A L E TT E R
G R E N V IL L E
L O R D
,
O N TH E
FU N D
S IN K IN G
.
BY
THO
M
A
S P E R EG R IN E
O HN
J
M
U
C O URTEN AY, E S Q
LO N DO N
R R AY
,
AL BE
MDCC
,
:
M
A
C XXVIII
.
R L E S TR
EE T
.
M
.
P
.
PR E
FA CE
.
a
r
h
e
s
n
c
ss
r
y
ss
d
t
t
e
e
a
a
u
r
t
h
a
e
r
r
t
o
e
e
e
h
a
p p
alth
h
ou h
t
e
o
f
ll
o
i
n
o
b
s
v
ti
s
d
f
r
w
e
a
o
n
r
o
c
e
e
o
m
r
g
g
p
a e
r s o n wh
d
st
y
s
o h
d
s an o ffi
c
u
n
a
l
r Hi
o
e
e
s
e
p
j
r nm
G o ve
ss o nly t h
nt th
e
ye
xp
re
ese
e
nti m
e
nts o f
th
eindivid ual write
r
Heis e
ntir e
ly ig nor ant o f th
inio ns e
eo p
nte
r
h
n
o r b th
n
rs o f
i
t
i
ist
t aine
db
t
e
C
a
e
e
e
b
y
y
nancial q
ue
stion now
o n th
at fi
Finance up
eg r e
at issu
e
ce
inks it al so ne
ssar y to ap
o l o g ise
fo r th
e
Heth
le
is tract Hew as de
s o f g iving
ngtho f th
si r o u
a fu
xp
ll h
isto rical e
l anatio n o f th
e sy ste
mo f
e
r
P
h
a
u
stab
lish
d b
itt
t
fi
nancee
t
e
h
o
r
o f th
e
y
ewas al so de
sirous o f p
und ;andh
Sinking F
ursu
nville
s ar u
m
n
t
i
n
t
o i nt
ing Lo r d G re
e
o
b
g
p
y p
s
o se
xi o n o f th
Hefe
ar s th
at t h
e
setwo p
urp
eco nne
on
d re
titi
h
as o c
e
casio ne
p
IT is
,
M
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M
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M
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.
C ON T E N T S
S
ec
P ag
t
1
2
3
.
Intr oduction
Principle o f the S inking Fund
O n the E ssay C hap I N ecessity o f a S u rplus
venue f the support o f a S inking Fund
Histo ry o f the S inking Fund o f 1 7 1 6
MPitt s system of finance ;S inking Funds of 1 7 8 6
and 1 7 92
unds and In
O n the Inutility of borrowed S inking F
unds operating in War
e
ffi
cacy of S inking F
O n the E ssay C hap II Operation and results of
the present S inking Fund its benefit consisting in
the release of pre v iously appm
d taxation
piat e
O n nominal C apitals gi v en f money borrowed
On the operation of the Fund as supported by sur
plus taxation
On the r educt on of Debt as e ffected by mere ex
changes f E qu v alents C ompound Interest
On the E ssay C hap [ IL Attemp ted Permanence
and fre quent Interruption of the S ystem
On the benefits of C ompound Interest ;pro v isions
adopted f giving permanence to the S inking Fund
of 1 7 8 6
.
.
,
.
5
r.
.
7
.
.
.
,
.
1
12
22
’
.
6
e
-
or
4
.
30
38
—
—
r
8
or
.
9
.
10
.
12
.
.
51
,
i
o
11
48
54
,
i
.
55
—
,
.
59
or
61
vi i
C O N TE N TS
i
Se
ct
13
P age
.
.
th e ac t ual Fai l ur e of these en deav o ur s h i sto ry of
MPi tt s S i nki ng Fu nd 1 7 8 6 to 1 793 ;effe c ts of
taxes an d th e ir r epe al
S i nki ng Fu n d duri ng th e w a of 1 7 93
odifica ti on of the S i nki ng Fu n d i n 1 8 02
M
u n d i n t h e w a of 1 8 03
S i n ki ng F
M
odi ficatio n of the S i nki ng Fu n d i n 1 8 13
eS i nki ng Fu n d duri ng the p r esent pe riod of pe ac e
Th
R epeal o f Taxe s ;Dea d W
e i gh t
Allege d Fai l ur e of th
eS yste mgene ra lly
O n L ord G e
nville co n c l u s io n ;
s u pp os e d adv a nt age s
of t h e S i nki ng Fun d
C o n c l udi ng O b
se rvatio ns and S ugge s tio ns
On
r
’
,
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,
l4
15
.
.
16
.
17
.
18
.
19
.
20
.
2]
.
r
r
’
r
63
79
89
92
93
1 00
1 08
s
1 13
1 18
L E TT E R
LOR D
M
Y
GR
ENVIL L E
.
L O R D,
T HO U G H not unused to political contro
n
c
e
f
fi
d
d
e
f
i
undertake
with
un
eigned
rs
I
ve
y
the task o f commenting upon your Lordship s
E ssay I never read an appeal to the public
ore likely to produce the e ffect which it
Y our authority as a states
contemplated
man great fo r the last forty years is
strengthened and embellished by the ab
sence o f personal interest The ingenious
malignity o ften effectual against ministers
cannot impute to your Lordship retired
among your pines and disconnected from
parties any othe r motive than that which
o
u
avow
desire
advise
your
country
a
t
o
y
,
,
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m
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-
B
2
in a discussion o f urgent interest and per
manent importance
The advice oreover penetrates willing
,
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m
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,
,
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 w ill no t
say con sidering yo ur lordship s peculiar
situation that these circumstances j ustify a
distrust o f the advice ;but I do submit that
they detract much from the value o f the
testimony which is borne to the soundness
by the sympathy and t h
e
o f that advice
applaus e with which it is received : at the
least I may urge them as a part o f my o wn
j ustification fo r setting forth my dou b
t s as to
the wisdom o f the counsel
I am p ainfully sensible o f the inequality o f
th
econtest in which I engage The opinions
o f a subordinate o fficial man have no extrinsic
value t hey can derive no weight except from
the force o f the arguments which suppor t
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3
m
the
N o r could I with perfect confiden
ce
repel an imputation that they a
r e tinged
with prej udice I do not wish to den y that
my notions o f public finance were formed in
the school o f Mr Pitt the author o f the
measure which it is now proposed to con
de n ;o f that great and a iable man I
have an affectionate remembrance which has
tempted me in the society o f his successors
to exclaim :
inus e
re
n ! Q uant a
st
cu
He
liq
uzs
e
sse
r sa
a
i
n
i
ve
u
t
q
This feeling I o wn has g n
erated an un
willingness to admit that h i s principles in
ranch o f po litical science were fu nda
any b
mentally wrong and dangerous I m ak e this
ad ission because though probably neither
Lord Grenville nor the public kno ws eno u
gh
his
ory
to
lead
either
to
ascribe
of
t
y
y
opinions to this prej udice there ar ethose in
high places wh
being aware o f the perti
o
ve
nacit y with which I have fo r more than fi
.
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,
,
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m
m
,
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m
m
m m mm
m
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'
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e
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m
m
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,
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m
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B 2
4
s
and twenty years advocated the principl e
o f Mr Pitt s S inking F und (though I have
certainly modified some o f my notions as to
their application) may detract o n that ao
count even from such weight as belongs t o
my opinion All that I desire is that while I
claim no credit fo r the deep and continued
attention which I have bestowed upon the
matter in question my suggestions may no t
receive less than t h
eir due consideration b
e
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’
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,
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,
cause the opinions o u which they rest were
learned in youth from an admired aster
Your Lordship deprecate s an imputation
Opposite in its kind I subscribe readily and
heartily to the forcible o bserv ations which
h
o u have
ade
upon
t
e
arrogation
poli
f
o
y
tical consistency No doubt it is peculiarly
absurd fo r us wh
o make a daily boast o f
t he progress o f science and intelligence and
re
upo n j ustify important ch ange
s to co n
th
e
e Opini ons
fi
ne each i ndividu al man t o th
which h
emay have originally formedo r i
m
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m
,
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m
5
b
ib
e
d;whatever may be the duration
of
his
li fe o r the variety o f his experience Accord
ing to this plan error has a li fe estate in
,
.
-
,
every living mind ;the heir may discard it
but t h exist i ng possesso r must sustain it
From your Lordship apologies fo r inco n
sistency were quite un necessary ;but here
again I must make a distinction between
him wh
and those wh
the
o gives
o follow
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 O f improvement and the habit Of
discarding opinions formerly sacred engender
an aptitude to dissent and a love o f paradox
S ome men afraid O f giving too much weight
to Opinions consecrated by time o r authority
are tempted to give too little I am per
ad
d that among a great portion o f the
su
e
House Of Co mmons and O f literary and poli
e
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t ical wr it
'
r s o f the present day contradicti on
e
,
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 me
asure o r a
doctrine truly wise or sound is commonly
praised even far beyond its erits and
usually praised ignorantly and inaccurately
This ha
ntly the case O f the S ink
s been emin e
ing F und ;its invention has been spoken o f as
an effort o f geni us and its operation as a
work o f enchantment It is no t unnatural
f
hat
the
real
beauty
O
a
figure
so
tawdrily
t
disguised should not alw ays receive the
praise which it deserves in its native sim
'
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m
appears to me that as well in the form
f
t
tion
your
judg
ent
as
in
the
argumen
O
a
in wh i ch it is conveyed y o u lay too much
stress upon adventitious and incidental circum
l nl O nS which are u
sta n
ce
s ;y o u combat O p
It
,
,
‘
,
m
justly imputed to your opponents above all
you entirely neglect t h
efundamental princi
ple o f the measure which y o u condemn You
have therefore not presented to the public
the qu e
stion which they are required to de
cide This View Of the defec t s in your lord
ship s treatment o f the great subject of con
f
emboldens
me
to
o
ff
er
the
ollowing
rs
t r o ve
y
Observations
,
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§
YOU
2
.
have no where as I humbly submit
distinctly stated the true princ iple o f the sink
t
e
slat ur e
ou h
ing fund : this is Th
at t h
i
Le
g
g
no t t o i p
o sea
e
e
u
b
u
rd
e
u
e
r
t
a
l
n
on th
pp
p
e
s o
so u
rc
t
re
h
e
u
h
Those
have
c
o
n
t
r
w
o
f
y
the supreme power o f the state at any parti
cular period ought not indefinitely to anti
cip
at ethe means wherewith their successors
are to administer its affairs They must not
provide fo r the expenses to which they are
subj ect by a perpetual mo rtgage o f the ren
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8
s
tal and income o f the people fo r all ag e
They ust themselves and their
t o c o me
ur
e xisting constituents bear the additional b
den which is necessary to avoid such per
u
al o r indefinite anticipations
t
e
p
Thes emaxims which in truth are only
various expressions o f the same meaning
constitute as I sugge st the principle O f t h
e
sinking fund ;that upon which it is endea
dto give t o arrangements fo r redeeming
vo ur e
the public debts the character o f sacred Obli
a
i
t
o n andfundamental law
g
m
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I may be under a prej udice o r a delusion
b
ut I o wn that the principle appears to me
to b e Obviously j ust
It is indeed only the application to t h
e
whole rental and resources o f the country o f
a principle which o ur law has by repeated
acts imposed upon all those individual o r
corporate proprietaries which have a p
e
r e
p
tual succession : upon the crown fo r instance
and the church A correspondi ng restric t io n
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is voluntarily imposed by the acts o f indivi
duals who leave their property t o more than
heir in succession ;all but the last (and
o ne
in the case o f the state the crown or the
church there is no last) are limited in their
power o f charging the land fo r j ointures
i
marriage portions and other perfectly le
t
i
g
mate expenses : still more in their power o f
mortgaging it fo r personal debts
Distinctions might unquestionably be
shown between these cases and that o f the
state ;but I am the more confident in using
them as ill ustrations o f my position because
your lordship has correctly Observed that a
reference to similar transactions in private li fe
is the best o f all instruments fo r the discovery
o f truth in political
There is i ndeed a class o f public debts to
which the limitation o f duration is applied
by law Parishes and sometimes I believe
counties are empowered to raise money fo r
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E ss ay p
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41
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10
ce
rtain public purposes by a nticipation o f
their rates parliament has never thought fit
to allo w o f a perpetual charge upon these
funds The po wer o f charging is usually fo r
years Within whic h time the debt
t wenty o ne
ust be discharged either by the ori ginal
terms o f the loan o r by the application o f a
Yet the purposes f o r which
sinking fund
this charge is permitted are no t usually e
h
e
p
ral ;and a perpetual mortgage might be
e
allowed with at least as much reason as in
the case o f a national debt
The so vereign power o f the state is u
controlled by laws ;humanly speaking it is
o mnipotent ;but it surely will no t be c
on
tended that those who exercise it are not
under an Obligation I would even say a moral
Obligation to regard the interests o f their
successors and descendants If the payment
and
o f taxes is burdensome t o the peopl e
the operations o f finance are di fficult to the
i
u
legislat ure it is no t j ust o r e
t
a
l
o
r
t
h
b
f
e
e
q
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m
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12
creates a perpetual annuity can o nly
be renounced through a breach o f faith ?
Thus much preliminarily o n the principle
I will no w follo w y our lordship through the
det ails o f your argument ;and shall have fr e
quent occasio n to en force and illustrate the
funda ental doctrine the maintenanc e o f
which is essential t o the greater par t o f wha t
ro
I shall Offer in opposition to your several p
positions Perh aps the arrang e
ment which
which
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u
o
y
have made
Of
your argument is not the
nt fo r discussing the qu e
most co nve e
stion
in reference to that doctrine ;but I still think
it best to pursue the E ssay thro ugh its regular
course as well i n deference to your lordship
as because it contains very fe
w Observation s
whi c
h are no t worthy o f separate not i ce
m
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,
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§
YO U
s
.
begin by laying down as a rule The
necessity o f a surplus revenue fo r the Sup
,
l3
po rt
of
a sinking fund
And from this
"
you nat urally and reasonably deduce the two
further positions ;the o nea ffi
rming The
inutility o f borrowed sinking
the
other The i ne fficacy o f Sinking funds ope
rating in
According to my principle the parli ament
which raises money by anticipation o f the
revenue is limited as to the period fo r which
the mortgage is to endure The plainest and
simplest mode o f e ffecting this limitation is
by borrowing money Upon an annuity to exis t
only during the limited period When this
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mode is adopted we pay fo r the money b
or
rowed a temporary interest exceeding per
haps by a fifth or a sixth that to which we
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should be liable if we agreed t o pay the
interest fo r ever
This excess necessarily
obliges us to appropriate if it exist o r to
create by taxation if it do not exist so
mu cho f surplus revenue And there is in
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ss ay;
p 5
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p
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7
.
Xp
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12
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14
this case no question ;the whole money must
be raised or we are bankrupts ;but there is
no reason fo r 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 o ur loans u
pon such ter inable
annuities y o u woul d think it unadvisable so
ow
t o raise them ? I am really not aware h
I
a
would
answer
this
uestio
but
n
o
u
;
q
y
sure that y o u perceive at once that an an
swe
r in the affi
rmative implies an adherence
to my position that we ought t o subj ect Our
selves to additional taxation in order to
lighten the b
urden upon posterity
I would almost venture furthe
r to ask you
whether it would not have been benefic i al t o
E ngland if t h
ere could have existed during
the last century a fundamental and irr e
l
a
e
p
able law limiting the power O f parli ament in
its mortgages o f the revenue ?
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Ho wever no such constitutional limit ation
does o r can exist ;and there are we know
practical di fficulties in the w ay O f 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 be fore stated
fo r the sak e O f redemption but w ealso pay
fo r this unwill ingness o f the lenders
It is not to o ur present purpose t o inqu ire
Whether there has no t been sometimes a t o o
ready acqu iescence in this unwillingness ;I
pass then to the other mode by which the
limitation o f the mortgage is to be effected
This mode consists in borro wing upon a
perpetual annuity ;setting apart in addition
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to the interest s o much o f revenue as will
redeem the annuity within the period limited
The manner in which this additional revenue
i s applied is in different provided that it so
e
operates as to set free at the end O f the p
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16
d re venue equal to the interest
of
the
loan It may be applied in the purchase in
th
emarket o f the particular securiti es which
occasion the appropr iation ;l n the purchase
o f any other annuities O f equ al amount ;or
in any other mode whereby the charge which
will remain upon the resources o f the state
at the expiration o f the period is proportion
ab
ly diminished
It is unquestionably true that the ad
dit io nal revenue destined fo r this purpose
ought to be a clear surplus beyond all charg e
fo r th e interest O f deb t s and all other per
manent charges upon the revenue ;and it is
rio
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also true that it ought to be a surplus beyond
the amount o f the ordinary expenses O f the
state e xisting at the time ev en though those
expenses are no t in their legal form perma
nent ;the appropriation would be otherwis e
e vasive and nugatory
S o far then I concur in your lordship s
firs t positi o n And yet I do no t admi t as a
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consequence o f this position that
ffi
the appropriation is always ab s
urd or Ine
cacio us when there may happen to be in
o ne
o r more o f the years in which it endures
a deficiency o f revenue occasioning a new
debt
My difference from your lordship upon
is p
th
o int is a necessary consequence o f my
principle o f a sinking fund The surplus
from which tha t fund is to be supplied may
cease fo r a time and the condition which has
been prescribed as to the duration o f charge
may nevertheless be strictly preserved This
happens when (as in the year 18 2 7 to which
*
you refer ) a deficiency occurs which there
is good reason fo r supposing temporary ;an
anticipation then takes place o f the resources
o f the next o r next two years immediately
following
N O permanent c h
arge is in this
case created ;if the defici ency still con
t inue
s the principle would assuredly require
P ge 1 0
necessary
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that it should be sup
plied by the creation o f
w revenue
a ne
The principle is in eith
r
e
case maintained
In my Opi nio n w eought
always to keep up a
x
n av e
rage reven ue e
ce
ding in amount every per anent and o r
e
dinar y charge ;so as to meet the accidental
o ccurrence O f a deficiency : bu t if t his pro vi
ci
sion has not been ade the temporary de
fi
ency must be met by a temporary expedient ;
ln
and every t h
then
proceeds
as
be
f
ore
g
Perhaps you may suggest that even
according to my principle the obj ect would
ad
have been equally well e ffected if w eh
s
uffered the appropriation to be suspend e
d
until a returning surplus had supplied it and
re p
laced the fund in the condition t o which
an uninterrupted appropriation would have
brought it I confidently aver that this
modewould have been in every respect mor e
i nco nvenient and would have led to greater
co p
lexity o f acc o unt than that o f issuing
‘
.
'
.
,
m
,
m
,
.
,
,
,
,
,
‘
,
!
’
,
,
,
m
,
E xchequer bills
,
.
If,
inde
ed your lordship had
,
2O
tically supported by loans in time Of peace
The sinking fund ought in such a case to b e
either restored to its due amount by taxa
tion o r avowedl y reduced to the amount o f
s
existing surplus It can scarcely be ne
ce
sary t o argue that the state ought in co
mon prudence and with a view to its power
o f conducting any war which may arise to
apply some surplus o r at least to mak e no
addition t o its debt At all events in time o f
settled peace
the finances ought to be and
may be placed upon a regular and almost
certain basis The legislature has an O p
r
o
p
t unit y o f fixing the scale o f its expenditure
it s taxation and o f the surplus if any which
it will apply to the reduc t ion o f debt It
may determine and act upon the principle
f the burde n o f
whereby the apportionment O
taxation between present and future times
is t o be fixed ;and the reason so etimes
urged fo r maintaining a nominal sinking
fund the preservation o f a dormant principle
.
.
,
m
.
,
,
,
,
,
,
.
,
,
,
.
,
,
,
,
.
,
.
,
,
’
,
,
m
21
t o 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 O f the
sinking fund is equally useless and absurd
in war unles s t h
efinancial arrangements
including that si nking fund proceed upon
a plain and intelligible principle to which
there is at once the possibility and the
rigid determination to adhere Yo u my
Lord wh ile you deny with forcible argu
ments the utility O f attempting this ad
ncerefer t o past history in proo f o f the
he
re
,
.
,
,
,
,
,
,
,
,
.
,
,
,
\
,
,
hopelessness o f success We may give you
say a visionary permanence to the sinking
fund by law its useless forms may be con
t inue
d in vain semblance o f that which
once w as powerful and active but its vital
spirit w ecannot so preserve * 3
Now my Lord I am no t satisfied o f o ur
inability to preserve at all times an active
E ss a y p 13
.
,
,
,
,
,
’
,
,
,
,
9"
,
.
.
22
and salutary principle o f finance founde
d
upon the scheme o f whichth e sinking fund
is a part ;I believeth
at the failures which
,
x
e
a
relate
as
I
su
m
i
t
wit
much
r
h
b
e
a
gg
y
ti on originated in the neglect now sanc
dby you r Lordship s great authority o f
tio ne
fundamental p
r in
cip
le
s;
I do no t despair O f
an attempt to r einvigorate those p
ri nci le
s
In supp o rt o f th
is essential d ifference o f
Opinion I u st no w fo ll o w your Lords h
ip
through your h istory o f the sinking fund
ou
,
,
,
,
’
,
p
.
m
,
.
§
THE
4
.
syst em unde
r wh
i ch a perp e
tual charg e
i s lai d upon the c ou ntry wh
eneve
r a de
fi
c i ent revenue is suppli e
d b
a
an
oasts
o
b
l
y
o f rather les s antiquity th an we commonl
y
suppo se During the reigns o f Willi am and
Anne considerable su s were borrowed ;
b
ean
nuiti e
re in general
s cre ated we
ut t h
ann ui ties for ter s o f years o r fo r lives ;
the pri ncipal bei ng t o b
esunk at the end
'
~
,
,
m
.
,
m
,
.
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 t h
e
banker s debt which perhaps as it arose
from the fraud o f ancestors it w as 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 o f that parti
c nlar debt In 1 7 1 6 the surpluses o f all
the particular funds and o f other more
general funds into which some o f them had
been united were carried together with
some savings effected by the reduction o f
interest to a new S IN K IN G FU N D
which
fund was made applicable to the payment O f
debts existing o n the 2 5t hDecember 1 7 16
and fo r no ne other use intent o r purpose
whatsoever i And it was so applied with
,
,
,
’
,
,
,
,
.
,
,
,
.
,
,
,
,
,
,
,
,
,
,
”
r
r
,
i n al
T d
,
xix
.
13 1
,
.
o I
f Act 5 G e
.
.
ca p
.
3
.
se c t
.
66
.
24
e
out any systematic exception (ther were I
believe some silent encroachments ) during
the reign o f G eorge I and the first six
y ears o f G eorge
notwithstan
ding that
w ithin the same period O
th r debts equal to
much more than the half O f those redeemed
were paid O ff by thi s fu
nd
In 17 33 S ir
R obert Walpole took half a million from the
fund
This measure your lordship ascrib s to the
sagacity o f Walpole wh
outrunning the
o
”
dis c
overed
w isdom o f his contemporaries
the contradiction o f increasingdebt in the
very moment o f pro fessing to reduce
Your lordsh
ip is much too good an h
ist orian
not to have observed th e facility with which
motives good or bad are ascribed to the
heroes o f history ;I must humbly s ubmit
that you have furnished a notable instance o f
the practice Your argument stood in no
need O f Walpole s authority ;but there is
,
,
,
.
,
e
,
,
.
,
.
e
,
,
'
,
,
.
’
E ssay p
,
.
1 6, 1 7
.
25
really no t any ground fo r believing that he
acted upon any h
igher motive than that which
he pro fessed t h
edesire to relieve the landed
interest by voting the land tax at o neshill
ing instead o f two He showed reasonable
grounds fo r his suggestion but did not hint
at that w h
ichy o uno w imagine fo r him
He
denied peculiar sacredness o f character to the
measure o f 1 7 1 6 he argued that circum
stances were so much altered that public
creditors were no w more afraid o f being paid
o ff than o f losing their principal ;
that the
landed gentlemen desired and deserved relie f
Walpole
Of a loan there w as no question
indeed so far from adopting the obj ection
urged against the sinking fund as operating
at a time when ne
w debts were incurred had
a fe
w years be fore laid be fore the king a r e
presentation from the House o f Commons in
w hich that Objection w as over ruled j
,
.
,
‘
.
,
,
,
.
,
,
,
,
,
,
,
"
-
.
i st viii 1 200 1 5 6
o ns to the K i ng Ap ri l 8
1 R ep r esentati on of the C o m
m
Parl Hi t v iii p 6 5 1
Parl
H
.
.
.
,
,
,
,
.
'
,
.
s
.
.
,
.
.
,
17 2 8
.
26
Walpole was
I suspect righ t in his lighter
estimation o f the measure o f 17 1 6 it was an
arrangement o f finance not establishing any
ne
w principle but simply consolidating what
had b
een doneupon a s imi lar principle in
variety and detail th is minister h owev e
r
had hi sel f recently countenanced the no
tion O f the inalienability o f the fund when h e
advised G eorge Il s answer to the Commons
R epresentation
Hist orical illustrations if used at all should
,
,
,
.
,
m
,
,
,
,
,
,
’
’
.
m
,
eaccu
b
,
ate and co plete ;otherwise this
i nquiry concerning Walpole is o f no great
or t u
importance ;but I gladly sei z e the o p
p
nity which y our referenc to the debates of
17 33 affords me o f exhibiting not in Walpole
f
t
o
h
e
in
his
op
o
ents
some
indications
t
b
n
u
p
pr in cipl efo r which it is my great obj ect to
r
,
e
,
,
,
Parl Hi st vn 6 66
ade f gradually
ep ro v i s i on m
Th
di s ch ar gi ng theN ati onal Debt is n w be co m
e s o c e rt ai n an d
c onsid e r able th a t n o thi ng but s o m
e u nfo r eseen e v ent ca n alte r o r
dim
i n i sh i t w h ich g iv es u t hefairest p rospe c t o f seei ng th e
w
ol d d ebt s disc h arge d wi th ou t any ne c e s si ty of i n curri ng ne
9"
.
.
l.
or
.
,
o
,
,
s
”
.
28
true that successive ministers did nOt show
much solicitude to increase the taxation o f
thei r country for the purpose o f providi n
g it
with a surplu s ;and that their reductions o f
debt wer principally though not wholly
effected by the falling in O f annuities and
by the dimin utions successively made infh
e
rate o f interest o n the public securities by
tenders Of repay ent
In oth r words
they too k t he advantage afforded to them by
the provident limitations o f their forefathers ;
they readily availed the selves o f any o p
rtu
o
n
i
t
f
which
the
state
the
public
secu
o
p
y
r it ie
s furnished fo r relieving themselves from
the burden o f taxes an
ed
d they borr ow
without scruple and witho ut an
definite
y
li mitation all that they wanted in war some
times too in peace taking little heedO f the
future making no provision fo r the r e
de p
tion o f debt and in the last instance the
Amer i can war providing very ins uffi
ciently
e
'
,
,
,
m
e
,
,
m
‘
,
,
,
,
m
,
,
,
,
,
E s sa y p
,
.
1 7, 1 8
.
29
even fo r it s interest Is this the example
which y o u recommend fo r imitation ?
It did not require the fanciful calculations
o f Dr Price to convince the j u
st and prudent
minister O f 1 7 8 6 that this system o r rather
these practices O f finance were no t worthy
O f his country o r o f his fame
I will not exaggerate Mr Pitt s merit in the
restoration O f the finances after the American
w ar ;his measures were highly j udicio s
and greatly a ssisted the elastic tendency
to recover from distress which this free
country has al ways developed My Obj ect
is t o explain the system O f finance which
Mr Pitt adopted so soon as these co ope
rating causes had produced a surplus O f r e
venue I am sorry to say that even y our
lordship stands in need o f this explanation ;
still more those who are familiar only with
the compl i cated transactions o f lat er years
.
,
.
,
,
,
,
,
.
’
.
u
,
,
.
.
-
,
.
,
,
,
.
30
§
5
.
Mr PITT in applying to the exis ting debt
dat o ne
his fund o f redemption which he f e
illion could find no rule either in law o r in
history fo r its appo rtion ent between o ne
period or generation and another It was Oh
vio us that unless a conside r able burde n were
borne by th
epeople t hen existing no at e
rial reduction could be e ffe
But it was
cted
neither reasonable no r nece ssary that the
burden should be cont inued without any relief
ewhol e debt s h
until t h
ould be extinguished
Your lordship consider s the measure o f limi
a wise p
recaution showing an
t at io n as
early and j u st ap
pr hension o f the e
vils
since fel t fro an opp
o site
As
as at no subse
indefinit e accumulati o n h
quent
time been o ur polic y I know not to w hat
period you re fer
I attempt not to define the exact motives
m
,
.
m
,
,
m
,
,
,
.
'
,
,
m
.
,
,
,
,
.
,
m
e
,
,
.
Prefac e p
,
.
ix
.
31
Mr Pi tt s decisi on but he app e
ars to have
determined that the fund should operate
without producing any direct relie f duri ng
th
eperiod which is usually assigned to a
human generation He did not fix the nu
ber o f years but he calculated the amount
which the fund would reach in about t wenty
eight years Within this period the savings
e ffected by the annual application O f the
fund were to be applied together w ith the
original fund to the reducti o n o f debt After
wards the fund as it would then stand was
to be applied to the reduction O f debt ;the
annu a
l savings were to be disposable fo r cur
rent services fo r the repeal o f taxes o r
otherwise as parliament might direct E x
pressing the same thing in other words fo r
the sake O f a brevity which is quite int e
lli
b
I
might
say
that
during
the
first
period
l
e
i
g
the fund was to accumulate at compound in
during the second at simple interest
st ;
te
re
”
The application as you truly Observe
of
’
.
,
,
‘
m
.
,
,
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,
,
.
,
'
,
,
,
‘
,
,
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,
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,
,
,
,
.
,
32
compound interest to the institution o f
a sinking fund co nsist s in adding to the
“
income O f the sinking fund the annui ties
which that fund successively redeems
A syste o f simple interest leaves the
applicable to the repeal o f taxation o r to
*
the exigency O f any other service
All this my lord is as si p
leas it is j ust ;
neither Mr Pitt nor any other sensible man
ever viewed the operation o f compound in
st in an other li ht
te
re
I
have
no
doubt
g
y
but that much Of the nonsense to which you
allud
eas to the magic o f compound interest
has b
een talked in provincial towns ;but its
refutat ion really did no t deserve a whole
section O f your E ssay
”
as
But you Obj ec t to the term i nterest
applied to the annuity saved to the state by
tj
the purchase o f it s o w n de
b
Assuming
that it was desirable to secure the appropri
It hyour lordship in
at io n I cannot agree W
of
‘
,
”
.
m
m
,
'
,
,
.
m
,
.
,
.
,
.
'
'
,
,
‘
,
“
’
.
,
9"
E s s ay p
,
.
51
.
Tp
.
61
d
.
33
m
dee ing th
is a perfectly useless fiction As
su
re
dly an account m ight have been kept o f
the savings e ffected 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 o f
these amounts quite a matter o f course w ith
the O fficers O f the exchequer and the bank
witho u
t any intervention O f parliament o r
even o f the treasury the stric t appropriation
would be more effectu al ly secured I am
satisfied that this effect was produced o r
o r more
materially aided by this cause F
e
than a quarter o f a century the fund o p
rated without encroachment
We ar enot
now considering the advantage derived from
the appropriation but the e fficacy o f the
e
devices fo r securing it
I cannot but b
lieve that the alienation o f the sinking fund
.
,
,
.
,
,
,
,
.
,
.
.
,
.
,
,
and especially the appropriation o f the an
nual savings to any other purpose w as made
m uch more di fficult to the minds o f par lia
,
D
34
'
ments and ministers than it would have been
under another s y stem Indeed much that is
’
said as to the de
luszo n practised under the
syste
o f the sink
ing fund furnishes proo f
”
o f this position
The nation did not see
that it was the true owner o f these annu
”
1 ties ; and th refore left them in the hands
o f the c
But I leave this
o
rs
1 ss1 0ne
which is in truth a merely formal part O f
r inquir y
ou
It may be possible to have and
st r ic
t ly t o appropriate a sinking fund with
inery which has become so
t the mac h
ou
,
.
,
,
m
,
.
e
m
m
,
,
,
,
.
,
.
,
'
,
,
’
m
m
I have stated that in former wars i ade
quate p
ade fo r the ch arge
r o vl SIO n had been
occasioned by new loans To ensure su fh
ncy in future w as an important p
r o v1s1 0n
cie
This it was
o f Mr Pitt s system o f finance
i possible to e ffect prospecti vely ;the pro
vision mus t necessarily be made by the p
ar
g
nt O f the time : it w as only by requ irin
lia e
r st o f the revenues
full and distinct acco unt s fi
applic a
le t o the existing charge ;and se
b
,
,
.
,
m
’
.
.
m
.
’
,
,
36
to extend It authori z es the creation o f an
annuity fo r any period not exceeding forty
fi
veyears without any fund O f redemption ;
but requires that provisi o n shall be made
fo r redeeming within that period any ah
nuit y fo r a longer term o r any perpetual an
unity which may be created o n acc ount o f
any new deb
t If no provision fo r t his pur
pose be made b y parliament it directs the
appropriation Of a sinking fund o f o neper
cent which is calculated t o e ffect the r e
demption within the period limited This
appropriated fund is part o f the additional
charge a
ttending a new loan fo r which a se
parate and su fficient revenue is according to
Mr Pitt s system to be provided
The period o f forty fi
years was arbitra
ve
rily chosen ;probably beca use it was the esti
mate d period fo r the extinction o f debt by
a sinking fund equal to o nehundredth part
A longer o r a shorter perio d
o f the capital
would have been eq ually reasonable ;but
.
,
,
,
,
,
.
,
,
.
,
.
,
,
[
’
,
.
.
-
,
.
,
.
.
37
it was essential to the principle to fix some
limit which should not be transgressed
Yo u will Observe that according t o this
system there would be no new financial
arrangement at the end o f a war unless the
peace establishment should go beyond its
antecedent rate : taxes imposed fo r carry
ing o n the w ar would cease ;taxes laid on
in consequence o f the loans would remain
i ncluding within themselves the power o f
extinction within a period O f moderate
.
,
,
,
,
-
,
,
,
extent
This then my Lord w as the simple and
intelligible system o f Mr Pitt ;and I would
almost venture again to ask your Lor dship
whether if instead o f a sinking fund a posi
tive limitation could have been prescribed
fo r the term O f annuities charged upon the
revenues the system would no t have been
even in yo ur v i ew prudent j ust and p
r ac
.
,
,
.
,
,
,
,
,
,
,
le
b
t ica
.
,
,
38
And I would also
ou
it
y
w ould not have been even with the sinking
fund
mitting if you please the achinery
dient in tim eo f
asyste inall r e
spects exp
e
gace
I would ask y o u st ill further wheth e
r;even
ere admitt e
d and knownbefore ha nd
if it
t h at in war the plan O f reduction must be
su
spended it would not be advisafi
l eto esta
lish and m a
intain th
is wh o le system in
b
esyst e
t i e o f peace t h
m being as I
will ag ain st at eit still more brie y al way s
ve n
t o maintain a r e
ue s uffic ient for all per
manent charges and o r dinar y e
xp
e
nse
s with
a moderate surplus applied to th e payment
o f old debts ; and no t to anticipate future
revenue fo r more than fort y fi
veyears
"
’
,
e
,
whether
m
,
m
’
ask
,
,
‘
fi
.
’
'
,
W
,
,
,
,
,
m
"
fl
-
’
'
‘
,
‘
,
.
'
‘
,
-
.
§
I
NO
W advert
to
6
.
the alleged
sinking funds operating in
n
e
ffi
cacy
i
war
”
.
At
of
the
39
first introduction o f the plan o f 17 8 6 Mr
e
l ve
d any anomaly in the
rc
Pitt had no t p
e
process o f borrowing and paying debt at
the same time Perhaps indeed he had not
contemplated the case Mr Fo x saw the
di ffi
culty and Mr Pitt readily adopted his
suggested remedy This was the clause so
O fte n mentioned O f late years fo r enabling
,
.
,
,
.
,
.
.
.
,
.
,
thestate in time
to avail itself o f the
amount O f the sinking fund without departing
Mr F ox s clause authori z d
from the plan
the co
1 ss1 0ne
rs to place themselves in the
situation o f the loan contractors Instead O f
Old stock in exchange fo r their money they
were to receive a portion o f the new stock
created as the consideration fo r the loan
Under this clause as applied to the sinking
fund o f 1 7 8 6 the e ffect would have been
this ;the loan o f the year instead o f the Old
d bt would have been lessened by the
amount o f the sinki ng fund in that year ;the
total debt at the end o f the year and the
,
of
w ar ,
e
,
’
m
m
.
.
.
,
,
.
,
,
e
,
,
.
,
40
income o f the sinking fund would have r e
mained o n the same scale as if the purchases
e
o f the sinking fund had proceeded and t h
whole sum required had been raised by loan
A Sl p
lesusp
e
ns n O f the purchases o f the
sinking fund would have had the same effect
upon the d bt ;but the annual income o f the
,
,
,
.
m
m
e
,
fund
would no t then have been increased
by a sum equal to the interest thereupon
ly a part
The clause therefore w as s1 p
O f the machinery fo r securing to the fund
ro
its growing income without a spec ial p
vision by parliament In either case there
would have been an increased debt with a
permanent charge without any pro vision fo r
the redemption o f the excess
But be fore a war occurred so as to call
this clause into possibl eoperation the act
o f 17 92 had passed establi shing a ne
w prin
le namely the limitation o f forty fi
cip
ve
years Under this act the sinking fund when
,
,
.
m
,
‘
,
,
.
,
,
,
.
,
,
,
,
-
'
.
applied upon the principle Of
MFox
r.
,
’
s
clause
41
to the service O f the year receives not only
the interest o f the stock newly created and
,
trans ferred to it but a new ann ual payment
O f o ne
per cent upon that stock as well as
upon the stock r ally create dand sold t o th e
contractors The e ffect there fore is t o leave
the debt at the same amount at which it
would have stood if the whole loan had been
borrowed o f the contractors ;that is greater
by the amount O f that loan than it was at
the commencement O f the year ;but the por
tion o f this new debt nominally trans ferred
to the commissioners is att nded like all
the other portions O f it with a sinking fund
,
.
e
,
,
,
.
'
,
,
,
,
.
e
,
,
,
calculated
years
fo r
,
its redemption in
forty
-
fi
ve
.
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 o f debt without any pro
vision fo r redemption
The s i nk i ng fund then during war 1 8 still
,
.
,
,
,
42
Whether Mr
F ox s clause be acted upon
’
.
,
the purchases proceed and the loan is
increased by their amount a mere piece o f
or
,
,
m achinery fo r preservin
the
principle
and
;
g
in the latter case it certainl y may be termed
o rr o w e
d sinking fund
w itho ut inaccuracy a b
But I beg your lordship to Observe, that
”
the p reservation o f the principle is not
simply the r ecord o f a dormant regulation
not t o be enforced until after the war It is
an essential part O f the system that the r e
enue
shall
be
kept
to
the
ull
amou
t
the
f
n
f
o
v
interest o f the debt whether l n t h hands o f
the commissioners or o f the stockholders and
that an additional revenue shall be created
consisting o f real surplus beyond o r dinary
expenditure su ffi
cient fo r the redemption o f
the increaseddebt in whatever form the in
rease occurs : so that the due proportion o f
c
the b
urden o f this debt shall be borne by
those wh
o incur it
Now all this I ad l t ight possibly be
,
,
,
.
,
,
,
.
e
,
,
,
,
.
,
,
mm
,
44
tio n I presume you apply only to the prs c
tice o f the late w ar when the purchases o f
,
,
fl
,
t he commiss ioners went
at the same time
w ith the loans and not t o a period in which
Mr F ox s clause is permitted to operate A
refutation o f your opinion is therefore super
u ons with a vie
Wt O the defence o f the sys
tem o f which that clause is a part But it is
no t certain that the double process has occa
da loss
sio ne
When Mr Pitt h
o w much against his
wishes and expectations no man knows better
th an y our lordship was led into the war o f
1 7 93 and required t o raise money by loan it
w as his intention carried so far as to be an
no unce
din his budget speech
to make use
o f the s i nking fund in virtue o f the clause
But h e was persuaded and he and all other
ministers acted upon the persuasion through
ar that the cessation o f the pur
o ut the W
o n,
,
,
’
.
.
‘
'
,
.
~
.
,
.
,
,
,
,
,
‘
.
,
,
l
P ar l Hist xxx ,
.
.
p
.
56 2— 3
.
45
chases would lower the market price o f the
stock which he o ffered fo r the lOan more tha n
the diminution O f the amount o f loan would
raise it ;and this w as up to a very late
p riod the o p l o n O f all the monied men
whom Mr Vansittart consulted with the sin
gle but certainly very important exception
R icardo
The question is incapable
o f Mr
I am myself inclined with
o f demonstration
Mr G renfell to the Opinion o f R icardo ;but
the opposite Opinion is by no means abs urd
There is nothing fanciful in the supposition
that if a horse dealer having been in the
habit o f buying fi fty horses annually at a fair
and paying a good price fo r them were sud
de
nly to discontinue the purchase and to
bring o nehundred horses to the same fair
fo r sale his absence as a purchaser would
depreciate the price o f horses generally at
that fair more than a reduction o f the
number O ffered fo r sale by one hal f would
,
e
m
,
,
,
.
,
,
.
.
.
.
,
,
,
,
.
,
,
‘
,
,
,
,
,
,
,
,
,
46
raise it But I do not press this point b
e
n arg u g fo r the sinking fund pro
cause w h
e
s e
t
i
c
v
l
e
I
may
presume
that
the
sale
and
p
y
purchase o f stock by g o vernme
nt will no t
d simultaneously
again procee
The disco ntinuance o f the double proce ss
does not nec e
ssarily imply the discontinu
ance o f the whole syste ; not only the
dive r sion o f all the reve
nue s compo sing the
sinking fu nd to t h
ecurren t ser vice but also
th
efailure to ake any provision fo r the
r edemption o f ne
By this failure
w debt
those w h
o borrow and use the money thro w
O ff from themsel ves the whole weigh t O f t h
e
debt ;ins t eado f b e
aring as under the plan
o f the sinki ng f u
nd a proportion o f it deter
mined by a p
re
le ;
vious and permanent r u
ichr ulerequires us to bear in the first
wh
veo neequal forty
and every year o f forty fi
ft hpart o f th e taxation occasio ned by e
fi
x
ens e
s
inar y exp
t r ao r d
.
m
,
,
,
.
m
.
,
,
m
,
,
.
,
‘
,
(
,
,
.
‘
,
-
.
,
47
Lord
m
y
m
the point upon which I a
most anxious to explai n mysel f to your lord
ship is that this rule involves no t a mere
question O f machinery but a principle o f
action ;I might almost say a question not
uity ! The rule in its
ut o f e q
o f finance b
No w
,
,
,
,
,
,
,
,
,
detail is arbitrary and a matter o f political
arrangement ;in its principle it concerns the
fair dealing o f man with man
To conclude upon th is part o f the subj ect
ffi
the ine
cacy o f sinking funds o p
e
r at l ng l n
”
war : I am still inclined to think that the
sinking fund with all its machinery may
usefully be le ft to operate in time O f w ar
notwithstanding that ne
wloans are raised ;
but I should deem mysel f quite success ful in
my argument if I could establish with yo ur
lordship and with those by who the ques
tion must be decided this o negreat point :
that when we supply the deficiency o f our
o w n contributions by anticipations o f future
revenue weare to limit the d uration o f our
,
,
,
.
,
—
,
,
,
m
,
,
,
,
48
mortgage and bear during i t s continuance
r eual share o f the burden
ou
This
may
be
q
done notwi thstanding that the machinery o f
the sinking fund be entirely stopped
,
,
,
.
,
.
§
7
.
considering your first chapter I have ne
cessarily made many o f the remarks which
occur o n the second wherein y o u treat o f
The Operation and results o f o ur present
”
If indeed I have succeeded
sinking fund
in my bold attempt to impute to your lord
ship a misapprehension o f the character o f
the fund I have already shown the irr e
le
van o y to o ur present argument o f the four
l nt ain in this part
r o o s1 t 1 0ns which
ou
a
y
pp
o f your E ssay
the t w o
Y o u s t ate as preliminar ies that
great obj ects o f the fund are the increas e
o f the national wealth and the reduction
IN
,
.
,
.
,
,
,
’
m
,
,
’
.
,
,
,
,
of
the national incumbrances ;and that
E ssay p 24
*
,
.
.
,
49
le
vain and value
ss is all which it has ever
done and all which it ever could do fo r
"
I answer
the advantage o f the public
thus
An immediate reduction o f incu
b
r anc
with
hich
as
you
elsewhere
e
s
w
?
(
j ustly say an increase o f we al th is sy no ny
mous) is no t the Obj ect o f the fund But
notwithstanding several legislative deviations
'
’
,
,
’
—
m
.
"
,
,
,
.
the original plan and perha p
s some
errors in practice it has answered that which
fl
i
n
t
l
sse
n
c
by
sacrifices
made
e
e
was its O b
g
j
from
,
,
,
,
,
,
in other words by taxes borne at an ear
lier period the incumbrances sustained by the
country at a l ater time This position r e
quires no detail o f calculation nor i s it
affected by any o f those which have been
o w much accuracy matters not
made (with h
here ) to show that in the whole course o f its
existence the fund has even occasioned a
fin ancial loss It is no w enough to re fer to
the mate
rial assistance derived by the public
,
,
,
-
.
,
,
‘
,
,
.
E s s ay p
,
.
26
.
T p 34
.
.
50
fi
nances in 18 13
m
sub se
que nt years fro
th
efund as modified by Mr Vansittart
Of thi s use o f the sink ing fund you are
aware fo r y o u affi
r fir st proposi
r m in yo u
t ion that
all the direct benefit o f which
this establishment can o n the most favour
able supposition have been productive
consists i n its having from t ime t o time
placed at th
efree disposal o f t heco
muni ty certain portions O f annual tax
atio n previously a p
propriated t o the inter
ests o f o ur public
But secondly
“ That all the means by wh i ch it has actuall y
,
an
d
,
,
.
.
,
,
,
,
,
,
m
,
,
-s
,
,
l
produced this effect have been supplied t o
5 it by surplu s taxation le
d in e
xces s o f
vie
the current xp
enditure o f the state and
therefore imp
o sed o r continued solely for
”
this especial purpose
In these t wo propositions I conc ur ;they
ar e in truth the very ground work o f
y
reo f has bee
n to
argument ;the Obj ect wh e
‘
‘
e
,
,
,
.
"
,
-
,
F
’
E ss y p
a
,
.
26
.
m
52
e
Obj ec t fo r wh
ic
h they are plac d there Yo u
state very correctly that our public
that is all that we can be required to pay
consists not in capital but in
that hat is called capital ser ves only to
express the price at which the state may
at its o wn convenienc eredeem its engage
duct l o n from these
nt sj
The only de
e
acknowledged truths which I find in th e
“
chapter is that no undue advantage has
accrued to the public creditor merely from
the needless complication o f the form
7 which has been given to o ur lo ans
i
namely t h
eform Of stock sometimes greatly
exceeding in nominal capital the oney lent
“
I do no t k now what is meant by undu e
advantage
In a bargain fairly m ad eno
thing can be un due but if it is meant
that the amount o f thi s nominal capital is a
atter o f indi fference either to the state or
t o the loan contractor I have again the mis
.
,
‘
,
.
,
'
W
,
,
m
,
“
,
,
'
‘
m
,
,
,
.
”
.
,
m
“
"
«
,
.
,
E ssay p
,
.
29
.
Tp
.
31
.
Ip
.
32
.
53
to dissent It is either by the pur
chase o f this nominal ca ital at the m arket
price or by an O ffer to p
ay O ff at par that
the state redeems a part o f the a
nnuities
which it owes S O much o f nominal capital at
a lower rate o f interest per cent as will yield
a given annui t y has a higher marketable
value than a smaller capital which bearing
a higher rate o f 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 O f interest O n the o ther hand
the state is exposed to the probability o f
having much more to pay fo r redeeming a
similar annuity when funded In stock o f the
firs t mentioned description The question in
o w much heavier a charge
these cases is h
fo r interest is it prudent to incur fo r the sake
o f Obtaining money in return fo r the smaller
nominal capital ? The amount O f the nom inal
capital can only be a matter o f indi fference
fortune
.
p
,
,
,
.
.
,
,
,
,
,
,
.
,
,
,
,
.
.
,
,
,
54
the stat e nev e
r con t emplat es the reducti o n
O f th
eannuities wh i ch i t pays either by pur
chasing the capital o r reducing the i nterest
Th e
re is as sur e
dly a di fficulty in bri n
ging
into o ne account capital beari ng different
rates o f interest nor can any such account
be framed fo r any useful purp o se But really
t his discussion is o ut o f place
if
,
,
.
,
.
.
§
THE
9
.
observations whereby
u
r
O
y
second
p
ro
.
position is supported are p ervaded by the
isconception as to times and persons which
I have already explained
or
Fo r every p
tion o f previously appropriated wealth
which o ur sinking fund h
as p laced at the
2
disposal O f the community it has no t
e sa e communit y a
wi thdrawn from t h
corresponding portion o f wealth previously
It withdrew
free and
it from th
ir predecessors When y o u ask
e
m
,
.
”
‘
m
,
,
.
E
ss ay p36
,
.
.
55
In what
respect is it a more reasonable
or
more real operation t o reduce taxation by
taxing than t o pay debt by
the p
oint o f your epigra is at once blunted
the
Obser
v
ation
that
the
f
ather
in
the
b
y
case supposed taxes himself now in order
that the deb
t which he incurs may not sub
c
e
t
the
so n t o accumulated tax ation here
j
after
,
m
,
,
,
,
,
,
.
10
.
m
carry with you the same isap
h
re
n
e
p
sion through your third propositio n; The
reductions o f debt thus e ffected are mere
excha nges o f equivalents
And ther e
are
in this section striking instances O f the i
re
putation o f weak and exaggerated r e
s
e
n
p
vocates O f the system wh i ch
t at io ns to the a d
o u condemn
y
A purchase O f stoc k in the market is as
d
l y as all fair purchases ar ean exchange
re
su
In the case before us the
o f equivalents
YO U
,
m
,
,
.
,
,
,
,
.
E s ay p
s
,
.
37
.
T ih
.
56
cost o f the purchase is the result o f super
added taxation
Is this truth now known
”
.
fo r
the first time ? The only question is
whether it be prudent at a certain present
expense o r expense continued through a
certain p riod to redeem an annuity charged
r heirs fo r ever
This ques
Upon us and o u
tion was once resolved in the a ffirmative
and the act followed the decision
S ome
”
millions have been removed from o ur
”
incumbrances
To produce this effect
correspondi ng incu brances had been fo r
merly sustained All this I freely admit t o
your lordship if admission can be applied to
an universal and obvious truism
I also concur with your Lordship in trying
these transactions by a reference to s 1m11ar
”
transactions in private life
The case is
exactly that O f a landed proprietor who r e
deems a mortgag e fo r the sake o f enlarging
the disposable income o f his heir He pay s fo r
eannuity redeemed its equivalent value in
th
,
,
,
e
,
.
,
.
m
.
,
.
,
”
.
,
,
,
.
,
,
.
,
57
ready money and to make this money dispo
sable he has taxed himsel f by the wealth
“
withdrawn from direct enj oyment
It is
possible if his affection fOr his son or a con
io usne
ss o f having incumbered the estate
sc
xt r ava
a little t o o much throu gh his o wn e
gance render him very highly desirous o f
liberating the inheritance that he may even
borrow the money on a life annuity or an
insurance O f his life N O doubt if instead
O f redeeming the annuit
he
had
saved
the
y
equivalent in a su o f money to be b
e
e
u
h
a
t
e
d
to
his
heir
the
e
ect
would
be
the
ff
q
same In neit her case is it pretended that
the purchase is to him
a matter O f
gain
He su ffers the privation ;his so n
derives the equi valent benefit
Whether
E ngland was in 17 8 6 or at any other period
or is now under a like Obligation with the
landed proprietor is indi fferent in reference
to the present Object which is simply to
ill ustrate the reasona b
lenes s o f redeeming a
E ssay p 1 2
,
,
,
.
,
,
,
,
,
,
,
.
m
,
,
,
.
,
”
,
3)
.
.
,
,
,
,
,
,
.
.
58
r etual charge by an equival e
pe
nt
sacrifice
p
ven thoughthe t rans action produce no p
ro
e
fit t o the pu rchaser hi self
Your final rem ark under this h e
ad is
an Obj ection to the systematic and invio
lable m aintenance of a s i nking fund pre
scribed to itself by a n ati on by law fo r it s
”
a
t
o wn supposed advantage
e
I submi t that if the app r opriatio n b
d upon a rinciple i t o ugh
t to b
e
foun d
esys
t th
t e at ic andough
e
fo r et o b
re
esubj ec t e d
t i ons necessarily liab
le to b
t o such s an c
e
eleg isl ature
super sed e
dby a ne
w law as th
can pr o v i d e Perhap s if t h
ead vantagee
x
c
h
o
t
e
d
c
ame
on
y
t
o
t
hos
rom
ti
e
e
f
l
w
e
p
t o timeact upon t he appropriation legal
sancti o ns m i gh
t be ore burdensome than
useful : but I am certain that in private li fe
convenience and comfort are very much con
t
db
h
e
lt e
s
t
ys
su
eatic appropriation o f a
y
p artic ular fund or se
ries o f receipts t o any
dist ant Obj e
ct whic h even without any po si
,
,
m
.
,
,
,
,
,
,
.
,
m
p
,
,
,
,
,
,
.
m
,
m
,
,
,
m
,
.
,
~
,
’X
E ssa p
y
.
.
47
.
60
should be a little too sanguine or too strict
in their anticipations o f permanent and un
qualified Operation I cannot admit that the
r
history o f
Pitt s sinking fund proves
cacy o f his measure o r t e
either the ine
ffi
hopelessness o f any attempt to r einvigorate
,
M
.
’
h
.
,
‘
-
a sinking fund
to provid efo r
If indeed the attempt be
the true interests o f posterity much better
“ than posterity itsel f
it is lik ely enough
to be defeated ;but here again I must r e
mind your Lordship that in maintaining a
sinking fund w edo not simply recommend
to o ur successors a course o f conduct bene
fi
cial to them o r rather to their successors
but we commence that course ourselves ;
and the benefit is felt by thos wh
o come
after us whether they follow in the Sam
track or not If they are less provident o r
less just t o their posterity their disregard o f
ast no c nsure o r work
r example will c
ou
any justification retrospectively fo r us
E ss ay p 59
,
,
,
"
,
,
,
,
,
,
e
,
e
,
.
,
e
,
,
,
,
’1‘
,
.
.
,
.
61
But yo u
r L ordship knows that in usi ng
”
r
the t e
s
I
can
dra
we and
st e
r ity
w
o
p
no accurate line o f distinction between the
two The most lengthened operations o f
ou
r sinking fund would not exceed the period
during which not u nfrequently the same
man has a voice in parliament and it may
have no inco n
siderable operation Within a
period much shorter ;so short as to render
its maintenance a matter o f consideration fo r
statesmen wh
k not beyond the events
o lo o
m
”
,
.
,
,
,
,
'
,
.
in which they are themselves to sh are
.
5
12
.
I A DM
the expected benefits of a sink
IT that
ing fund at compound interest depend for
their permanence and extent
on its unva
ried accumulation but I deny that t hose
be
nefits are annihilated by the suspension o f
that accumulation or by its cessation before
the period originally planned Let me ap
ply
these remarks to your second and third posi
.
,
”
,
,
”
,
,
.
62
tions o n the provisions adopted fo r gi ving
pe
r anence to the sinking fund o f
”
and the actual fail u
re o f these e
nde
avo u
rs
f
I h ave nothing t o obj e
ct t o your de
sc
ri
p
tion o f these provisions ; I have already
su fficiently noticed yo ur criticisms upon their
dly t h
se
technic alities Assur e
e
were adopted
”
“
by Mr Pitt
in the hope in my opinion
”
“
groundl ess
ir contri
no t entirely
o f the
”
buting t o give permanence to the sy st e i
And it is somewh at remarkable that Mr F
ox
W ho had no t that taste fo r financial d e
tail s
which belonged to the minister appears fully
e: the only amend
to have j oined in thi sh
Op
ment which he proposed was the int ro duc
tion o f a new fiction Wh en y o u describe it
as the aim o f these fictions
to induce th
e
British parliament t o act in after ti es
in opposition to its o wn deliber ate judg i
ment o f what might best promote the publi c
”
happiness and aver that if they failed o f
m
.
‘
,
.
.
,
,
a
m
,
.
.
,
,
,
.
m
,
,
,
E ssay p
,
.
60
.
Tp 6 5
.
.
Ip
.
62
.
63
6‘
this they did nothi ng
you repeat yo ur
"6
,
error as t o the relative bearings o f the sink
epresent and the future ;
ing fund upon t h
”
“
and y o uforget that the public happiness
as well as the convenience o f the government
must at any particular moment almost ne
ce
s
the
di
ersion
the
v
f
o
sar ily be promoted b
y
fund S urely knowing the temptation to be
,
,
,
,
.
stro ng to depart for a temporary purpose
r
from a system of permanent advantage
Pitt did W isely in throwing the obj ect o f
temptation as much as possible into shade
W hether similar devices would have the same
ffect now I have much doubt ;but I b
e
e
lieve that t hey did tend greatly to the end
desired
M
,
,
,
.
.
,
.
13
.
truly my Lord there h
as not been the
complete failure which y o u imagine at least
that failure is not demonstrated by the pre
BUT
,
,
,
E ss y
a
64 5
-
,
.
64
se
n t circumstances o f the sinki ng fund ;I
wish with your lordship to dwell rather upon
principles than upon measures ;but I assur
your lordship that w ithout somethi ng ore
particular than the bri f history which you
give we cannot illustrate the principle upon
which the question now at issue must be
decided The qu stion is whether w eshall
no w in time o f peace adopt any sy stematic
plan for reducing o ur national debt o r pre
venting its future growth There is not even
necessarily no w a question whether our plan
shall embrace any period o f war which may
I
oc cur It is surely not enough for the deci
sion o f this question to say that in a similar
time of peace more than forty years ago a
like plan was adopted o f which now scarcely
a trace re ains ;without adverting at least
to this one little circu stance o f detail tha t
within seven years from the institution o f the
fund commenced a war o f more than twenty
years duration
Even according to your
“
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65
‘
lO IdSh
l pif
I correctly underst and y o u every
”
“
o neof the
causes o f this failure is to be
”
ascribed to that long and perilous contest
Ho w then do they demonstrate the impolicy
o f the institution during peace ?
But your E ssay does not trace with exact
ness the Operation o f these c auses in avoid
ing details it somewhat confounds occur
s
re
nce
It is impossible to make good use
r decision without a
o f the materials of o u
methodical arrangement o f facts as well as
I invite yo ur lordship to acco
o f pri nciples
pany me while I attempt this arrangement
The sinking fund o f 1 7 8 6 operated with
t disturbance and without counteraction b
ou
war until the year 1 7 93 In that interval
poli tical events had occasioned some extra
ordinary expenses ;for these provision w as
made by the prudent inister o f that day b
occasional taxation
Th e prod uctiveness o f the revenue induce
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m
“R
9
ose s E xamination
’
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,
,
1 7 92 ,
p
.
43
.
66
w
Mr Pitt in 17 92 when he instituted the ne
sinking fund appropriated to each future
loan to mak ea special grant to t h
eo ldfund
rplus
And the fu
o f o neyear s clear s u
ture benefit o f this surplus he proposed to
divide giving o neh
alf to the fund and with
the o th
ta
x
es
It
is
singular
that
e
a
l
i
n
r re
e
p g
Mr Fo x i the leader o f an opposition pos
s ssing great interest in t h
eland and pre
tendi ng to peculiar sympathy with the people
reproached Mr Pitt with an unworthy th
irst
after popularity because he did no t give the
whole of the surplus to the fund ! In my
opinion Mr Pitt s w as t h
ewiser decision
especially as the appropriation o f o nemoiety
to the redemption o f 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 w as inalienable ;b
e
yond that point it w as av ailable in the event
,
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Page
Pa rl
8 44
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Histl xxix”
p
.
8 24
.
68
ring which the t axes composing this fund
had been le vied was o neof unusua l p
ro s e
p
rity there is no pretence for i p uting to
them a severity o f pressure I confidently
submit that through t h
l s the short but only
period of continued peace t h
esinking fund
had completely succeeded
Nay my Lord I will even venture to ask
n
o w go back to
whether
if
you
could
o
u
y
1 7 93 o r rather to that per iod o f 1 792 up to
which you r tained the hope o f peace ;i a
n
i
n
i
yourself
and
the
nation
to
have
been
as
g
g
l o usl
watered
as
in
these
latter
years
co p
y
from the pure stream o f science
wo uld
stand
up
among
your
peers
the
heredi
o
u
y
tary possessors o f lands and honours and pro
pose the abrogation o f the sinking fund
Your first chapter would have given me the
hope o f an affirmative answer ;but in that no w
before me after enumerating the causes o f
failure during war no t at this present moment
E ssay p 50
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,
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69
a question between us y o u h
avewrought
yourself (forgive the expression) into a train
o f reasoning not only against borrowed sink
ing funds and against all systematic plans
o f redemption
even by a real surplus but
almost against payment o f debt in any mode
whatever
Yo ur arguments if I see them clearly
thro ugh the metaphors which occasionally
fi
r st
daz zle me appear to be these
ou
y
say that an accumulating fund exacts a pre
sent sacrifice not only o f the taxes which
ut o f those
compose the fixed a
llowance b
which defray the purchased but still conti
dinterests and that for this great i
nue
mediate and increasing evil the only r e
“
turn o ffered is the hope o f a speculative
good deferred to some indefinite but distant
period and even in its ultimate e ffect pro
i
u
v
o
duct iveo f a very questionable and e
q
cal advant age
Your deduction is that
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E ssay p
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70
.
m
70
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the rulers o f any commu nity in the mos t
prospero us condition o f its finances ought
to apply themselves to the direct interests
o f those whose happiness is their primar
y
andespecial charge ; in other words r e
pe
al taxes t o the utmost Wit h
out any regard
to the future
,
,
,
.
I submit that in these passages there
are glaring rrors evincing an inacc urat e
observation o f the system which y o u con
de n Ho w can it be said that the ac cu
asing
ulat io n o f the sinking fund is an incr e
evil ? It is true that the amo unt o f taxes
applicable to the fund and therefore dis
posable if the fundb
eabolished increases in
t it is no t true that
every successive year ;b
u
the amount o f taxes o f which the sinking fu nd
prevents the repe al increases continually
If the sinking fund o f
o r increases at all
1 7 8 6 had never been create d taxes t o t h
e
amount o f twelve h undred thousand po und s
annuall y might at some time betwee n 17 8 6
,
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71
and 17 93 have been repealed And if the
fund having been formed had been abo
d o r suspended at any time within
lish
e
the same period there might have been r e
pealed such an additional amount as was
equal to the red e
emed interest ;ultimately
more than four hundr ed tho usand pounds
Andthis continu ally growing power o f repeal
ing taxes y o ur lordship represents as the in
creasing evil o f the sinking fund forgetting
that without that fund the whole o f this
amount o f four hundr e
d tho usand pounds o f
taxes must have been borne by the country
fo r all time to come ! An increasing power
o f e ffecting a good you style an increasing
evil because it is not immediately enj oyed
,
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,
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,
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,
Again the good you say is to be enjoyed
”
at some indefinite but distant period The
period is not indefinite and it is no t ne
ce
s
ote I will no t here r eargue the
sar ily re
propriety o f assigning a limit to o ur debt
I will o nly remind y o u th at the definition of
,
,
,
,
m
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-
.
72
the period (subj ect only to variations o f
price) is the very essence of the system ;and
that if at any time W
ithin that limit t h
estate
is minded to anticipate the period it may
secure a share o f the advantage whi c
h was
ultimately to be enj oyed propor t ioned to the
duration o f its forbearance
But you add that this contemplated advan
tage available as y o u say at a distant period
e
available as I say at any period o f t h
eo p
e
ration o f a sinking fund is as weh
se
ave
n
very questionable and equivocal
M y Lord I have looked back and Icanno t
find the passage in which y o u treat the r e
pe al o f taxes and of that advantage we no w
speak as other than a great and certain good ;
I look forwar d and I come at once upon a
passage in which the repeal of taxes is stated
egreat and a dvantageous obj ect
as so m uch t h
that it ought not o n any consideration not
even for the sake of ext e
nding its operation
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Page 7 0
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73
to be postponed by any state which h
as the
power o f effecting it
Yo u will probably admit that y o u have
been led t o o far by the vehemence o f argu
ment when you question even the eventual
advantage to o w from the sinking fund
But you say in re ference to benefits to be
reali z ed herea fter that an earlier although
more gradual repeal o f taxes would spread
its benefits in a thousand fertilising chan
nels over the wide field of social industry ;
e
and never could its absence be co p
n
sated by any forced direction given after a
dreary vacancy to the produce o f the same
sources pen t up till it bursts these artificial
barriers
I a not sure that I have caught the
eaning contained in this metaphorical pas
sage The question is between repealing
fl
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,
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m
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m
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at once an amount
,
ist ing
,
,
surplus
of
of
x
taxes equal to an e
annual revenue and letting
,
Page 7 1
.
74
m
that s urplus operate annually in the di inu
tion o f charge and then at some future
period whether previously fixed o r not is o f
no importance here repealing taxes equal to
the surplus and saving The first alternative
which your metaphor contemplates i s an
earlier but it is no t a gradual r epeal T h
at
epithet is calculated to mislead us Your
suggestion re ally is t o disperse at once
among the community the whole amount
which is no t w anted at the exchequ e
r ;in
the hope as I presume , that the increase of
wealth thus occasioned will either augment
at a future period the produce o f existing
taxes o r furnish re
sources for additional tax
at ion It is only under this construction that
your reasoning can have any practical bear
ing upon the question
I am w ell aware o f the distrus t with which
an argument in palliation o f the e ff ect o f
s e
i
a
H
c
taxes is receive d e
when
it
proceed
s
p y
from an o ffi
cial man ;but I cannot do j ustice
,
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76
tax S econdly t h
ereimp o sition of an
o ld o r the imposition o f a ne
w tax is felt
u ch more severely both by consumers and
traders than the continuance o f o newhich
e xists
It follows that where there is any proba
and when is there not
that poli
ilit y
b
ti c
al o r financial occurrences will require at
no very distant period an augmentation of
revenue a government which possesses a sur
plus w ill consult the convenience and happi
ness o f its subj ects most by so disposing it
as to avert the probability o f renewed taxa
tion I therefore confidently submit that
without any regard to the interests o f the
next generation still less o f distant posterity
there i s wisdom and kind consideration for
the people in applying a surplus o r a part
of it to a sinking fund I say o r a part o f
it because it is no inconsiderable circum
stance that within a period o f moderate
duration a moiety app lied to the sinking
cular
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77
'
fund will effect as much direct relief as the
whole dispersed at once
If then my Lord the expected e ffec t o f
r t ih
s
your fe
channels
is
not
the
actual
g
augmentation of revenue but the enlarge
ment o f resources to b e drawn here af ter from
the people by fresh taxation I am satisfied
that even if your speculation be correct y o u
estimat wro ngly its O peration upon the
public happiness
I am well aware that the reduction of d uty
often increases the consumption o f the par
t icular article relieved and even o f others ;
to the great increase o f individual comfort
dsometimes without loss o f revenue ;this
an
truth ough
t always to be in the mind o f a
minister o f finance If th e diminution o f
duty be compensated by the increased con
sumption it is a mere financial arrangement
not a question o f surplus It m ay certainly
sometimes be prudent to postpone the appro
t
i
r
i
a
n
o f surplus in order to give time fo r
o
p
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78
the trial o f the e xperiment in any p articul ar
direction
If you give away your actual sur
plus and your experiment then fails you are
W ithout r e
so u
in
fresh
taxation
if
rc
ee
xce
t
;
p
you apply it t o a sinking fund you have in
your hands the means o f repairing the loss
According t o my principle I should certainly
be unwilling t o make this use O f a sinking
fund especially in time o f peace ;it is pos
sible to preserve at once t h
eprinciple and
the i mediate benefit ; but all that I would
no w urge upon your Lordship is that if
w elook to the possibility o f war occurring
in o ur o w n times nay if w elook even b
e
yond o nesingle year w e shall disregard
your Lordship s cou n
sel to cast away the
surplus which reviving prosperity may aff ord
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us
ist o r y o f actual
To return now to the h
occurrences ;I contend that Mr Pitt s sink
ing fund so long as p e
ace continued pro
nequivoc al and sub stantial good
dan u
duce
to
.
i
’
.
,
,
-
.
x
79
The e xtent o f the advantage was limited by
the return O f w ar ;an event so completely
unexpected that in the very year preceding
o ur military forc e had been reduced
De
tailed figures are not necessary to show h
ow
much the benefit would have been enlarged
if peace had continu ed ;I am satisfied that
if it had lasted only to the end o f the cen
tury not a man in E ngland would now doubt
o f the wisdom o f Mr Pitt s system o r listen
s e x hort ation t o renounce it
nville
t o Lord G r e
,
,
,
,
.
,
’
,
.
’
.
14
.
I no w at your Lordship s invitation
consider the actual operation of the system
during the far different circumst ances pro
“
Under these you say
it
d by w ar
duce
compelled us to heap loans upon loans and
taxes upon taxes in a series o f unlimited
fi
it increased the de
accumulation
ncy o f the revenu e by the full amount
cie
t o which its operations were carried
BUT
’
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”
.
80
Its wh
nt all its fi x ed allowances
o le amo u
,
,
all the redeemed annuities and all the
pretended accumulations o f interest by
which they are increased served only to
”
swell the long schedule o f taxation
In
addition to the war loans w ehad sinking
fund loans rapidly increasing and ulti
”
mately o f very large amount
To the
new charge o f interest created by the fo r
mer a further and similar charge was
”
superadded by the latter
To neither
o f these new services were the annuities to
,
,
.
,
,
,
.
,
.
be redeemed by this increasing fund at all
available ;both were t o be met always by
*
fresh taxes 3
eills o f which you
N o wonder indeed if t h
give this long catalogue convinced parlia
ment that the system had faile dand led to
its ultimate suspension !
But your representation o f facts my lord
I a compelled to Observe is in some parts
E ssay pp 72 3 4
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81
greatly exagger ated in others wholly in
correct
In order to estimate the effect o f t h
esink
ing fund wemust consider what would have
been the operations of finance if your lord
ship had in 1 7 8 6 outrun the W isdom O f your
c ontemporaries over ruled the prej udices 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 o f the nat ional account o n
side and the other I will go no furt her
o ne
at present than the year 1 8 02 bec ause in
that year the fir st w ar termin ated and the
first alteration was made in Mr Pitt s sink
ing fund ;and in the course o f the sub
se
quent war the fund underwent a second and
still more material alteration
I f then there had been no sinking fund
the surplus o f twelve hundred thousand
pounds would have been dispersed by the
repeal o f taxes ;by that amo unt the revenue
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82
pplicablet o t h
nt c h
e
eperm ane
arges o f t h
state in technical language the income of
*
the consolidated fund would have been di
inished o n the o ther h and the charge
upon that fund w ould have been diminished
by the amo unt o f t h
efix ed al lowance to t he
sinking fund O f 178 6 ;so far t hen the ao
co unt is no t affected by th e system o f 17 8 6 ;
the deficiency w as not incr eased nor any
necessity create d fo r an additional loan :
taxes certainly were continued ; no fres h
t ax es imposed
But under the act o f 17 92 a fi x ed allow
on the capital o f
ance o f o neper cent u p
ve
ry ne
d t o the sinking
w loan was adde
e
echargeUpon the consoli
fund whereby t h
dated fund was annually increas ed ;t o defray
this charge which progressively increased
from abo ut sixty thousand pounds to t wo
millions and a half annually new and suffi
f
T b
e tri ctly a c c urate I m ust b se rve th at
thi fixe d allow n c e fo r m e
d a part f the annual upply ;but
i t wa i nva riab ly vote
d th
edi t i n c ti n i m
e re
ly te
ch nical
a
,
,
m
2
—
,
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-
,
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,
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,
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o
s
O
,
a
s
s
o
,
s
o
o
as
s
s
.
84
that we chose to revive and ag ain impose the
r pealed taxes to that amount ;and suppos
in also that we had determined to impose in
g
every year taxes to the amount Of the one
per cent we should hav had those several
amounts disposabl
either to defray the
charg e O f loans o r for current services If
th y ha
d be n applied to current ser
vices the loan O f ea c
h year might have
been diminished ; that o f 17 93 by sixty
thousand pounds ;that o f 1 8 01 b
two
mil
y
lions andahalf ;those o f the other years by
various intermediate sums
To this extent y o u a
r ecorrect in asc
r ib
ing t o the sinking fund the origination Of
loans ;it did not diver t o r appropriate to
itself a single amount o f capit al raised by
loan o r o f income raised by previous t ax
ation ;but it did occasion the aintenanc e
and the creation o f revenues which might
have been revived o r created with a vie w
of
Yo u forget
diminishing t h
e loans
e
,
,
,
,
.
e
,
e
!
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'
e
,
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,
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m
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,
85
that fo r every addition thus occ asioned to
the loans a former amo unt o f debt was r e
deemed so that alth
ough the sum annually
borrowed was incre ased no addition was
made t o the debt
o w widely this state
I know my Lord h
ment differs from some which have been
over and over again made in parliament and
ppor t ed by a formidable array o f figures ;
su
as well as from your lords h
ip s more pointed
and forcible statement It is however ex
ac
t ly con formably in substance though it
di ffers in expression with that o f Dr H amil
ton whom your lordship like some others
mistakingly supposes to have placed in a
new light the Operation o f the sinking fund
Lord
I
take
my
stand
with
Again then
y
Mr Pitt and I confidently submit that he
had a right in 18 02 to look back with pride
at the worki ng o f his system
H e had adhered to it in all its parts
H e had maintained at ore than its ori g i
,
,
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m
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86
m
.
nal a ount the revenue wh
ich e
xisted b e
fo re
the war he had made an adequ ate provi
ewar
sion fo r all the ne
h th
w charges whi c
had occasi oned H e had made provision for
e
the redemption within the limited p
riod o f
forty fi
years from the origin o f each loan
ve
e
o f th
debt whic hhe had created ;h
ewhol e
had borne the share in this redemp
tion which
th at limitation prescribed ;and he h
ad les
s ened by the millions whi ch his sinking
adpurchased before t h
fund h
ew ar as well
as by w ar t ax es unknown t o his immediate
re decessors the amount to which the debt
would o therwise have increas d
H ad peace b een then maintained upon the
scale o f expense o f t h
eformer peace inde
pendently O f any permanent charge arising
t o f the war there would have been a clear
ou
surplus o f revenue
over and above the sink
ing fund That fund amounted t o five millions
t d
re
d thousand pounds If it had
eight h
been deemed advisable at th at mome nt to
,
.
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87
at t h at l arg e
in o rd e
r th
t b
annual revenue migh
edisposable that
ave been a proof no t
very measure would h
ut o f t h
ebenefici al operatio n
o f the failure b
o f the pl an
This considerable income was
no doubt the result o f taxation and t ax atio n
might by other modes o f proc e
eding hav e
raised a S imilar revenue ;but by none I will
ve
nt ure t o say o f such easy and ino ffen siv e
O peration upon the people
Indeed the
hithe
r to easy pressure o f th e system w as
pretty cle arly demonstrated by the i p
c
isi
tion o f e x tensive and productive t axes in t h
e
su
cceeding years
I must here Observe that it is possible that
an additional revenue might have been eces
sary even though the war ha d not been r e
newed ;this necessity is r eferrible to a cir
cu st ance for which Mr Pitt s system had
no t and coul d not have speci ally provided ;
the tendency o f the ordinary expenditure
d uring a war to exceed that which preceded
d
h
t
u
t
a
n
e
n
t
e
f
u
d
o
n
p
,
,
,
,
.
‘
,
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,
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,
.
m
,
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m
,
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'
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’
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,
,
,
,
88
e
h war
It cannot no w be ascertained whe
ther the increased revenue would have met
this n
according to the estimates
e
w charge
o f th
eperiod it wo uld have b een more than
adequate It is obvious that a sinki ng fund
o r any system which requires the imposition
beyond the amount r e
o f taxes during w ar
qu ired as interest o n the loans,affords a ready
method o f meeting this increased e
i
Xp
nd
e
ture ;if contrary to the fact o f 1 8 02 other
means are wanting
But I will again pause to ask your lord
ship whether if y o u could no w go back to
the peace Of Amiens either with o r without
a o r efavourable opinion o f its duratio n
than that which y o u entertained and which
the event j ustified you would o n reviewing
its operation both in peace and in war
counsel at that period o f peace the abro
n
a
t
i
o f the sinking fund o r its diversion
o
g
from the ob
j ect o f its institution ?
t
.
,
.
,
,
,
,
.
,
,
m
,
I
'
,
,
,
,
,
,
,
89
15
U
M
.
call your attention to a modi
fi
cat io n which the sinking fun ddid undergo
in 1 8 02 w hich has occasioned much o f the
prevalent misconception o f its nature
W e have already seen that Mr Pitt s
sinking fund o f 1 7 8 6 was to operate for
o neperiod at compound interest afterwards
at simple interest until the whole o f the Old
debt should be redeemed
The several
smaller sinking funds created under the act of
17 92 were to Operate at compound interest
each by itself until its particular loan sho uld
b discharged
In 1 8 02 the o ld sinking fund had ap
h
d
r o ac
e
within
six
the
o r seven years
p
period at which it would operate at simple
interest ;from that time the finances would
have derived an annual progressive relief o f
about two hundred thousand pounds fo r
about thirty y ears The relief occasioned
by the separate sinking funds was computed
I
no w
ST
,
,
.
’
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,
,
,
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,
,
e
,
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'
,
,
,
,
.
90
commence in about twenty years ;from
u
w hich period it wo uld operate very irr e
g
lar ly but very extensively thro ugh a period
o f rather more than thirty ye ars
Thes ecalcul ations ar esubj ect t o much
v ariation ;but the truth is that a mistake o f
to
,
,
.
,
ven ten ye ars
e
more is o f no imp o rtance
That which I wish t o impr e
ss upon yo ur
lordship is h
o w much
o u ar emist aken in
y
speaking o f
r Pitt s fu
e
nd as ne
ve
r to b
made av ailabl et o any pr e
sent uses o f th
e
state
no no t in its utmost nec e
ssities
but continually to be augmented fo r the
f ”
benefit o f some remote p
r it
o st e
y
Mr Addington in 1 8 02 certainly with the
full concur rence o f Mr Pitt repealed all the
provisions whereby any relief w as t o be de
rived from any part o f the sinking fund until
the whole existing debt should be discharged
a transaction estimated to be completed in
or
M
,
.
,
’
.
,
—
,
,
.
,
.
,
,
.
,
,
ree years
By thus appro
about forty th
u
i
e
t
r
a
h
f
nd
prospectively
l
a
r
g
t
i
n
t
e
o
p g
E s ay p 7 5
-
.
,
s
,
.
.
92
16
.
war recommenced in 1 8 03 ; the o ld
sinking fund proceeded and as the act o f
1 8 02 had not aff ected future loans new sink
ing funds o f o neper cent were created
The amount o f the loans however was much
diminished by the very j udicious and ener
ge tic resolution o f Mr Addington (acting I
believe I may say , under the advice and
cert ainly with the assistance o f Mr Vansit
a resolution adopted and extended by
u
r Lordship to raise a
Mr Pitt and b
o
yy
large proportion o f the supplies within each
ear
This
syste
proc
eded
without
o
y
THE
,
,
,
.
.
,
,
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,
,
,
,
.
,
,
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m e
,
.
m
m
I pe rfo r m a ve r y agreeab le duty in bearing testi ony t o
the judgment and vigou r f the measures whereby MVan it
tart no w L ord Bexley augmented n this and on other occa
sions the revenue f th e state ;and I am more particularly
d esi rous f adverting to the present measure f raising a large
sum within the year by war taxes because I did express an ap
prehension that he proceeded too fa I am now satisfied that
although (as usually happens) the r evenue was not at once aug
d to the extent f the increase d taxat i o n th
easur e o f
nt e
m
e
em
1 8 03 w a j ud i c i o us an d s ucc e s ful
,
o
r.
,
,
,
o
s
,
o
,
o
o
,
r.
,
o
s
,
,
s
.
93
difi
cat io n for the first four years
of
the war
I sh al l not dwell upon the proceedings of
1 8 07 because I am determined to avoid per
sonal argument ;it is enough to say that in
that year a portion o f the war taxes was mort
gaged for about fourteen years a meas ure
92 ; and
strictly within the principle o f
that in the following years other portions
were made permanent by Mr Perceval and
charged with the interest and corresponding
sinking fund o f new loans It is quite unfair
in my opinion to Obj ect to these measures
”
as encroachments o n the sinking fund o r
departures from its system They were in
fac t modifications occasioned by the in
creasing pressure o f the war of measures
which were an improvemen t upon th
at
system
.
,
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,
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17
Bur
in
.
a second alteration was made in
1 8 1 3,
S ee MR icardo s a rti c le in th e E ncyclopedia Britannica
cited in t heE ssay p 6 6
*9
’
r
.
,
.
.
,
94
lli
the sinking fund wh
icht h
o u hvery int e
in
its
first
principle
being
very
full
of
i
b
l
e
g
details has tende dif I may so express y
self greatly to mystify the subject ;and I
am satisfied that your lordship has no t care
fully considered it
Its avowed and leading Ob
j ect w as to cor
rect the error o f 1 8 02 by restoring to the
sinking fund it s principle o f gradual relief
e
There were in my opinion several o b
c
j
lepo ints in the mode in which this
t io nab
Obj e
ct w as e ffected : two I will p ar ticularly
mention First the re
medy w as applied
t o a par t which w as no t a ffected by the dis
i
o n if the correction had
ease ;in my o p
e si nking fund o f
been applied only to t h
18 0
2 the measure would have strengthened
instead o f impairing as I am convinced it
has the principle O f the sinking fund S e
ly the principle o f self Operation was
co nd
destroyed by leavin0 par liament to fix
from time t o time
the amo unt of th e
,
g
,
m
,
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,
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,
.
’
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m
,
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-
,
g
,
‘
,
,
96
original system ;which the plan of 1 8 13 pro
fessed to revive by restoring to the establish
ment that which though certainly overlooked
by your lordship was truly
o f its very
”
essence a principle of gradual relief
Now my Lord I must again invite you to
look back and review the operation o f the
sinking fund upto the period which we are
r
the
first
at
which
it
so
no w co nside
a
s
w
g
relaxed as t o afford present relief
The sinking fund now amounted t o thirteen
millions ;o f which rather more than six mil
lions and a half consisted offixed allowances
the remainder o f the redeemed interest C er
t ainly although t h
esinking fund had never
existed an amount o f taxes gradually rising
from twelve hundred thousand pounds t o
thirteen millions might have been applied t o
the current service And if those sums had
been raised in war taxes they would have
constituted a fund whereon the interest o f
loans might have been charged just as they
,
,
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,
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m
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,
97
were c h
arged after the year 1 8 13 upon the
sinking fund The great benefit which th
e
p ar liament and people of 1 8 13 derived from
the sinking fund consisted in the obligation
which its e xistence had imposed upon pre
c eding parliaments to create the surplus r e
venue instead o f borrowing the amount upon
a perpetuity
Actual arithmetical gain
th ere w as assuredly none ;financial and poli
tical convenience in my opinion much
I cannot allo w that in 1 8 13 the inst it u
tion could b
ejustly styled ine fficient : or one
einterests O f r e
which had consulted only t h
mote posterity
Between 1 8 13 and 1 822 Mr Vansittart s
measure placed at the disposal of parliament
an a nnual income o f nearly ten millions
,
,
,
,
,
,
,
.
,
-
.
.
’
,
.
,
has had a real e ffect in calling fo rt h ex
eti n which although th ey might have been made as well
and as e ffectually would not have been made unless to follow
If the sinking
out th e line which that syste mr e quire d
fund had not been in vie w it is likely that taxes would hav e
”
ilt n p 1 53
been imposed f the interest only H am
1 C ommons Jo ur nals L XXV II 7 92
“
r
o
esinking fun d
Th
s
,
,
,
”
.
,
‘
o
—
or
.
’
,
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,
.
.
98
During the latter years o f the
w ar , w hen
the
r
reat
and
successful
e
orts
were
made
f
o
ff
g
accomplishing that fo r which the country had
fought so long and so bravely there were
raised upon this annual fund the greater por
tion o f the immense sums which those e fforts
required For the present purpose it is no
st o r a
matter whether thi s was effected by a r e
1 le
tion or by a subversion o f Mr Pitt s p
r 1 nc
p
Further loans were raised in t h
esame way
during the following years o f peace ;and
thus the income o f the sinking fund within
nine years stood in the place o f ten millions
o f ne
w taxes
If then the sinking fund be considered as
having expired under Mr Vansittart s opera
tio ns it will be allowed to have ade one o f
those vigorous e fforts which sometimes i
mediately precede death For a testimony
o
o f its living merits let me refer you to one w h
witnessed with no ordinary p o wers o f O b
se
r
vation its existence and its decease
An
e ffi
cient sinking fund in the opinion o f
,
,
,
,
.
’
,
,
.
.
,
,
,
.
,
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’
.
,
m
m
,
.
,
,
,
.
,
10
0
n
provided fo r and there would have b
ee
“
left an e ffi
cient sinking fund
Had this
system been adhered to during the w hole
progress o f the war he would h ave been
the last an to raise his voice ag ai nst the
sinking fund
These ar ethe words Of
R icardo ;and I might rest Upon the
alone
esinki ng fund
an argument fo r re
storing t h
,
.
m
,
m
.
A FTE R war had been terminated andits e
x
penses defrayed it certainly did behove par
lia e
nt to rep lace the finances upon the sa fe
and plain ground o n which the war had found
them ;and I ad it that this process might
have been sooner and more j udiciously con :
duct ed Of the steps taken towards th is con
clusio na slight sketch is su ffic ient
Nothing permanent was attempt ed until
,
m
,
‘
m
—
.
.
,
the year 1 8 19 The Obj ect was after fully
discharging all e xpenses o f the war andr e
.
,
,
r
Parl
.
b
De N e
w
,
S eri es V III
,
.
3
31 6
.
fl
l OI
ducing
the o ating debt t o a convenient si z e
to secure a revenue su ffi
cient according to
its average pro duce to cover all permanent
and or dinary exp
nses including a provision
e
for the redempt ion o f the fu nded debt
A
strict adherence t o the law o f the sinking
fund even as it w as modified and relaxed in
1 8 13 would have required a great temporary
increase of taxes great because the nominal
amount o f the sinking fund was even then
fifteen illions anda half and t h
eestimated
surplus o f revenue not more than t wo ;tem
r ar
o
l
f
because
the
oper
tion
f
the
o
a
w
o
a
p y
18 13 would have a fforded consi d
erable and
periodical relief T h
is taxation would not
have been required if the taxes which ex
ist e
dat the end o f the war had been con
d;fo r there had already been a repeal
t inue
o f taxes to the amount o f nearly nineteen
*
millions ;composed no doubt principally
o f taxes specially destined for the war ex
.
,
,
,
,
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,
,
,
m
,
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,
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,
,
d
i
u
n
t
re
e
p
.
M
r
.
R
ob inson s B udget speech
’
,
ppen dx
1 826 , A
i
1V
.
1 02
It was determined to have a real surplu s
o f five millions 1
with which vie w three mil
w taxes were imposed
lions o f ne
N O altera
tio nwas made in the law o f the sinking fund
its nominal amount continued far to exceed
the bal an c
e o f free revenue and there w as
now as I conceive a mani fest departure from
the principles o f Mr Pitt and from those
which I have humbly submi t ted as essential
to a sinking fund in tim o f peace from thi s
period and until the year 18 2 3 the operose
transactions O f the sinki ng fund were justly
e xposed to criticism and ridicule. The ma
chinery w as no w ine fficient even for se
curing an appropriation o r preserving a prin
96
,
.
,
,
,
,
.
e
,
,
,
,
esolved ; That to provide f the exigencies f the
public se rvice to make such progressive reduction f the N a
t i nal Debt as may ade q
uately suppo rt publi c credit and to
a ffo r d to the country a prospect f future relief from a part f
its present burdens it is absolutely necessary that there should
be a clear surplus f the income f the country beyond the
expenditure f not less than five m
i llions ;and that with a
view to the attainment f this important object it is expedien t
now to increase the income f the country by the imposition
”
f taxes to t h
eamount f three m llions per annum
C m
mn J u nal L XXI V 509
9"
R
o
or
o
,
o
,
o
o
,
o
o
,
,
o
o
,
o
o
o
o
,
’
s
o
r
s.
.
,
i
.
.
—
o
1 04
the moreco nsiderable portion o f the fund
w as lent to the public for current expenses :
th
egre ater part o f the interest and sinking
fund being charged upon the fund itsel f
under the act o f 1 8 1 3
But even the surplus o f five millio ns has
no t been constantly reali z ed sin ce the deter
mination o f 1 8 19 This deficiency is owing
to the gr eat reductio n o f taxes ;amounting
nearly to eleven illions and a half while
th
edecrease o f charge by the reductio n o f
the interest o n the five and four per cent
stocks is under two
illions
Although
therefore the five millions have been regu
lar ly paid to the commissioners they have
eresult o f a permanent surpl us
not been t h
but have been obtained in part through
casual receipts ;and sin ce 1 8 2 3 by what is
i sically calle
d th
ede
adwe
ig h
t arrange
wh
ment to which as being intimately con
d with the principle o f the sinking
ct e
ne
fund and bei ng v e
ry little understood I must
request yo ur Lordship s attention
’
,
.
,
.
m
,
,
,
m
,
.
.
,
,
,
,
,
m
,
,
,
‘
”
,
,
,
,
’
.
1 05
the sinking fund h
d o n its
e
ad contin u
o r on the pla n o f 1 8 1 3 the
o r l gl nal plan
arrangement would in my opini on have been
both j ustifiable and expedient W e all ad
it that fo r t h
eextraordinary expenses o f a
w ar we may reasonably borrow ;your lord
ship says o n a perpetuity Mr Pitt said o n
anannuity o f forty fi
Now the
vey ears
charges which are the obj ect o f this arrange
ment arise strictly and truly o ut o f the w ar
although from their nature being pensions
arid allowances end uring for the lives o f indi
uals they are not paid at once but co n
vid
st it u
t e so long as they endure an annu al
charge (o r dead weight) quite unconnected
with the current expen se
s o f the state If
they could have been discharged at once in
single payments which might perhaps have
amounted to twenty o r thirty millions I ap
prehend that there would not have been
in practice and certainly not in principle
any Obj e
ction to raising that sum by loan
If
,
,
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,
m
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-
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,
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,
,
‘
1 06
charged upon the permanent revenue with
the required sinking fund fo r discharging it
in forty fi
veyears
A s this could not easily be done the
revenues o f forty fi
are
ve coming years
charged with such an annuity as will spread
at w h
th
equally over t h
o leperiod the au
o
dlimit o f a national mortgage the whole
r ise
expense o f these war payment s ; which
would otherwise press very unequally and
severely on th
eearlier y ears By the sale o f
that annuity those unequal annual su s are
to be raised while the pressure upon the
public is equal in e very year
This equaliz ation is not less reasonable in
itself than it is consistent with the principle
fo r which I have humbly contended ;but it
is quite inconsistent with the resol ution o f
1 8 1 9 discarding o r at least suspending the
principle o f forty fi
ve years and affirming
“
the necessity o f a clear surplus o f the
income o f the country beyond t h
e ex
,
,
-
.
,
-
,
,
,
,
m
.
,
,
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,
,
,
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-
,
1 08
ducing t axes a
s an experiment o f the e ffect
,
reduction upon the produce o f the r e
ainde
r ;
but as w eare no w upon t h
ecauses
of t h
esinking fund I cannot
efailureo f t h
it these to wh
i ch the prese nt defalcation
o
is co rr ectly t o b
etraced
of
m
.
m
,
,
.
.
19
.
I HAV E submitted to yo ur Lordship this
history o f the sinking fund in t h
ehope o f
c o nvincing you th
at y o u have misconceived
boththe degree and the causes o f th e i
put ad failure and that you draw an u nau
efailur e w h
th
dconclusio n from t h
ich is
o r ise
ad
mitted
Th
e institut io n w as for ed forty two
o f six
e
This
period
consisted
a
r s ago
y
year s o f pe
ace ;twenty four years o f w ar ;
“
.
,
m
-r
,
m
.
'
-
,
.
,
.
-
then twelve years o f pe
ace It s operation
in the first period w as necessarily upon a
small sc ale ;but no t e
n your lordship will
Ve
.
impute to it a failure
.
.
1 09
The question now being whether to r e
establish the institution during peace I might
fairly disreg ard in the determination of that
questio n the wh
ole following period o f war ;
but I have ende avo ured to show that its o p
e
rati o n even during the war was not witho ut
advantage ;and that the obj ection to it is ap
plicable only to a mistaken choice bet w een
two modes o f using it equally parts o f the
syste
This mistake if it be o nemight be
avoided by a recourse to Mr Fox s clause
arge o f failure upon the present
Your ch
period o f peace it is impossibl eto repel :
but it is a failure occasioned by ext rnal
violence not inherent disease
The violent measures were the systematic
reduction o f the fund to five millions ;and
the destructi on Of the surplus whereout that
provision w as to come
The first o f these may o r may not have
ro
been judicious It is not altogether i p
bable that if the gradual operation o f the
,
,
:
,
,
,
,
,
,
m
,
,
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,
’
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,
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e
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,
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'
,
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,
m
1 10
plan o f 1 8 13 in affording relief had been
su fficiently understood and impressed upon
parliament it might ha ve been found e
e
Xp
dient at the expense o f a continued pressure
to persevere in it ;borrowing money fo r
every expense in any degree connected with
the war ;and maintaining o ur taxation until
released by the operation of the sinking fund
at the scale Of the ordinary peace e
xp
nd
i
e
ture enlarged as it has been by the events
o f passed years
But surely my Lord it is not j ust to i
pute failur eto the S inking fund because
after a war o f unexampled e ffort and p
r o fu
sion succeeding a very short period o f peace
it was not found possible to adhere strictly
to a system planned in contemplation o f an
alternation o f peace and war more conform
able to experience The sinking fund o f 18 1 9
it is admitted was not calculated to redeem
the debt in forty fi
veyears from that period ;
,
,
,
,
,
,
,
,
,
m
.
,
,
,
,
,
,
~
.
,
,
-
'
st ill
ss
le
from the respective peri o ds of its
1 12
fund has been the consequence
of
attempting
too much more indeed than Mr Pitt co n
tep
lat e
d The ultimate suspension as
you stylethe pres e
nt state of the fund is the
consequence o f over sang uine anticipations o f
financial pros p
eri ty Nor can these resu lts
”
be deemed a decisive experi e nt which
m
,
.
”
.
,
,
-
m
.
o ught t o lead to the total abandonment o f
”
the system
O ne word more before I quit this long
section of the E ssay I believe that I have
al ready disposed of all the passages wher ein
”
increasing
loans
and
o u allude
t
o
y
extraordi nary taxation
except o ne r e
markable pa ssage withwhich y o u co nclude
by lamenting that means had not b e
n found
e
fo r carryi n on the war with more vig o u r
and effect by sparing to us those additional
loans o r additional taxes by an earli e
r dis
continuance O f the system Your lordship
herein correctly ascribes to the system its
n
e
ower
giving
at
any
moment
h
f
o
s
p
.
,
.
,
,
,
g
,
,
,
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,
,
1 13
e ffectual support as I have shown the late
fund did a ff ord us in a period o f the greatest
exertion Let it even be granted that the
aidwill be most e fficacio us if so ught at the
first moment o f war why do you co unsel
us against collecting in time o f peace mate
rials so import ant to the vigorous prosecution
o f the contest
,
,
,
.
,
,
,
,
.
20
.
”
your conclusion you dispose o f four
various heads of ad vantage as those which
are ascribed to a sinking fund by its different
Upholders
1 S ome you say recommend the sys tem
”
as a reso urce in unforeseen emergencies
O n this you originally observed that a
disposable surplus has its o wn advantages
and disadvantages but in both it essen
The o ne
t ially di ffers from a sinki ng fund
IN
,
,
.
.
,
,
.
,
,
,
.
Th
e
passage is altere d in the second edition and the di ad
“
v antage is xplained It consists in the surplus beginning in
needless taxation and probably le ading to needless eXpend
”
ture P age 8 0
,
O
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1 14
e
is appropriated the other fr e
The o ne
therefore you infer cannot answer the pur
pose o f 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 obj ect o f the in
st it u
t io n;
yet it furnishes o f itself a sufficient
reason for maint aining it in peace
The
l s o r1 g 1 n
appropriation o f a fund having t h
would be the u nforeseen emergency
but a sinking fund the most strictly appro
i
t
r
a
e
d
to
redemption
f
debt
in
any
other
o
p
for
than a specific pledge to the stock
holder is always within the power o f parlia
ment ;and its liability to be used o n an
emergency may fairly be claimed as o neo f
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 st atesman
it is none except under any particular cir
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1 16
sinking fund he says
we repeal taxes ;
taxes are generally paid o ut o f revenue
which would otherwise be expended and
which thus come to be employed in increasing
the annual produce o f our land and labour
This is not my view o f the effec t o f the
repeal o f taxes I s ubscribe to your Lord
ship s doctrine that o ur object is not the
multiplication o f wealth but the multipli
cation o f that social happiness which is
derived from wealth and which consists
essentially in its use
Most assure d
ly ;
and there is an addition to the happiness and
comfort o f every man who finds that he has
”
the free use o f a part o f his income
hitherto due to the government o r t hat with
the same income he may enlarge his con
sumption hitherto straitened by what was
in e
e
ct a sumptuary law
In relief from
direct o r indirect taxation he experiences
o ne
fo r
o r other of these substantial benefits ;
*
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S upplement to the E ncyc lopedia Bri tannica
S ystem
"
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Page 42 1
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“
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Funding
1 17
the effect which this plan fo r enlarging no t
”
narrowing his enjoyments produces upon
the national wealth h e cares nothing
I too my Lord in arguing for a sinking
fund disclaim all speculative and circuitous
“
advantages ;I discard all notions o f forced
accumulation and compulsory
nor
indeed is any thing like them t o be found in
the authori t y which you quote I concur in
your view o f the proper aim o f legislation
but I would not that the parliament o f the day
should diminish by burdensome anticipa
tions the power o f all future legislatures to
pursue the course which you recommend
4 I do not perceive the absurdity which
o
r
Lordship
imputes
to
are
commendation
u
y
o f the sinking fund as giving confidence at
home and abroad I kno w not h
o w accu
ly an enemy will estimate o ur power
r at e
when there is a question o f w ar between us
b
ut it is obvious that we assert o ur rights
with more con fidence when we know that
E ssay p 8 2
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1 18
”
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we possess not unreal wealth but the
facility o f maintaining without additional
taxes fifty thousand additional soldiers o r
O f realising many millions o f money
Un
doubtedly this is the effect no t o f a sinking
fund peculiarly but o f a surplus revenue ;I
submit that experience limited but decisive
has taught us that a sinking fund is the easiest
and surest mode o f preserving this surplus
and in that sense it gives us confidence in
r foreign and domestic policy
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21
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I HAV E examined with a boldness fo r which
I again apologise sincerely the reasoni ngs
whereupon y o u counsel the abandonment of
the sinking fund I have now to solicit your
attention to the details o f the ad vice o f 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
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12 0
A clear ye
arly su rplus is the balance o f
the average p roduce o f the revenue over and
i
nd
xp
above the average o f the ordinary e
e
ture Our permanent income ought to be
estimated upon an average comprising years
o f various production ;and our estimate o f
expenditure ought to allow for contingencies
In some years there will be a balanc e
o f in
come in others a slight deficiency ;but if
w eintend to have a real fund o f redemption
w emust provide a surplus beyond the ave
rage balance o f income and expenditure
H owever desirabl eit may be to restore the
veyears I do not think
limitation o f forty fi
that parlia ent can prudently o r consistently
with recent pr o c e
edings call upon t h
le
epeo p
for a larger s urplus than that which was deli
r at e
ly fixed by the H ous e o f C ommons in
e
b
1 8 1 9 and which is now by law the amount
I know not to what ex
o f the sinking fund
tent any expected reductions O f expenditure
still less
w ill assist in e ffecting this surplus
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12 1
can I estimate the improvement of which
there are visible s y mptoms in the existing
revenue I fear that neither o f these causes
will afford the surplus without a restoration
o f a small portion o f the thirty millions o f
taxes which have been repealed in the pre
sent period of peace ;and I a aware that
ta
xes may possibly be required to the extent
"
o f the whole five millions
,
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m
,
9
For reasons already given I here presume
that no further portion o f 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 o f the annuity
I do not insist upon the immediate impo
sit io n o f five millions of taxes ;we may fairly
take t w o years in the operation during which
w emay watch the progress o f the revenue
,
,
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,
In the year 1 8 27 there was no real surplus the deficiency
w hich I estimate at about nine hundred th usand pou nds w e
may f rl expect to supply by unpmvcd e venue
,
,
o
ai
y
r
,
.
122
and
ascertai n the amo unt required and the
readiest sources fo r supplying it That there
will be any di fficulty in obtaining the sur
plus experience forbids me t o doubt ;it
might be procured by addition to the present
taxes upon consumption and expenditure o r
by the levy o f an income tax to the amoun t
o f double the sum r equired accompanying a
great reduction o f those taxes upon co nsu p
tion and ex enditure which are much less
1 le
conformable to the true p
r 1nc
s o f taxation
p
and interfere much more with production and
the employment o f labour
The next question regards the limitation
under which this sinking fund is to be applied
By the act o f 1 8 2 3 it is to accu ulate
at compound interest until it shall amount to
o ne hundredth part o f the debt
that is
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I
efunded debt and the unfunded if unprovide d f
l Th
think that no part f the unfun d ed debt w hich though n t spe
is a charge upon the revenues f the next
cifi
cally provided f
o r soon following years ou gh t to be i nclude d among th e o bj ects
f t h e ink i ng fun d
9"
o IV
4 Ge
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o r,
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or
,
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12 4
to renew o ur inc umbrance at the
sam eamoun t as that which would be re
dee ed this mode o f applying theprinciple
would keep down the debt at its existing
amount ;but it would be a most improvi
dent scheme fo r us wh
o are always liable to
w ar ;and would be quite inconsistent with
Mr Pitt s system which requires the equali
z at io n o f the permanent income
with the
ordinary expenditure and the maintenance O f
a clear surplus fo r redeeming debt
To your Lor dship however this supposed
system o f loans in peace ought t o be accept
able ;fo r the arguments founded o n th ah
surdity o f o ur co ncern fo r the interests o f
osteri
t
y
would
clearly
justi
f
y
us
in
borro
w
p
ing at all times as uch money as w ecan
f
or
ossibly
raise
any
purpose
whatever
p
upon perpetual still more certai nl y upon
terminable annui ties
W e ought as I suggest so to manage o ur
one per cent si nki ng fun d as t o place our
t inually
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12 5
selves as nearly as possible in th e situation
o f having borrowed
in war upon annuities
veyears
of forty fi
and o f not borrowing at
all in time o f peace
,
,
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,
-
.
O n these grounds as well as because I o b
,
to
the
parliamentar
discretion
borrowed
c
t
e
y
j
from the act
of
18 13,
I disapprove
of
the
provisions o f the existing sinking fund act
and conceive that if the propo rt ion o f o nein
the hundred be preserved it ought to be used
o f redeeming in forty
for its original purpos e
five years the debt to which each fund is
appropriated ;this can only be effected by
an unchecked O peration at compound in
:
,
,
,
st
ee
t r
.
Do I then propose that
r
ou
sinking fund
accumulate ? I
o f five millions should so
answer no And my reason is this we are
now perhaps in respect o f the existing debt
in the situation in which Mr Pitt stood in
17 8 6 ;and in creating o r restoring a fund o f
redemption we may fairly fix a period at
which it shall begin to work actual relie f
.
,
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,
,
126
from tax ation The unchecked accumulation
nd woul dpostpone this relief sixty
o f the fu
and then e ffect it to an
o r seventy years
amount much too large fo r o neoperation ;
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 o f Mr Pitt s
four millions at S imple interest ;effecting in
every y ear 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 o f seven illions 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 o r perhaps a little soo ner will o f itself
adopt a definite r ule O f relie f If I were to
suggest a rule I think that it would b
ethis ;
that from that period one half o f the sum
mmHv saved by the o peration o f t hef
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12 8
fund I hope and tr ust th at we shall
never conduct another war without raising a
large portion o f the supplies with in the year
A part o f the a d
ditional taxes levied fo r thi s
purpose should be added t o the permanent
revenue the surplus o f which is in t h
eordi
nary course applied to current services
The produce would during w ar reduce the
amount o f the annual loans and thus operate
upon the amount o f the deb
t 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 t h
eo neper cent sinking
funds being a substitute for terminable an
unities o ught as much as possible to be
assimilated to them A very ingenious but
eccent ric connexion o f your lordsh ip s the
late L o rd S tanhope made a suggestion in
fo r securing the unvaried appropri
ing
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S ee a similar suggest on
i
1
'
Parl
.
1n
Hist
Dr Hamilton
.
xxvi
.
l7
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’
s b ook p
,
.
1 54
.
12 9
ffe
ct u
ation o f the fund which would have e
ally answered this purpose and may be
adopted with much advantage now H e pro
posed to make the sinking fund a part o f the
engagement with the stockholder from
which there could be no departure without
a breach o f faith By this he intended not
only to secure the inalienability o f the
“
fund but to purchase the stockholders
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 ight purchase by the
application o f a part o f the fund the consent
stockholders to the
o f the three per cent
conversion o f their stock into a smaller capi
tal at a higher rate o f interest ;o r we ight
,
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m
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this is the first time f mentioning the stockholder I
take the oppo rtunity f expressing my satisfa c tion at your lo rd
ship s concurrence (e v ident from yo ur omission f the topic ) in
the rejection f all cla mon the part f the stockhold er to any
inking fund except in the one case f the 3%per cent in
which there is a speci fic legal pledge Thegene r al pledge
rather to the land
As
1‘
’
o
,
o
’
o
o
s
z
o
o
,
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s
,
is
1 30
facilitate that which is the most desirable
o f all the results the conversion o f the per
manent into terminable annuities the differ
ence being paid o ut o f the sinking fund I
e
will not now pursue this topic into all t h
varieties o f which it admits although it is
intimately connected with the present dis
cussio n inasmuch as it refers to an eff ectual
mode of givi ng permanence to the sinking
”
fund
It must be admitted that this mode o f
appropri a
ting a Sinking fund exclude s the
possibility of making any other use o f it and
is therefore inconsistent with the second
Object o f the institution the collection O f the
means o f carrying o n future wars ;those at
least which may occur as wars almost cer
t ainly will within o ur period of limitation
Indirectly however o ur efforts in war would
be greatly assisted by th e provident and
e ffectual reduction o f o ur permanent debt ;
and alt h
o ug hif we have a fund at our dis
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132
at least o f the occasional surplus should be
granted for that time not specially appropri
ated to the sinking fund ;this would be no
”
grant t o remote posterity as by acce
le
r at
ing the attainment O f the maximum w eshould
eperiod not very distant
bring nearer to us t h
now according to my suggestion o f direct
and copious relief
My Lord I have now completed my e
n
de
avo ur to lay be fore the public the facts and
principles upon which they are t o decide the
great question at issue
I deceive myself if I have no t urged rea
sons O f no inconsiderable weight in favo ur
o f the principle o f limiting o u
r charge upon
posterity ;and I am still more confident that
I have shown good grounds fo r rej ecting your
Lordship s counsel wh
ich would lead us alto
gether to disregard o ur debts and no t even
in this time o f peace to think o f reducing
th m ;fo r this advice I submit y o u cannot
cite the opinion o f statesman philo sopher o r
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1 33
economist o r the e x ample o f any sober man
Foreign countries will fail you ;Russia and
France have sinking funds and the wary
and provi dent g overnment o f the North Ame
*
rican S tates have recently r einforced their
sinking fund to operate unchecked during
peace but to be disposable by congress dur
ing w ar
Your advice my Lord forgive me for saying
it is really o neo f those excesses into which
orators are sometimes misled by the int o xi
cation Of argument ;and it is well worthy to
be classed with those boasts o f heaven born
genius and magical power which y o uimpute
to us the advocates o f the policy which y o u
rej ect
O ur error you ascribe to the love o f sys
tem
My Lord although I utterly discard
all arguments (if arguments they can be)
founded upon a change o f your lordship s
,
.
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S ee in C ohen s C ompendium
f the Ame r ican Act f 1 8 1 7
’5
o
’
o
.
of
Finan c e p
,
.
17 7 ,
an
abs tract
134
O p inion upon the application O f a principle ;
I
o wn
that I see
w ith
unmeasured surprise
,
Lord G renville the contemner o f a systematic
policy I have always been taught to expect
from y o u indeed I have heard if I remember
well not un frequently from your lips an in
dig nant and contemptuous reprobation o f
occasional devices fo r carrying o n the public
affairs : those wh
o
w ere the more peculiar
admirers o f your Lordship would boast o f
your superiority in this respect to your friend
and fellow counsellor ;and would sometimes
reproach him with t o o ready a submission to
politic al circumstances while your Lordship
ass umed and pursued a statesman like and
undeviating rule o f action
.
,
,
,
,
,
-
,
-
.
I never could accede to the imputation
o
upon Mr Pitt w h
according to my humble
observat ion combined with more o f j udicious
discrimination than any statesman o f the time
an adherence to right and chosen principles
with a prompt estimate o f passing occur
,
.
,
,
,
,
1 36
mons o f this day will deem other wise o f their
duties as statesmen ;and that if the st ill r e
maining consequences o f the late struggle
have left us too weak to sustain the vi
u
o
r
s counsels o f Pitt w emay sti ll adhere
o
g
to the resolution suggested by the practical
wisdom o f C astlereagh and enforced by the
eloquence of C anning
'
,
,
,
.
I have the honour t o be with great respect
My Lord
Your Lordship s
Most obedient and humble servant
A S P E R E G R IN E CO UR TE N A Y
T HOM
,
,
,
’
,
L ondon Ap
r il 30
th 18 28
,
,
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7
TH E
MHU
(HI C O UN TR YJ
na
Q
NG
nn n nn;
r
WITH R EFER ENC E
l n B n rupc r m
e P upe sm d
P op
uatio
a
,
k
t y, C i
ri
a
,
an
so
fo rt h
.
A
LE
TTER
TO
G O D E R IC H ,
RD O FH IS
M
A
JES TY S TR EAS UR Y,
'
& c&c&c
.
.
.
e e rs he l be Ne sppe r s ned A Sc ch
n Fnl q G l s bec n S
K r m
m hes nd rdpr ce ld £ he unce
r sl hl d e
r n m J hn S ncl r
h
e
e
nt
L tt
of
i
rai s
i
t
.
G
in t
k a
ta
g t
g t y
i ff
Es
ay ,
i
a
i
w
o
-
g fr o
i
of
of
S ir
WELL
CR UTT
:nA L L ,
,
S U FFO L K
a
a
go
o
,
“
ig
gow,
o
to
t i g to
j
5 t
o
.
i
ai
R E C TO R
ot
,
as t o t
or
.
fl
LO NDO N :
AN D S O N , A N D BY AL L O TH E R
tO
K S E L L E R S.
18 i
ir
78
eany ind uce
m
e
nt t o und e
rt aket h
b
eth
ankl e
ss
ighs e
task o thr than a h
ns eo f p
at ri o tic d ut y ;
e
l ing o f g r atitud e to w ar d s a so v e
and a fe
re
ig n
o h
and a c o untr y w h
ad e
vinced the
ir s e
ns eo f
r vi c
e
rhap
s we
rene
ve
m
e
rits andse
s su
chas p
e
r
re
a
re
d b
n
o
t
h
r
i
d
ivi
d
u
l
e
n
a
nd e
y
y
,
e
,
,
,
,
'
,
,
,
June1 8 , 1 8 2 8
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