FUNDING SYSTEM.
this head we propose, first, to give an ac count of the rise, progress, and modifications of the SINKING FUND, accompanied with some observations as to the probability of its accomplishing the object for which it was instituted ; and, next, briefly to con sider the best mode of providing for our annual ex penditure both in war and peace,—an inquiry neces sarily involving the policy of that SYSTEM OF FUND ING of which the Sinking Fund has long been con sidered as one of the principal recommendations and props.
I. On the subject of the Sinking Fund, we shall have frequent occasion to refer to the statements of Professor Hamilton, in his very valuable publication, entitled, An Inquiry concerning the Rise and Pro gress, the Redemption, and Present State of the Na tional Debt of Great Britain. " The first plan for the discharge of the national debt, formed on a regular system, and conducted with a consider able degree of firmness," says this able writer, " was that of the Sinking Fund, established in 1716. The author of this plan was the Earl of Stanhope ; but as it was adopted under the ad ministration of Sir Robert Walpole, it is common ly denominated from him. The taxes which had before been laid on for limited periods, being ren dered perpetual, and distributed among the South Sea, Aggregate, and General Funds, and the pro duce of these funds being greater than the charges upon them, the surpluses, together with such far ther surpluses as might afterwards accrue, were united under the name of the Sinking Fund, being appropriated for the discharge of the national debt, and expressly ordained to be applicable to no other purpose whatever. The legal interest had been re duced from six to five per cent. about two years be fore ; and as that reduction was unfavourable to the commercial state of the country, government was now able to obtain the same reduction on the inte rest of the public debt, and apply the savings in aid of the Sinking Fund. In 1727, a further reduction of the interest of the public debt, from five to four per cent. was obtained, by which nearly L.400,000 was added to the sinking fund. And, in the year
1749, the interest of part of the debt was again re duced to 31 per cent. for seven years, and to 3 per cent. thereafter ; and, in 1750, the interest of the remainder was reduced to 31 per cent. for five years, and to 3 per cent. thereafter, by which a further saving of about L. 600,000 was added to the sinking fund." This sinking fund was for some time regularly ap plied to the discharge of debt. The sums applied, from 1716 to 1728, amounted to L. 6,648,000, be ing nearly equal to the additional debt contracted in that time. From 1728 to 1733, L. 5,000,000 more were paid. The interest of several loans, con. tracted between 1727 and 1732, was charged upon surplus duties, which, according to the original plan, ought to have been appropriated to the sinking fund.
" Soon after, the principle of preserving the sinking fund inviolable was abandoned. In 1733, L. 500,000 was taken from that fund, and applied to the services of the year."—" In 1734, L. 1,200,000 was taken from the sinking fund for current services; and, in 1735, it was anticipated and mortgaged." The produce of the sinking fund, at its commence.. !tient in 1717, was L. 323,437. In 1776, it was at its highest amount, being then L.3,166,517; in 1780, it had sunk to L. 2,403,017.
" The sinking fund would have risen higher, had it not been depressed, especially in the latter period, by various encroachments. It was charged with the interest of several loans, for which no provision was made; and, in 1772, it was charged with an annuity of L.100,000, granted in addition to the civil list. During the three wars which were waged while it subsisted, the whole of its produce was applied to the expellee of the war ; and even in time of peace, large sums were abstracted from it for current ser vices. According to Dr Price, the amount of pub lic debt paid off by the sinking fund, since its first alienation in 1733, was only three millions, paid off in 1736 and 1737 ; three millions in the peace be tween 1748 and 1756; two millions and a half in the peace between 1763 and 1775 ; in all, eight mil lions and a half.