SINKING FUND, a portion of the pub lic revenue set apart, to be applied to the reduction or discharge of the public debts. The appropriation of a part of the revenue to this purpose is a measure which had been adopted in other coun tries long before any necessity for it ex isted in England, a provision of this kind having been established in Holland in 1655, and in the Ecclesiastical State in 1685. Both these funds originated in a reduction of the interest payable on the public debts, which was the means after wards adopted for the establishment of a similar fund in this country.
At the commencement of the funding system, the loans were chiefly raised on terminable annuities, which are in them selves a species of sinking fund; but when the present mode of borrowing on per. petual annuities was preferred, it soon became evident, that a continual accumu lation of public debts would in time in volve the government in much embar rassment, if it was not attended with still worse consequences. Various projects were therefore offered for the discharge of the public debts, or for confining them within moderate bounds ; and, among others, the plan of such a sinking fund, as was afterwards actually established, was clearly laid down in a pamphlet, entitled "A Letter to a Member of the late Par liament, concerning the Debts of the Na tion," published in 1701. In 1713, Mr. A. Hutcheson presented to the King a plan for payment of the public debts. In 1715, different projects for this pur pose were published by Edward Leigh, Mr. Asgill, and others. And, in 171.6, a plan for the gradual discharge of the debt was actually adopted, which was af. terwards generally known by the appel lation of the sinking fund. Sir Robert Walpole claimed great merit as the father of this fund, though it certainly required very little knowledge or invention to co. py a plan, which had been found success ful in other countries, and which had been publicly recommended many years before ; but whatever claims Sir R. Wal pole might have to the formation of the plan, he indisputably has all the disgrace_ of having perverted and destroyed it. The act by which it was established was word ed as strong as possible, and expressly ordained, that the fund should be applied to the discharge of the public debts, and to no other use or purpose whatsoever ; but, in 1722, it was made a collateral se curity for th e interest of a million raised on exchequer bills, which prepared the way for more direct encroachments. In 1724,
a sum was taken from the fund to make good the loss to the treasury from the re duction of the value of gold coin ; and in 1727, the whole produce of the civil list revenues were settled on the King, by which the sinking fund was deprived of about 100,0001. per annum, to which the surplus of these revenues had usually amounted. In 1733, the gross sum of half a million was taken from the fund towards the current supplies, at which time the medium annual produce of the fund for five years had been 1,212,0001. ; but the alienation of it being continued, by charging it with the interest of new loans, taking sums from it towards the supplies, and even anticipating its pro duce, little progress was made in the re duction of the debt, and at length the sinking fund became a mere nominal dis tinction.
The ruinous tendency of a continual accumulation of public debts was strong ly pointed out by various writers on sub jects of policy and finance ; but by none with more zeal and ability than the late Dr. Price, who, about the year 1769, of fered to the public some observations on the national debt, in the third chapter of his " Observations on Reversionary Pay. ments," in which he particularly recom mended the establishment of a perma nent sinking fund, on the principle of that established by Sir Robert Walpole, but of which the efficacy had been so soon destroyed. In 1771, in an "Appeal to the Public on the Subject of the Na tional Debt," he showed that the best scheme for paling of the debt was that which had long been known, which had been adopted, but unhappily crushed in its infancy ; and in 1773, in the preface to the third edition of his " Treatise on Reversionary Payments," he took the opportunity of again enforcing the ne cessity of restoring the plan formerly established, and securing it from future perversion. This advice was repeatedly urged on subsequent occasions ; and in 1785, when Mr. Pitt was deliberating on the best means of establishing a new sinking fund, he particularly sought the advice and assistance of' Dr. Price, who communicated three plans, which ap peared to him the best adapted for car rying into execution a measure he had so long and so earnestly recommended. It was one of the three plans thus com municated which was afterwards adopt ed ; but with some alterations, which considerably affected its efficacy, and which it has since been found necessary to correct.