To provide for this growing deficiency, it was pro posed to raise supplementary loans, increasing in amount from year to year ; and for the interest and sinking fund on such loans, provision was to be made in the usual way by annual permanent taxes ; on these loans the sinking fund was not to be more than 1 per cent.
By the plan proposed, in fifteen years from its com mencement, on the supposition of the war continuing so long, the regular loan would have been twelve mil lions, and the supplementary loan twenty millions.
The ministry who proposed this plan, not conti .
nuing in office, the plan was acted upon only for one year. " In comparing the merit of different sys tems," says Dr Hamilton, " the only points neces sary to be attended to are the amount of the loans contracted—the part of these loans redeemed—the interest incurred—and the sums raised by taxes. The arrangements of the loan under different branches, and the appropriation of particular funds for payment of their respective interests, are matters of official regulation; and the state of the public finance is neither the better nor the worse, whether they be conducted one way or other. A complicat ed system may perplex and mislead, but it can never ameliorate." Accordingly, Dr Hamilton has shown, that the whole amount of taxes that would have been paid in twenty years, for an annual loan of eleven millions on the old plan of a sinking fund of 1 per cent., would be 154 millions. On Lord Henry Petty's plan, these taxes would, in the same time, have been ninety-three millions,—a difference in fa vour of Lord Henry Petty's plan of fifty-one mil lions; but to obtain this exemption we should have been encumbered with an additional debt of L. 119,489,788 of money capital, which, if raised in a 3 per cent. stock at 60, would be equal to a nomi nal capital of L.199,149,616.
The sinking fund was established with a view to diminish the national debt during peace, and to pre vent its rapid increase during war. The only wise and good object of war-taxes is also to prevent the accumulation of debt. A sinking fund and war taxes are only useful while they are strictly applied to the objects for which they are raised; they be come instruments of mischief and delusion when they are made use of for the purpose of providing the in. terest on a new debt.
In 1809, Mr Perceval, who was then Chancellor of the Exchequer, mortgaged L. 1,040,000 of the war-taxes for the interest and sinking fund of the stock he funded in that year.
By taking more than a million from the war-taxes, not for the annual expentiiture, but for the interest of a loan, Mr Perceval rendered it necessary to add one million to the loan of the next and all following years ; so that the real effect of this measure differed in no respect from one which should have taken the same sum annually from the sinking fund.
In 1813, the next, and most important alteration was made in the sinking fund. Mr Vansittart was then Chancellor of the Exchequer. It has been al ready observed, that the national debt amounted to L. 238,231,24.8 in 1786, when Mr Pitt established his sinking fund of one million. By the act of 1786, as soon as the sum of one million amounted, by the aid of the dividends on the stock, which was to be purchased by it, to four millions, its accumulation was to cease, and the dividends on the stock pur chased were to be available for the public service. If the 3 per cents. were at 60, when this million had accumulated to four millions, the public would have had a disposable fund of L. 20,000 per annum ; if at 80, of L. 15,000 per annum ; and no other relief was to be given to the public till the four millions had purchased the whole sum of 238 millions, the then amount of the debt. In 1792 Mr Pitt added L. 200,000 per annum to the sinking fund, and ac companied it by the following observations : " When the sun) of four millions was originally fixed as the limit for the sinking fund, it was not in contempla tion to issue more annually from the surplus revenue to than one million; consequently, the fund would not rise to four millions, till a proportion of debt was paid oft the interest of which, together wfth the annuities which might fall in, in the interval, should amount to three millions. But, as on the present supposition, additional sums beyond the original million are to be annually issued from the revenue, and applied to the aid of the sinking fund, the consequence would be, i that, if that fund, with these additions carried to it, were still to be limited to four millions, it would reach that amount, and cease to accumulate, before as great a portion of the debt is reduced as was originally in contemplation." " In order to avoid this conse
quence, which would, as far as it went, be a relaxa tion in our system, I should propose, that whatever may be the additional annual sums applied to the reduction of debt, the fund should not cease to ac cumulate till the interest of the capital discharg ed, and the amount of the expired annuities should, together with the annual million only, and exclusive of any additional sums, amount to four millions." • It will be recollected, that, in 1792, a provision was made for attaching a sinking fund of 1 per cent. to each loan separately, which was to be exclusively employed in the discharge of the debt contracted by that loan, but no part of these one per cents. were to be employed in the reduction of the original debt of L.238,000,000. The act of 1802 consolidated all these sinking funds, and the public were not to be exempted from the payment of the sinking fund it self, nor of the dividends on the stock to be pur chased by the commissioners, till the whole debt ex isting in 1802 was paid off. Mr Vansittart propos. ad to repeal the act of 1802, and to restore the spirit of Mr Pitt's act of 1792. He acknowledged, that it would be a breach of faith to the national creditor if the fair construction of that act, the act of 1792, were not adhered to. It was, in Mr Vansittart's opinion, no breach of faith to do away the condi tions of the act of 1802. Supposing, however, that the act of 1802 had been really more favourable to the stockholder than that of 1792, it is not easy to com prehend by what arguments it can be proved not to be a breach of faith, to repeal the one and enact the other. Were not all the loans from 1802 to 1813 negotiated on the faith of that act ? Were not all bargains made between the buyer and seller of stock made on the same understanding ? Government had no more right to repeal the act of 1802, and substi tute another less favourable to the stockholder, and acknowledged to be so by the minister himself, than it would have had to .get rid of the sinking fund al together. But what we are at present to inquire into is, whether Mr Vansittart did as he profess ed to do ? Did he restore the stockholder to all the advantages of the act of 1792 ? In the first place, it was declared by the new act, that as the sinking fund consolidated in 1802, had redeemed L.238,350,14$, 18s. id. exceeding the amount of the debt in 1786 by L.118,895, 12s. 10id., a sum of capital stock equal to the total capital of the pub lic debt, existing on the 5th January 1786, viz. L.238,231,248, 5s. 21d. had been satisfied and dis charged ; " and that, in like manner, an amount of public debt equal to the capital and charge of every loan contracted since the said 5th January 1786, shall successively and in its proper order, be deem ed and declared to be wholly satisfied and dis charged, when and as soon as a further amount of capital stock, not less than the capital of such loan, and producing an interest equal to the di• vidends thereupon, shall be so redeemed or trans ferred." It was also resolved, " that after such declaration as aforesaid, the capital stock purchased by the commissioners for the reduction of the national debt, shall from time to time be cancelled; at such times, and in such proportions, as shall be directed by any . act of Parliament to be passed for such purpose, in order to make provision for the charge of any loan or loans thereafter to be contracted." It was also resolved, that, in order to carry into effect the provisions of the acts of the 82d and 42d, of the King, for redeeming every part of the nation al debt within the period of 45 years from the time of its Freation, it is also expedient that, in future, whenever the amount of the sum to be raised by loan, or by any other addition to the public funded debt, shall in any year exceed the sum estimated, to be applicable in the same year to the reduction of the public debt, an annual sum equal to one-half of the interest of the excess of the said loan or other addition, beyond the sum so estimated to be appli cable, shall be set apart out of the monies compos ing the consolidated fund of Great Britain ; and shall be issued at the receipt of the Exchequer to the Governor and Company of the Bank of England, to be by them placed to the account of the com missioners for the reduction of the national debt ; t and upon the remainder of such loan or other addi tion, the annual sum of 1 per cent. on the capital thereof, according to the provisions of the said act of the 32d year of his present Majesty.