation have all been formed upon the principle of their beginning to operate only in five years hence. The author's ignorance of the true state of the public resources at the present moment, must apologise for putting the case (which he is, however, far from supposing a probable one), that the five years upon which he has all along been reckoning, as being to pre- 35 cede the adoption of any of the ideas suggested, should be considered as a period of equal difficulty with any of those which may succeed it. His ignorance also of the state of the public mind, must apologise for his supposing that perhaps this may not be considered as a favourable moment for agitating the question of any change what- ever in the management of the sinking fund. Should cither or both of these possible cases actually exist, he ti'usts that the following suggestions will be favourably received, as tending to derive an important and most legitimate resomce for diminishing the pressure of tax- ation. This resource, he conceives, may be found by annually converting a part of the tax on income (which is au annual tax durhig the war) into a permanent tax, a^d providing for the deficiency of revenue, occasioned by^ such conversion, by an annual addition to the public loan. Supposing it resolved then, to convert annually, during five years, .£.600,000 of the tax on income into a per- manent tax, and to replace to government the amount of revenue thus withdrawn, by an annual addition to the public loan, this measure would furnish, during these five years, towards the permanent taxes to be provided during that period o£'. 3,000,000 subject, however, to the deduction for interest and sinking fund, which the additions to the annual loan would require . . . . . 600,000 making of net addition to the permanent . taxes c£.2,400,000 This addition to the permanent taxes would not, in any degree, augment the present pressure of taxation, seeing it would only be, under a new form, part of the burthen which the country now bears. S6 The charge of the public funded debt, which we have supposed to be, at the end of five years . £.4^,666,666 would be augmented by this measure as follows : by the interest of these additional loans, which, in five years, would amount to ef.9,000,000 cf.450,000 and by the sinking fund which they would require .... 150,000 . ■ 600,000 whichwould make the total charge . , £.43,266,666 which, at the end of five years, would stand thus: the unredeemed interest, which, without ' these loans, was ........ <£.25,417,324 augmented by these additional • loans of .450,000 and diminished by the purchases of the fund attached to each of them 18,401 — 431,599 would then be . o£.25,848,923 and the sinkingfund, which^ without the addi-. tional loans, was found to be c£.17,249,343 augmented by the fund for the ' additional loans . . . . 150,000 and by its purchases .... 18,401 would then be ......... 17,417,745 making the total charge ....... £.43,266,666 . Supposing the operation to be continued for another period of five years, in which of .900,000 of the tax were to be annually converted into a permanent tax j this new 37 conversion, together with the continuation of the former, would furnish, during these five years, towards the perma- nent taxes for that period .^'.4,300,000 subject to the deduction for interest, on the additional loans, which would amount to .-£.28,500,000 .... c£'. 1,425,000 and for the sinking fund which they would require , . • 475,000 1,900,000 net addition to the permanent taxes » . . <£/2,600,000 and the charge for the whole debt, at the end of these five years, would stand thus : the unredeemed interest of . ,£.25,848,923 augmented by the loans of twenty millions a-year . . 5,000,000 and by the additional loans of ^".28,500,000 . , . . . 1,425,000 c£.32,273,923 and diminished by the purchases 5, 147,190 would then be c£.27, 126,733 The sinking fund, which was i". 17,4 17,743 augmented by its own purchases 4,812,191 by the fund for the loans of twenty millions a-year . . 1,(}66,666 and by its purchases , . . . 207,303 by the fund for the additional loans 475,000 and by its purchases .... 67,696 would then be 24,706,599 making the total charge .£.51,833,3SC 38 tvhich would make the proportion between the total charge and the sinking fund to be as 2J)9795 to 1, and the period of redemption, at five per cent, fifteen years, two months and seven days. We have seen that, at the end of ten years from the present time, upon the supposition that twenty millions a-year were to be borrowed at five per cent, the sinking fund would redeem the interest then remaining due in less than fifteen years. The exact period would, in fact, be fourteen years, nine months and twenty -two days. Therefore we are warranted by the preceding calculation to say that the operation of the additional loans, during ten years, would only retard the progress of the sinking fund in the redemption of the public debt ibur months and a half. Let us now consider the effect of the measure tipon the burthen to be borne by the country. The taxes which, without the measure^proposed, would, agreeably to the supposition upon which we have all along gone, be .£.13,333,333 and would be increased by the interest and sinking fund for the additional loans . . i^.2,500,000 but, as there would be derived from the measure, permanent taxes to the amount of . . 7,500,000 there would, in fact, be a saving of taxes of 5,0(X),000 and consequently there would be to provide only i:.8,33S,333 Now, let it be supposed that, at the end of these ten years, the blessings of peace were restored to the country, it would surely, in that case, be much more easy and agree- S9 able for the public then to remain burthened with a part of the tax on incomcj of which they now bear the whole, than to be loaded, during ten years of war, in addition to what they now bear, with the taxes, which the proposed Scheme would render unnecessary. It would then be for the consideration of Parliament to determine, whether the portion of the tax on income, rendered permanent, siiould remain so, or be replaced by permanent taxes of some other description. It would then also be matter of consideration, whether any, and what reduction of the sinking fund should then take place. The measure which we have just considered, could never be objected to as encroaching upon the sinking fund, as its income would all along remain untouched, and all its rights be respected ; yet if the whole of the net perma- nent taxes which would be procured by the proposed mea- sure were simply to be withdrawn from the sinking fund, without any compensation whatever, during ten years, the progress of that fund in the reduction of the public debt would be still greater than if the measure proposed were to take place, by £.]0S,233 of interest, corresponding to a capital of c£.2,l64,6G0. This must necessarily be the case, agreeably to what has already been said, upon the means of dispensing with additional loans for replacing to the sinking fund the income proposed to be withdrawn from it. In the present case, it w ould be more advantageous to the sinking fund to furnish the whole permanent income which would be derived from the conversion of the tax on. income, than to allow (he loans, which it would require, to take place. It was demonstrated, that if the interest and sinking fund required for the additiotial loans were paid to, or retained by, the sinking fund, and thus no additional loans were to be made, tliat fund would redeem more interest than if the loans were to tiike place, awd its 40 income were thereby constantly maintained unimpairect* It follows, therefore, that if, instead of taking the gross amount of permanent income, rising during ten years from ^.600,000 to <£.7,500,000, and paying back the propor- tional charge during the same period, rising from o£'.40,000 to of .2,500,000, the net amount of permanent income were withdrawn, rising from .-£.560,000 to ^£.5,000,000, the effect to the sinking fund and to the public must neces- sarily be the same. If further proof of this obvious truth be required, it will be found by calculating the value of the net income withdrawn from the sinking fund, which, at the end of ten years, will be found to be .£.6,634,138, which establishes the interest that would ha¥e been re- deemed by the ^£.5,000,000 taken out of the fund at of. 1,634,138 now the interest which the sinking fund, without any diminution, would have left unredeemed at the end of ten years, being 25,384,363 the interest unredeemed, after withdrawing these o£.5,000,000 of income, must be c£.27,018,50I the interest which would be unredeemed, at the end of ten years, if the additional loans were to take place, would, as we have seen, be . 27,126,734 which makes the difference, already noticed, between making, and not making, the ad- ditional loans • . . . . c£. 108,233 Supposing then, that instead of annually converting into a permanent tax, part of the tax on income, during ten years of war, it were resolved to take, during these ten years, the net amount of permanent taxes which that measure would supply, directly from the sinking fund, and 41 to engage to the sinking fund, at the end of" that period, the gross amount of that part of the tax on income which would have been converted, the public debt, at the end of these ten years, agreeably to the principles on which we liave all along calculated, would stand thus : the unredeemed interest would be . . . £.0,7,018,501 the sinking fund which (without any diminu- tion), would have amounted to i!" .23,948,970 less the sums withdrawn and their compound interest .... 6,034,158 of. 17,3 14,832 add the gross amount of per- manent taxes to which the fund would be entitled . . 7,500,000 24,814,832 total charge i" 5 1,833,333 which would make the proportion between the total charge and the sinking fund as 2.088 to 1, and the period of re- demption, at five per cent, fifteen years, one month, and two days, being one month and five days less than if the additional loans had taken place. 8uch would be the effect of this measure, if it should appear necessary, at the end of ten years of war, and upon the return of peace, to continue the burthen of of .7,500,000 in order to raise the sinking fund from of. 17,3 14,822 to -f.24,8 14,832. If this should then appear unnecessary, the public debt would stand thus : the unredeemed interest would be . . . of .27,01 8,.501 the sinking fund would be 17,314,822 making the total charge i:. 44,333,333 42 And the proportion of the total charge to the sinking fund would be as £.36042 to I, and the period of redemp- tion, al five per cent, nineteen years and a quarter. CONCLUSION. On an occasion in which a reduction of the sinking fund has been considered in so many points of view, it may appear extraordinary that no mention has been made of the plan, originally adopted in 1786, for preventing the excessive accumulation of the fund, and which, if the author's meinory may be depended upon, consisted of fixing a certain amount of annual income, beyond which the fund was not to accumulate. This annual income, he believes, was four millions, including the annual million originally vested in the commissioners for the reduction of the national debt. As well as he recollects, it was provided, that as soon as the sinking fund should reach this maximum, the interest of the stock purchased thereafter was no longer to be issued, and consequently taxes, to the amount of such interest, were annually to be taken off. The truth is, that this mode, however judicious and adequate to all the purposes in contemplation at the time when it was adopted, seemed much too slow and ineffectual for affording that relief to the subject which the large additions made to the public burthens, during the last twenty years, seemed to require. Another obvious scheme of reduction, by applying the sums to be taken from the sinking fund, to diminish the amount of the annual loans, he likewise declined from a similar motive. 43 It will remain with those who know the real state ol the public resources, to determine how far he has been right in doing so, and whether any of the ideas which he has ventured to suggest, for affording relief from the pressure of taxation, may, under all the circumstances of the country, be applied, either now, or at some future period, to produce this eHect. Of calculation there has been more than most people will have the patience to attend to. It is indeed a dry and ungrateful subject from which the public at large turn away with disgust; but it was necessary to sanction sug- gestions so novel in appearance, and so important in their consequences, by the authority of figures, which in matters of finance, is paramount to all argument whatever. There are, however, other considerations, besides those within the province of calculation, which well deserve attention. The borrowing system owes its origin to the desire of sparing to the public, as much as possible, the burthen of taxes, which, but for its invention, must have withdrawn from the industry of the country a very large portion of those pecuniary means which have carried that industry to the astonishing pitch it has attained to. In proposing, therefore, a modification of the sinking fund, in order to alleviate the pressure of taxation, raised by unavoidable causes to its present height, there is nothing which ought to alarm ; there is no room for deprecating ifmovation, for innovation there would be none, in adapt- ing to present circumstances the principle which is co-eval with, and actually gave rise to, the funding system. By raising money upon loan for a large proportion of the public exigencies, our ancestors thought, and thought wisely, that the money so borrowed, in order to leave a like amount in the hands of an ingenious tmd industrious people; would, in fact, be improved to an advantage infi- 44 nitely superior to the consideration of the interest paid for it. If this be true with regard to loans which required onl}'' the payment of interest, it must be at least equally true, with regard to the public debt, as now constituted, of the charge of which the fund for its redemption forms so considerable a part. Much has been said and written of late years on the increase of prices, which has been imputed by some to one cause, and by some to another; but the warmest partisan of any of the assigned causes, cannot deny that the aug- mentation of taxes has had a considerable share in such increase. Any measure, therefore, (not inconsistent with good faith and the general financial prosperity of the coun- try) which is calculated to keep down the augmentation of taxes, ought to be cordially supported by all parties. Not one of the various modes now suggested for attaining that desirable object, can justly be deemed the offspring of party spirit; for the author is altogether, as well by situa- tion as by principle, beyond the reach ol 'party. Not one of them can justly be considered as tending to favour a dereliction of the principle of the sinking fund ; of which, as far as his very limited means have permitted, he has always been a strenuous defender. In proposing to lop the luxuriance of that fund, when it seems to counteract .the very object of its institution, his own mind is as clear of all intention to weaken the respect due to that admira- ble institution, as the general feeling of the public would be adverse to such intention, if it were possible to exist. He is, however, well aware of the plausibility with which objections may be made to any reduction whatever of the sinking fund. The example of the abuses which crept into the management of what so undeservedly bore the name of a sinking fund in former reigns, and even during part of the present reign, will be produced as a proof of 45 the danger of diverting any part of tlic present fund from its declared destination. In answer to all such objections, it is only necessary to observe, that the various modes now proposed for modifying die present sinking fund are, all of them, calculated to guard against such abuses as pre- vailed in the management of the former one. By esta- blishing beforehand certain fixed regulations, which are to determine the nature and extent of the resources to be derived from the sinking fund, the great complaint against former abuses will be completely done away. It is not proposed that the present fund should be (what the former one so often was), a convenient resource for supplying occasional calls for money. It is not meant that this fund should be used as a substitute for borrowing ; but that such part of it as Parliament, in its wisdom, shall think an unnecessary burthen upon the public, shall be applied to the diminution of taxes. It is not to be a convenient mode of affording occasional ease to ministers ; but, in proportion to the progress actually made in the reduction of the public debt, it is to affo>d a regular and systematic relief to the subject. There is still another point of view in which a modi- fication of the sinking fund will, perhaps, appear to be not less important to the real interests of the public credi- tor than to the relief of the subject. If the fund be allowed to operate, without reduction, until it become equal, or perhaps, superior to the interest to be redeemed, the effect must infallibly be to diminish materially the value of capital. The Author of the present Retlections is far from subscribing to the sophistical doctrine which holds up to view the sinking fund, having fw object the payment of the public debt, as big with all the dangers to capital, which probably might attend a fund having no object but accumukUion ; but he is nevertheless convinced 46 that, in order to maintain the value of the capital restored to the public creditor by means of the sinking fund, it is necessary to guard against excess in its operation. This is no more than is necessary to be observed in the use of every comfort, in the exertion of every faculty, and in the application of every principle for the benefit of mankind. FINIS. I. Brettell, Printer, Hupert Street, Haj market, Loudon. K