" The additional debt discharged during these pe riods of peace was effected, not by the sinking fund, but from other sources.
" On the whole, this fund did little in time of peace, and nothing in time of war, to the discharge of the national debt. The purpose of its inviolable application was abandoned, and the hopes entertain ed of its powerful efficacy entirely disappointed. At this time, the nation had no other free revenue, ex cept the land and malt-tax granted annually ; and as the land-tax during peace was then granted at a low rate, their produce was inadequate to the ex pence of a peace establishment, on the most mode rate scale. This gave occasion to encroachments on the sinking fund. Had the land-tax been always continued at 4s. in the pound, it would have gone far to keep the sinking fund, during peace, invio late." This fund terminated in 1786, when Mr Pitt's sinking fund was established.
To constitute this new fund, one million per an num was appropriated to it by Parliament, the capi tal stock of the national debt then amounting to L. 238,231,9.48.
This million was to be allowed to accumulate at compound interest, by the addition of the dividends on the stock which it purchased, till it amounted to four millions, from which time it was not further to increase. The four millions were then annually to be invested in the public funds as before, but the di vidends arising from the stock purchased were no longer to be added to the sinking fund for the pur pose of being invested in stock ; they were to be ap plied to the diminution of taxes, or to any other ob ject that Parliament might direct.
A further addition,to this fund was proposed by Mr Pitt, and readily adopted, in 1792, consisting of a grant of L. 400,000 arising from the surplus of revenue, and a further annual grant of L.200,000; but it was expressly stipulated, that no relief from taxation should be given to the public, as far as this fund was concerned, till the original million, with its accumulations, amounted to four millions. The ad dition made to the fund, by the grant of L. 400,000, and of L. 200,000 per annum, together with the in terest on the stock those sums might purchase, were not to be taken or considered as forming any part of the four millions. At the same time (in 1792), a sinking fund of a new character was constituted. It was enacted, that, besides a provision for the inte rest of any loan which should thenceforward be con tracted, taxes should.also be imposed for a one per cent. sinking fund on the capital stock created by it, which should be exclusively employed in the liqui dation of such particular loan ; and that no relief should be afforded to the public from the taxes which constituted the one per cent. sinking fund, until a
sum of capital stock, equal in amount to that created by the loan, had been purchased by it. That being accomplished, both the interest and sinking fund were to be applicable to the public service. It was calculated, that, under the most unfavourable cir cumstances, each loan would be redeemed in 45 years from the period of contracting for it. If made in the 3 per cent., and the price of that stock should continue uniformly at 60, the redemption would be effected in 29 years.
In the years 1798, 1799, and 1800, a deviation was made from Mr Pitt's plan, of providing a sink ing fund of one per cent. on the capital stock created by every loan, for the loans of those years had no sinking fund attached to them. , The interest was charged on the war-taxes ; and, in lieu of a one per cent. sinking fund, it was provided, that the war. taxes should continue during peace, to be then em ployed in their redemption, till they were all re. deemed.
In 1802, Lord Sidmouth, then Mr Addington, was Chancellor of the Exchequer. He being desi rous of liberating the war-taxes from the charges with which they were encumbered, proposed to raise new annual permanent taxes for the interest of the loans of which we have just spoken, as well as for that which he was under the necessity of raising for the service of the year 1802 ; but he wished to avoid loading the public with additional taxes for a one per cent. sinking fund on the capitals created by those loans, and which capitals together amounted to L. 86,796,375. To reconcile the stockholder to this arrangement, he proposed to rescind the provi sion, which limited the fund of 1786, to four mil lions, and to consolidate the old and the new sink ing funds, i. e. that which arose from the original million per annum, with the addition made to it of L.200,000 per annum subsequently granted, and that which arose from the one per cent. on the capi tal of every loan that had been contracted since 1792. These combined funds he proposed should from that time be applied to the redemption of the whole debt without distinction ; that the dividends arising from the stock purchased by the commission ers for the reduction of the national debt should be applied in the same manner ; and that this arrange ment should not be interfered with till the redemp tion of the whole debt was effected.