This cautious proceeding could not be long continned. The expensiveness of the wars in which the nation was engaged at the end of the 17th century made it necessary to incur debts beyond the means of their prompt redemption, and at the peace of Ryswiek, in 1697, the debt amounted to 214 millions. During the next ten years, although the country was again involved in a continental war, its amount was reduced to little more than 16 millions, and the greatest efforts were made to raise money without imposing any lasting burden on the people. These efforts indeed soon found their limit, and at the acces sion of George I. in 1714, the debt had accumulated to the amount of 54 millions, an amount which excited great uneasiness and caused the House of Commons to declare itself under the necessity of making efforts for its reduction. In 1717 the debt amounted to 484 millions, and the annual charge in respect of the same to 3,117,296/. A great part of this debt consisted of annuities granted fur 99 year's, the money obtained for which had varied from 15 to 16 years purchase.
In the year 1720 the South-Sea Act was passed, authorising the company to take in, by subscription or purchase, the redeemable debts of the nation, the object being to reduce all the debts under one head of account at one uniform rate of interest. In the accomplishment of this scheme the projectors only partially succeeded, while the disgrace ful frauds by which the proceedings of the company at that time were marked, led to a parliamentary investigation which caused the disgrace of some of the ministers, the chancellor of the exchequer being expelled the House, and committed to the Tower for his share in the plot. It is not the least remarkable circumstance attending this scheme that it was attempted at the same time with the equally famous Mississippi scheme, which, with a similar object, was projected in France by John Law, under the sanction of the Regent Duke of Orleans. [LAW, JOHN, in Bros. Div.] In 1736 the public debt in England amounted to about 50 millions, but the annual charge had been reduced below two millions. At the peace of Aix-la-Chapelle, in 1748, the national debt exceeded 78 millions, but in the following year the public obtained some relief from the burden through the lowering of the rate of interest. Little else was done in the way of alleviation at this time, and at the break ing out of the Seven Years' 1Var, in 1756, the debt still amounted to 75 millions. A public writer of some repute, Mr. S. Hannay, says, at that date, " It has been a generally received notion among political arithmeticians, that we may increase our debt to 100,000,000/., but they acknowledge that it must then cease by the debtor becoming bankrupt." Those who in more recent times have witnessed the addition year after year to the debt of sums equal to more than the difference between its then amount and its declared limit, may smile at this prediction, and learn to put little faith in opinions which are not based upon previous experience.
When the Seven Years' War was ended by the peace of Paris, the debt reached 139 millions, and the annual charge was 4,600,000/. During the twelve following years, a period of profound peace, only 10,400,000/. of the debt was discharged. The war of the American Independence raised the debt from 129 to 268 millions, and the annual charge in respect of the same to 9,512,232/. So little was done in the way of liquidation during the following ten years, that at the begin ning of the war of the French Revolution the debt still amounted to 260,000,0006., and its annual charge to 9,437,862/. The outlay occa sioned by the prosecution of that war was great beyond all precedent. Between 1793 and the peace of Amiens the addition made to the capital of the debt amounted to 360 millions, and the annual burden was increased from 9,437,862/. to 19,945,624/. Between the recom
mencement of the war in 1803 and its termination after the battle of Waterloo in 1815, there were added 420 millions to the capital of the debt, which then amounted, including the unfunded debt, to 885 millions, and the annual charge upon the public exceeded 32 millions of money. This enormous, this frightful rate of progression, appears to have excited far less alarm than was expressed at the comparatively trifling additions made at the beginning of the funding system, a con sequence which probably must be in great part attributed to the establishment of the sinking fund, and to the hope which it held out of cancelling at no very distant period each amount of debt suc cessively increased.
A plan for the gradual extinction of the National Debt by the establishment of a sinking fund was proposed and partially applied in 1716 by Sir R. 'Walpole. The scheme for that purpose proposed under the same name by Mr. Pitt in 1786 had a greater show of reality about it. By this scheme the sum of one million was annually set apart from the income of the country towards the extinction of its debt. Other sums were rendered accessory to the plan, and it was supposed that at the expiration of 28 years the annual income of the sinking fund would amount to four millions, a part of which might then be applied towards relieving the burden of the public. So fax the project bore the stamp of reasonableness and prudence : had the fund of one million annually assigned to commissioners been an actual surplus of income over expenditure, its operation must speedily have been highly advantageous to the country. The fallacy consisted in this, that the sums devoted to it were borrowed for the purpose. The only real advantage secured by this means arose from the unfounded confidence which it imparted to the public, under which they willingly bore a higher rate of taxation than might have been tolerable but for the expectation of future relief through its means. Now that the absurdity is acknowledged of borrowing in order to pay off debt, which absurdity would in the case of an individual always have been appa rent, it is difficult to account for the blindness with which the whole nation clung to this so-called fund as the certain means of extin guishing the debt which in effect it contributed to augment through the less advantageous terms upon which the money was borrowed than those upon which an equivalent amount of debt was afterwards redeemed. The difference between the average rates at which money was borrowed and at which purchases were made by the Commissioners who managed the sinking fund between 1793 and 1814 was such, that through the operations of the fund, upon which such confident hope of relief was placed, the country owed upwards of 11 millions more at the end of the war than it would have owed but for those operations. At the period just mentioned the annual income of the sinking fund amounted to arising from dividends on stock purchased by the commissioners with funds borrowed at a higher rate of interest for the purpose. It was impossible however during a time of peace to raise by means of taxes so large an amount, in addition to the actual current expenditure of the country and the interest upon the unredeemed portion of the debt. During the war, when the deficiency of income was covered by yearly loans, the fallacy was not quite so apparent as it now soon became, for a few years after the peace the deficiency in the public income was borrowed from the sinking fund commissioners by parliament, a course which served to render the absurdity only the more apparent, and in 1824 the plan of keeping up a large nominal sinking fund in the absence of actual surplus income was abandoned.