We shall presently inquire, whether there can be any such dependence ; and, therefore, whether the sinking fund is not an instrument of mischief and de.. lusion, and really tending rather to increase our debt and burthens than to diminish them.
It is objected both to Dr Hamilton's and Mr Grenfell's projects, that the disadvantages which they mention are trifling in degree, and are more than compensated by the steadiness which is given to the market by the daily purchases of the commis. sioners,—that the money which those purchases throw into the market is a resource on which bank ers and others, who may suddenly want money, with certainty rely.
Those who make this objection forget, that, if by the adoption of this plan, a daily purchaser is with. drawn from the market, so also is a daily seller. The minister gives now to one party ten millions of money to invest in stock, and to another party as much stock as ten millions costs to sell ; and as the instal ments on the loan are paid monthly, it may fairly be said that the supply is as regular as the demand. It cannot be doubted, too, that a loan of twenty mil. lions is negotiated on worse terms than one of ten; it is true that no more stock will remain in the mar ket at the end of the year, whether the one or the other sum be raised by loan ; but for a time the con tractor must make a large purchase, and be must wait before he can make his sale of ten millions to the commissioners. He is induced then to sell much more largely before the contract, which cannot fail to affect the market price; and it must be recollect ed, that it is the market price on the day of bidding for the loan which governs the terms on which the loan is negotiated. It is looked to both by the mi nister who sells, and the contractor who purchases. The experiment on Mr Grenfell's suggestion was tried for the first time in the present year, 1819 ; the sum required by Government was twenty-four mil lions, to which the commissioners millions. In lieu of a loan of twenty-four millions from the contractor, there was one only of twelve millions; and as soon as this arrangement was known, previous to the contract, the stocks rose 4 or 5 per cent., and influenced the terms of the loan in that degree. The reason was, that a preparation had been made for twenty-four or thirty millions loan, and as soon as it was known that it would be for twelve millions only, a part of the stock sold was repurchased. Another advantage attending the smaller loan is that 800 per million which is to the bank for management of the loan is saved on the suns subscribed by the commissioners.
Dr Hamilton, in another part of his work, ob serves, " If the sinking fund could be conducted without loss to the public, or even if it were attend ed with a moderate loss, it would not be wise to pro pose an alteration of a system which has gained the confidence of the public, and which points out a rule of taxation that has the advantage at least of being steady. If that rule be laid aside, our measures of
taxation might become entirely loose.
" The means, and the only means, of restraining the progress of national debt are, saving of expendi ture, and increase of revenue. Neither of these has a necessary connection with a sinking fund. But, if they have an eventual connection ; and, if the na tion, impressed with a conviction of the importance of a system established by a popular minister, has, in order to adhere to it, adopted measures, either of frugality in expenditure, or exertion in rais ing taxes, which it would not otherwise have done, the sinking fund ought not to be consider ed as inefficient, and its effects may be of great im portance." It will not, we think, admit of a doubt, that if Mr Pitt's sinking fund, as established in 1792, had been always fairly acted upon, if, for every loan, in addi tion to the war taxes, the interest, and a 1 per cent. sinking fund, had been invariably supplied by annual taxes, we should now be making rapid progress in the extinction of debt. The alteration in principle which was made in the sinking fund by the act of 1802 was, in our opinion, a judicious one ; it pro vided, that no part of the sinking fund, neither that which arose from the original million, with its addi tion of L. 200,000 per annum, nor that which arose from the 1 per cent. raised for the loans since 1792, should be applicable to the public service, till the whole of the debt then existing was redeemed. We should have been disposed to have extended this principle further, and to have made a provision, that no part of the sinking fund should be applicable to the public service, until the whole of the debt then existing, and subsequently to be created, should be redeemed. We do not think that there is much weight in the objection to this clause, which was made to it by Lord Henry Petty in 1807, and re ferred to, and more strongly urged by Mr Vansittart in 1813. The noble Lord said, " I need hardly press upon the consideration of the committee, all the evils likely to result from allowing the sinking fund to accumulate without any limit; for the nation would be exposed, by that accumulation, to the mis chief of having a large portion of capital taken at once out of the market, withouteny adequate means of applying it, which would, of course, be deprived of its value.