In the reign of King William, and du ring a great part of that of Queen Anne, before the practice of funding on perpetu al annuities had become familiar, the greater part of the new taxes were im posed for a short period of time (for four, ' five, six, or seven years only) and the principal part of the grants of each year I consisted of loans in anticipation of the produce of those taxes. The produce being, frequently insufficient for paying,4 Within the limited time, the principal and interest of the money borrowed, deficien cies arose ; to make good which, it be came necessary to prolong .the original term. This expedient was repeated, and money was sometimes borrowed ow, a fund already anticipated for several years to come. Exchequer bills were issued, and lotteries introduced, but all these temporary means were found inade quate to the rapid increase of the public expenditure ; which of course silvan caus ed an accumulation of publk debts ; and as the interest payable to the puttlic cre ditors was frequently some time in ar rear, public credit was occasionally re duced to a very low ebb, and apprehen sions were entertained that the public debt hail already become too heavy a burthen for the country to prosper un der.
In the year 1711 a project was formed for relieving the government from the financial difficulties under which it la boured, by permitting the prowietors of various debts and arrears, amounting to 8,971,3251. to subscribe them towards raising the capital of a company formed for carry ing on a trade to the South Seas. The actual capital of the company was 9,177,9671. 158. 4d., which, for the further accommodation' of guvermnent, was in creased in 1715 to ten millions.
The total amount of the:national debt, on the 31st of December, 1716, was 48,364,5011. 8s. 4d. which, on the opening of the following session of parliament, was mentioned in the King's speech, and the Commons' address, as an insupporta ble weight, and the government appears to have thought it necessary to concert seriously such measures, as might lay the foundation of an effectual plan for its re duction. In consequence of this .dispo sition, all the existing taxes, except the land and malt, were made perpetual; and, having been distributed into three classes, called the. Aggregate, South Sea, and General Funds, the surplusses remaining, after satisfying the previous charges upon these respective funds, were formed into a separate fund, called the Sinking Fund, for the 'express purpose of disclrarging the principal and interest of such national debts and incumbrances as were incurred before the 25th of December, 1716. See SINKING FUND.
The memorable South Sea scheme, in the year 1720, was to have furnished a considerable sum, to be employed in the reduction of the public debts ; instead of Which it increased their amount by an ad dition to of 3,034,769/. 11r. 11d.
while theannual charge was rather aug mented than diminished by the allowance for management on the increased capital. The reduction of a part of the interest was, however, secured ; and as the corn patty's capital was redeemable; a further reduction of interest might be effected at a future period ; but this depended on future circumstances : whereas, had the terminable annuities which were convert ed into redeemable perpetuities by this scheme, remained in their original state, there was a certainty of their expiring at a fixed period.
In 1727 the interest on 37,738,0071. of the public debt was reduced from 5 to 4 per cent. which produced an important addition to the Sinking Fund. An opinion, however, began to prevail, that the pub lic debts had increased since the esta blishment of the fund, and that this provi sion was inadequte td th# purpose for which it was designed. This occasioned the of an excelhan essay on the public debts, which has been general ly ascribed to Sir Natlh. Gould, in which it was clearly shewn, that although from the South Sea subscription, and from se veral articles being brought to account which were actually due before the 25th of Decdrrber, 1716, there was an appear ance of increase, the deht had in reality been dithinished, and that from the great addition now made to the Sinking Fund, by the reduction of interest, it would, if not diverted tea any other purpose, dis charge all the debts then existing in about 56 years, or with a further reduction of interest in a shorter period.
The application of the sinking fund to its original object was, however, of short duration : in 1733 half a million was taken from it towards the supplies : larger sums were taken in the following years, and the whole amount paid crif by the fund, from its establishment to the year 1739, was only 8,328,3541. leaving the amount of the nationdhdebt 47,314,8291. The war which began in this year increas ed the debt to 78,293,3131. the interest on which amounted to 3,061,0041. per an num : but the rise in the price, of the pub lie funds on the peace enabled govern ment, in 1749, to lessen the annual charge, by reducing the interest on 57,703,4751. from 4 to 3i per cent. till the 25th December, 1757, and thence 3 per cent. This reduction produced a saving of 612,7351. per annum ; and with the salt duties, amounting to about 220,0001. per formed another important ad 6ition to the sinking fund, the yearly pro duce of which, on an average of ten years previous to • this augmentation, was 1,356,5781.; an income sufficient to have effected a very considerably diminution of the public debts, if it had been strictly applied to the purpose for which it was designed ; but being constantly taken towards the yearly supplies, scarce any progress was made in the reduction of the debt.