The Sinking Fund.

Wortley tell their constituents that they have not voted the tax to support a lavish expenditure, but to pay off the Debt; and the system works on "with the entire approbation of all parties."

Secondly, a Sinking Fund serves to keep up a certain amount of patronage, fees, and emoluments, which, without such a pretext, must be abolished.

Lastly, it leaves a surplus sum at the disposal of Ministers ready to be. devoted to any object they may deem expedient. They may employ it to subsidize foreign despots, to enter on a new war in support of legitimacy, or to supply deficiencies in the Civil List, or any other department of expenditure. That the money is voted for other purposes is no security that it may not be so applied; experience having shown that Ministers have never hesitated to avail themselves of the Sinking Fund when it suited their necessities.

I-HISTORY OF SINKING FUNDS.

Having adverted to the real motives of Ministers for keeping up the Sinking Fund Bubble, I shall preface the exposition of the Bubble itself, by giving a short account of the different plans that, at various times, have been put forth for the redemption of the Debt.

The first plan for the discharge of the Debt, formed on a regular system, and conducted with a considerable degree of firmness, was that of the Sinking Fund, established in 1716. The author of this plan was the Earl of Stanhope; but as it was adopted under the administration of Sir Robert Walpole, it is commonly denominated from him. The taxes which had been laid on before, for limited periods, being rendered perpetual, and the produce of them being greater than the charges, the surplusses were united under the name of the Sinking Fund, and appropriated to the discharge of the Debt. The legal interest had been reduced from six to five per cent. about two years before, and, as that reduction was conformable to the commercial state of the country, government was able to obtain the same reduction on the interest of the Debt, and apply the savings in aid of the Sinking Fund. In 1727 a further reduction of the interest of the Debt from five to four per cent. was obtained, by which nearly £400,000 was added to the Sinking Fund. And, in the year 1749, the interest of part of the debt was again reduced to three and a half per cent. for seven years, and to three per cent. thereafter; and, in 1750, the interest of the remainder was reduced to three and a half per cent. for five years, and to three

The Sinking Fund.

per cent. thereafter, by which a further saving of near £600,000 was added to the Sinking Fund.

An erroneous opinion appears to have been entertained then as well as subsequently, of the importance of applying the produce of the Sinking Fund invariably to the discharge of the debt, and borrowing by new loans when the exigencies of government required it. Accordingly, we find from 1718 to 1728, being a period of peace, £6,168,732 was borrowed towards the supplies. The sum applied from the Fund, in the same period, amounted to £6,648,000, being a very little more than the additional debt contracted in that time.

In 1728, the Fund was charged with the interest of the loan, and this was also done in the loans of the following years, and the additional taxes imposed to pay the interest of the loans were applied directly to the Fund.

Soon after the plan of preserving the Fund inviolate and borrowing by new loans was abandoned. In 1733, £500,000 was taken from the Fund towards the supplies of the year. In 1734, £1,200,000 was taken from it for the same purpose; and, in 1735, it was anticipated and mortgaged. Afterwards the operations of the Fund, in time of peace, was feeble, its produce being often directed to other purposes; and, at that time, the nation had no other unappropriated revenue, except the annual land and malt taxes, which were inadequate to the expense of a peace-establishment on a moderate scale. It was, therefore, necessary, if no additional taxes were imposed, to have recourse to the Fund, or to the absurd system of discharging old debts by contracting new ones. In the peace which followed the treaty of Utrecht, being a period of twenty-six years, the longest the country ever enjoyed, the amount of debt discharged was only £7,231,508. In time of war, the produce of the Fund was applied to the service of the year, and loans only made for the additional sums wanted.

The produce of the Fund, at its commencement in 1717, was £323,439 Medium annual produce, from 1717 to 1726, both inclusive, 577,614

It is unnecessary to trace the operation of this Sinking Fund Delusion further. It was continued, nominally, in the accounts of the Exchequer till the establishment of Mr. Pitt's Sinking Fund, in 1786; but it did little in time of peace, and nothing in time of war, to the discharge of the Debt.

The Sinking Fund.

Dr. Price says, that, at the time he wrote in 1772, it had afforded about twenty millions towards the payment of the Debt in fifty-six years, being nearly £357,000 annually at an average. If, from this sum of twenty millions, we subtract the debt contracted from 1718 to 1738 the remainder is nearly equal to the debt discharged in periods of peace; so that the first Sinking Fund, like that we are going to describe, served no object further than entailing an additional expense on the country for management.

MR. PITT'S SINKING FUNDS.

1786.

The present Sinking Fund was established under Mr. Pitt's administration in 1786. The various branches of revenue then existing were united under the name of the Consolidated Fund. Besides the interest of the debt, this Fund is charged with the Civil List, and other pensions and grants from parliament. In 1786, the surplus of the Consolidated Fund, being one million, it was vested annually in the hands of commissioners for the redemption of the debt, to be applied for purchasing capital, in such stocks as they should judge expedient, at the market prices. To the one million was to be added the interest of the debt redeemed, and annuities falling in by the failure of lives, or the expiring of terms for which they were granted, and life annuities unclaimed for three years were considered as expired, and added to the Sinking Fund. When the Fund exceeded four millions it was enacted that the surplus should be at the disposal of parliament.

1792.

Another Sinking Fund was established this year of one per cent. on the nominal capital of each loan, to which the dividends on the capital redeemed by this Fund were to be added. When annuities for a longer term than forty-five years, or for lives, were granted, the value which would remain after forty-five years was appointed to be estimated, and one per cent. on that value set aside for their redemption. This Fund was appointed to be kept separate, and applied for the redemption of the debts contracted subsequent to its institution, by which means it was estimated that every loan would be redeemed in forty-five years, at furthest, from its contraction.

In the same year, £400,000 was granted in aid of the former Sinking Fund, and £200,000 was granted, by annual acts, for the same purpose, till 1802, when the grant was rendered perpetual. Savings, by the reduction of the rate of interest of the debt, were appointed to be added to that Sink

The Sinking Fund.

cent.

ing Fund, but no savings of this kind took place till the present year; when there appears a prospect of a saving, by the conversion of the five navy annuities into a four per cent. stock.

1798.

per

The country was now blessed with two Sinking Funds, one accruing from the surplus of the Consolidated Fund, the other from the one per cent. on all loans. This year the application of one per cent. on the capital of loans to the Sinking Fund was deviated from. A part of a loan of sixteen millions was charged on a tax then imposed, called the Aid and Contribution Tax; for which the Income Tax was substituted in the following year. In like manner, a part or the whole of the loans, for several years, was charged on the Income Tax, and no Sinking Fund of one per cent. provided for their redemption. This system was abandoned in 1802, when all the loans were united, and the interests of these loans charged on the Consolidated Fund.

1802.

The system of a Sinking Fund, of one per cent. on loans, subsequent to 1802, was revived, and has been followed in all loans, except that of 1807, when Lord Henry Petty's plan was adopted. The limitation of the Sinking Fund to four millions enacted at its commencement, and a similar limitation in 1792, were repealed; and the application of annuities whose term was expired, and of savings by the reduction of rate of interest to the Sinking Fund, was repealed.

LORD HENRY PETTY'S SINKING FUND.

In 1807, lord Henry Petty (now marquis of Lansdown) being Chan cellor of the Exchequer, brought forward a new plan of finance. It was accompanied with an elaborate set of tables, and, being very complex, was not generally understood. As it, however, promised to raise the necessary loans with little or no increase of taxes, it was favourably received, and probably would have been continued for some years if the Whigs had remained in office.

In this plan the annual deficiency to be supplied by loan was proposed to be raised by mortgaging the war-taxes to the extent of ten per cent. on the sum borrowed; the surplus of which sum, mortgaged, after paying for interest and management, was to form a Sinking Fund for redeeming the

The Sinking Fund.

debt, and thereby disengaging the part of the war-taxes mortgaged, in a certain number of years, according to the rate of interest at which the loan was transacted. Thus, if the interest and management was five per cent. there would remain five per cent. as a Sinking Fund, and this would pay off the debt in fourteen years. Advantage was also to be taken of the falling in of annuities at different periods, by the expiring of their terms, of the reduction of the rate of management of the debt, and of an expected surplus from the present Sinking Fund.

It is unnecessary to enter into a further detail on this plan, as the ministry who planned it did not remain long in office, and it was not followed out after the first year. Like the plans by which it had been preceded and succeeded, it did not contain any device either for raising the supplies or paying the Debt, otherwise than by first taking the money out of the pockets of the people.

MR. VANSITTART'S SINKING FUNDS.

The SIEUR VAN is the last Sinking Fund-Monger we shall bring forward. The SIEUR's plan of finance, proposed in 1813, and adopted by Parliament, is a modification of Mr. Pitt's Sinking Funds, and, among other objects is intended to rescind the alterations which had been made in these Funds, as originally established in 1786 and 1792, and restore them, as far as practicable, to the state in which they would have stood had no such alterations taken place. As these alterations have been noticed in the preceeding summary it is unnecessary to recapitulate them. The VAN's plan was attended with the same palatable feature which accompanied lord Henry Petty's, of promising an exemption from taxes for the three next years and a smaller amount of them in the succeeding years. The manner of obtaining the former of these points was by declaring the debt of 1786 cancelled, and allocating the Sinking Fund provided for it to bear the charge of the new loans. In other words, the Sinking Fund, which had accumulated under former systems, was destined to relieve the present and future exigencies of Government.

- The plans of Mr. Vansittart was neither better nor worse than the plans of his predecessors; like them it served to amuse and delude, but, in principle, it was the same. If the taxes for the present were lighter, the debt for the future was greater. And this must be the fate of all Sinking Funds; when taxes are not imposed to the amount of the expenditure, an increase of debt to a higher amount than the sum saved in taxes is inevitable. It was