The year 1920 marked a new zenith of Brit ain's national debt, and although many loans raised during that year were in the nature of conversion operations, a great deal of new money was raised and as in some of the previous loans, new features had to be introduced to ensure a ready absorption. Owing to the high rate of income tax, which touched 6/– in the I., one Government loan took the form of 4 per cent stock, tax-free, while in the case of yet another loan privileges were given to make payment for death duties with the bonds reckoned at their par value. Again, in 1920, 4 per cent Victory bonds were issued at the price of 85, having the right to be redeemed at par in a series of drawings each year and also carrying the right to be tendered for death duties. Thus it will be seen that although Great Britain did not resort to any forced loans in spite of the great strain of the war, unusual inducements were attached to many of the war loans. Moreover, in addition to the loans raised internally, considerable borrowing was effected in the United States. This borrowing took the form during the earlier years of the war of raising from Ameri can nationals, various amounts, ranging up to the equivalent of about ii5o,000,000. These loans were raised before America came into the World War. Following upon that event, the United States Government gave credit to the British Government for goods and services supplied, and this indebtedness subsequently resolved it self into a liability of over £900,000,000, which was finally funded on terms involving the ultimate repayment over a period of some sixty-two years, dating therefrom. In addition, Great Britain bor rowed temporarily certain sums from some of her overseas domin ions, and from some foreign countries, but most of such debts have now been repaid.
In 1923 a committee was appointed on national debt and taxation, presided over by Lord Colwyn, and its report was published in 1927. The majority of that committee recommended that steps should be taken to increase the sinking fund to £75,000,000 a year. They hoped that with the aid of additional repayments of loans by the Govern ments of Great Britain's Allies, reductions in the interest charge from conversions and redemptions, and possibly expanding rev enue. such an amount should be quite practicable within a brief period. The committee was also strong in its recommendations that Government conversion loans should not be issued at a dis count, but the advice was disregarded. The Colwyn committee also deprecated any other system than that of definitely revealed and fixed sinking funds. They stated that in their opinion "there was no possible device which could absolutely ensure the contin uance of debt redemption, if the Government of the day decided on a contrary policy." Their recommendations as regards the enlargement of the sinking fund as a whole were strengthened by the fact that the sinking fund provisions, ear-marked for specific loans, themselves encroached very considerably upon the total amount available for debt redemption as a whole.
Arising out of post-war conditions in Great Britain, a new form of liability was incorporated by the State in connection with various undertakings mostly of a local character, where money although not raised directly by the State, carried with it State guarantees. The circumstances responsible were generally those connected with the dearness of money, which made it difficult for industrial concerns to raise new capital on terms calculated to make the undertaking a paying proposition. Accordingly, and for a short period, when it was shown that the capital required was for the purpose of providing employment, which would not otherwise be provided, the State gave certain guarantees. The total amount involved was not large, being prob
ably within the limit of about .L00,000,000 but the point is one to be regarded as coming within the sphere, if not of British debt, of British liabilities, and moreover constituting a special feature arising out of the financial and social problems following upon the World War.
Although the debts of the United Kingdom are self-contained, and there is no kind of liability with regard to the indebtedness of oversea dominions, the senti mental connection between them is close and especially so in recent years, when there is an increasing tendency in Great Britain to speak of empire as well as of the national finances. If, there fore, the British debt were to be added to debts of the various oversea dominions, the position at the end of 1938 or early in 1939 comes out approximately as follows:— United Kingdom . ...... £8,163,000,000 Eire (Irish Free State) 50,000,000 Canada . ......... f 723,000,000 Australia (Commonwealth) . . . . LI ,275,000,000 New Zealand . . ..... . 290,000,000
India South Africa . . ...... . L 280,000,00o Basic figures show that the total debt of the British Empire is nearly f I 1,000,000,000 and that the increase since the start of the century has been almost tenfold, the growth being as remark able in the case of the overseas dominions as in the case of Great Britain itself. For the most part, the growth in the Canadian and Australian indebtedness may be connected with the World War, but expenditure on the development of the resources of new coun tries has also added a considerable part, especially in the case of Australia.
When Alexander Hamilton (q.v.) became the first secretary of the U.S. Treasury in 1789, one of the major problems con f ronting him was the preparation of a statement of the Na tional debt, and a plan for its settlement. This was the sub ject of his Report on Public Credit submitted on Jan. 9, 1790. The foreign debt, almost all French, incurred during the Revo lution, including principal and accumulated interest, was placed at $11,710,000. It had been contracted under certain precise conditions which allowed of no disagreement in the way it was to be paid. The domestic debt was more difficult to deter mine since it consisted of a variety of credit obligations issued at different times under varying terms of contract. Hamilton esti mated the principal at $27,383,00o and accrued interest at $13,030,000. These credit obligations had passed current in the country as monetary medium and had depreciated in value. The question arose as how they should be repaid, and Hamilton reached the conclusion that the present holders should be paid full value. Against much popular ill feeling Hamilton's plan was adopted. The third question, concerning the matter of State debts which totalled $18,271,786, was whether the Federal Government should assume these debts or not. Hamilton favoured assumption on the theory that it would contribute to a more orderly, stable and satisfactory arrangement of national finances and also con tribute to national unity. The Southern States, whose debts were low, objected to the plan, and Hamilton was able to carry it through only by a political bargain which granted to the South ern States the removal of the national capital from Philadelphia to a territory to be set off from Virginia and Maryland, the Dis trict of Columbia. The Funding Act of Aug. 4, 1790, which provided for three loans to take up the three different classes of indebtedness, at once stabilized the finances of the new nation.