TO THE PARLIAMENTARY DEBATES, VOL. XXIV. TABLES RESPECTING THE PLAN OF FINANCE PROPOSED TO PARLIA MENT IN MARCH 1813, BY THE RIGHT HON. NICHOLAS VANSITTART, CHANCELLOR OF THE EXCHEQUER. OUTLINE OF THE PLAN. FROM the period of the complete introduction of the Funding System in the early part of the last century, to the close of the American War, the object of our measures of finance during war appeared to be only to provide for the immediate expences of the year, by borrowing such sums as were necessary for any extraordinary charge incurred, and by imposing such taxes as might meet the interest of the loan, leaving to the period of peace the consideration of any provision for the repayment of debt; and this being attempted at irregular periods and on no permanent system, was never carried into effectual execution; the total amount of debt redeemed between the Peace of Utrecht and the close of the American War being no more than 8,330,000l. The accumulated expences of the American war, and the depressed state of public credit and of the revenue at the close of that war, impressed on the vigorous mind of Mr. Pitt the necessity of adopting a more provident system, of which he laid the basis, with admirable judgment, in the Sinking Fund Acts of 1786 and 1792. At the commencement of the war of the French revolution, Mr. Pitt thought it sufficient, to meet the charge of military and naval expence by loans, accompanied by that provision for gradual redemption, which had been established by the Act of 1792. The increased expences of the war, and the prospect of its long continu(VOL. XXIV.)—Appendix. ance, induced him however, in 1797, to aim at the most efficacious system by which a long duration of war can be supported, that of equalizing the income with the expenditure of the country. For this purpose he proposed, in 1798, the establishment of a general Tax on Income; intended, with the aid of some other war taxes, to provide within the year, for a considerable part of the public expences, and also to repay within a few years after the conclusion of peace, all debt contracted beyond the amount of the Sinking Fund in each year. The plans adopted for increasing the national income upon the renewal of the war, by lord Sidmouth, and afterwards by lord Grenville and lord Henry Petty, in 1803, 4, and 6, were on a much larger scale; and there is every appearance that the income of the nation, might at this time have equalled or exceeded its expenditure, if the necessity of a large increase in our foreign expences had not arisen. The total amount of the public expenditure, exclusive of the Sinking Fund, was on an average of the years 1806 and 1807, about 61,600,000l. The income of 1807 (taking the Property Tax, according to its assessment, at about 11,400,000l.) was about 59,700,0002. The net produce of the public income, on an average of the years 1809, 1810, and 1811, deducting the arrears of property tax paid in beyond the assessment of each year, was about 64,000,000%. which, with the addition of the taxes im (A) posed in 1811 and 1812, would appear to leave a considerable surplus beyond the amount of expenditure of 1807; but to this expenditure must be added the increased charge of unredeemed debt since that year. This amounts to about 2,300,000l. which, added to the beforementioned sum of 61,600,000l. being the expenditure of 1807, makes together nearly the above sum of 64,000,000%. The expenditure of the same years 1809, 1810 and 1811, amounted it is true, on an average, to nearly 73,000,000l. and that of the year 1812 may be estimated at about 81,000,000. exclusively of the repayment of Exchequer Bills and Loyalty Loan. The amount therefore of the sum to be provided, in order to equalize the receipt and expenditure of Great Britain, on an average of the years 1809, 1810, and 1811, allowing for the increased charge of unredeemed debt, may be estimated at 9,000,0001. or, taking the expenditure at 81,000,000l. at about 17,000,000l. from which sums must however be deducted the future produce of the taxes imposed in 1811 and 1812, which may be estimated at about 2,500,000l. and which would reduce the former sum to 6,500,000l. and the latter to 14,500,000l. To raise even the lowest of these sums by an immediate imposition of new taxes, in addition to the great exertions already made, would, however, be considered as a very heavy burden; and one, the severity of which might be felt still more sensibly, from an apprehension, by no means unreasonable, that such a sacrifice might eventually prove to have been unnecessary, as many supposable and even probable cases may arise during the continuance of the war, in which it would be possible very considerably to reduce our expences. Nothing more, therefore, can be expected as a permanent war system, than to provide for such a scale of expence as must necessarily arise out of the state of war, without including that great increase which has been occasioned by our extraordinary exertions abroad in the last four years, and which, in whatever way it may appear to the wisdom of parliament most proper to provide for it, must be consider. ed as of only an occasional nature. In the foregoing statement it is assumed, that the Sinking Fund is no portion of the national expenditure. In fact, by cancelling a certain portion of debt in each year, it reduces the debt really incurred, to the amount in which the sum borrowed exceeds the sum to be redeemed. It is evident indeed, that whether the fund is applied in the purchase of stock already existing, or in reducing the amount of stock to be created, the effect will be nearly the same; and the equalization of the public income and expenditure may consequently be considered as a primary advantage of the Sinking Fund, no less than the actual redemption of debt. The former of these objects, so far as is requisite to meet that part of the expences of the war, which may be considered as necessarily permanent, appears, by the foregoing Statement, to have been already accomplished. It has, indeed, been ef fected by means which, while they shew the extent of the resources of the country, and evince its firm and unshaken spirit, point out at the same time the expediency of not calling for any further sacrificet which may be avoidable: for this great object has, in fact, been accomplished by the extraordinary payment of more than 200 millions of war taxes. This unexam. pled exertion may be considered as no less powerfully co-operating with the Sinking Fund, in its other great object of the reduction of the debt, since the crea tion of a new debt to an equal amount has thereby been avoided. These considerations may be thought sufficient to point out the general expe diency of any alteration of the present ar rangement of the Sinking Fund, which, without violating the provisions of the Act of 1792, may diminish the weight of those further burdens, which the progress of the war may still impose upon the nation; and with this view, it may be proper to advert to the remarkable period at which the redemption of the debt has actually ar rived. When the establishment of the Sinking | example, no provision was made for the Fund was proposed by Mr. Pitt, in 1786, immediate reduction of that part of the the debt amounted to near 240,000,000l. ;* loans which was charged upon the income a sum, of which, few then living ever tax; but it was intended that those sums hoped to see the redemption, but which, should be redeemed by a prolongation of by the steady perseverance of parliament, that tax in time of peace. In 1802, when in this important measure, has already the income tax was repealed, and other funds were provided for defraying the interest of these loans, it was again thought unnecessary to make immediate provision for the redemption of the principal, which was left to be redeemed by the prolonged operation of the Sinking Funds already existing. been redeemed. It is true, that this redemption has been effected, not solely by the operation of the Sinking Fund established in 1786, but in great part by the provision made for the redemption of loans since contracted, and also by the redemption of the land tax, and, in some degree, by the purchase of life annuities. These additional exertions shew the spirit and perseverance with which the original system has been carried into execution, amidst all the difficulties of an expensive and protracted warfare. The separation, kept up, for purposes of account, between the original Sinking Fund of 1786 and the additions subsequently made to it, is, however, only nominal; it neither has been, nor can be attended to in practice; because the whole of the debt contracted since the establishment of the Sinking Fund, having been borrowed upon the old stocks, and no distinction made between the old and the new proprietors, the whole Debt is considered as one indiscriminate mass, to which the purchases made by the Sinking Fund are equally applicable. No right of priority of redemption can exist in any particular class of stockholders, nor can any conditions of repayment be claimed (except in the instance of the five-percent loan of 1797) beyond those laid down in the Act of 1792, under the faith of which all subsequent loans may be considered as contracted. By that act, provision is to be made for the redemption, within 45 years, of all Debts subsequently created; and, within this limit, parliament has the power to regulate the mode of the redemption at its discretion; and has in fact exercised that discretion in several instances. It may therefore be considered as decided, not only by the recorded opinion, but by the established practice of parlia ment, that while provision is made, in any manner, for the redemption of each respective portion of the public Debt, within 45 years from the time of its being created, the enactments of the Act of 1792 are complied with. It would consequently be equally consistent with the Act of 1792, either to redeem any number of loans by applying to the separate redemption of each the distinct portion of Sinking Fund created at the time of its being contracted, or by applying the whole fund, in the first instance, to the total redemption of the first contracted loan, and afterwards to that of the several succeeding loans in their respective order; so that each of them should be redeemed within 45 years from its being raised. This second mode would, however, be attended with important advantages. In the first mode, the whole charge of interest and Sinking Fund, occasioned by any number of successive loans, is appropriated, without any possible relief to the public, until the whole of one of the loans shall be completely redeemed by the exclusive operation of the one-per-cent originally attached to it; which is not likely to happen in much less than 40 years, and may exceed that term. But in the latter case, several of the loans first contracted In the years 1798, 1799 and 1800, for will, in the event of a war of considerable * £.238,231,248. duration, though much short of 40 years, have been redeemed previously to the con clusion of the war, and will have furnished, to a considerable extent, the means of providing for a fresh charge; and this resource will be continually increasing, in proportion to the duration of the war. Another advantage will be, that the redemption of the debt, being more gradually diffused over the whole period, will produce less alteration in the state of property. This successive redemption is indeed a point of no small importance to the regulation of the money-market, as the rate of interest and the value of money might be very inconveniently affected, by the too rapid increase or the too sudden reduction of the sums brought into circulation by the Sinking Fund. It should not therefore be suffered to accumulate for too long period; while, on the other hand, it should not be too much diminished by extinguishing at once too large a portion of the public debt. These considerations appear to have occasioned that provision of the original Sinking Fund Act of 1786, by which its accumulation at compound interest was limited to four millions; and they will be still more effectually provided for, by the mode of successive redemption, which has been pointed out; while another advantage, attending it, would be, that throughout nearly the whole period of its operation, a much smaller portion of the national resources would be occupied in providing for the public debt. The point at which we are now arrived in the redemption of the debt, affords a most favourable opportunity for the adoption of this mode; which would have been originally preferable, and which the actual duration of the war, and the prospect of its possible further continuance, render at present peculiarly advantageous. Upon these principles, it is the object of this paper to propose a Plan, by which a gradual and equable reduction of debt may be provided for, with great immediate advantage to the public. It is only necessary to enact, that the debt first contracted shall be deemed to be first paid off; whether purchased by the Sinking Fund originally provided for its redemption, or by any other. It has already been shewn, that this supposition involves no absurdity, the old stocks and the additions to them being so mixed as to render all discrimination impossible; and it is surely very allowable in practice to assume that any given portion of the public debt is discharged, when an equal sum funded in the same securities, has been paid off. A sum equal to the capital of the whole public debt existing in 1786, having already been purchased by the commissioners, or transferred for the redemption of land tax, or the purchase of life annuities, the execution of this plan will only require, with regard either to this sum, or to any debt hereafter to be redeemed, that a certificate of such redemption shall be published in the Gazette, and laid before parliament by the commissioners; and that, thereupon, the stock so redeemed and standing in the names of the commissioners, shall be at the disposal of parliament, and liable to be cancelled, in such proportions and at such times as parliament may direct, to such an amount as may be necessary for charging, upon the same securities, the dividend and sinking fund of any loan which may have been contracted for the public service; but that the whole Sinking Fund created by the Act of 1786, or by any subsequent Act, shall be continued and applied, until the total redemption of all debt now existing or to be created during the present war. In order, however, effectually to secure the means of redeeming all future loans within fortyfive years, and to preserve a proper proportion between the Sinking Fund and the Unredeemed Debt, it will be expedient to enact, that whenever the sum borrowed in any year shall exceed the sum to be paid off, a sinking fund shall be provided for the excess of loan, equal to one half of its interest; and for the remainder of the loan (or for the whole, if not exceeding the amount to be redeemed within the year) a sinking fund of one-per-cent. conformably to the Act of 1792. It may also be observed, that as this ar Bills will ultimately be redeemed, otherwise than by conversion into funded debt; in which case the provision now made for their redemption, will be an anticipation of the Sinking Fund which would then be provided. The mode of exercising this discretionary power of parliament to cancel such portions of debt as shall have been redeemed, may be varied as circumstances may require; but, during war, that which has been pointed out, appears to be most generally advantageous. rangement involves the repeal of those provisions of the Act of 1802, under which the whole Sinking Fund then existing was directed to accumulate at compound interest, till the complete redemption of the debt which then remained unredeemed, it will be proper to make good to the Sinking Fund the, annual sum of 870,000l. which would have been appropriated to the redemption of the different sums provided for in 1802, if that consolidation had not taken place, and if those sums had been accompanied by the usual The effect of its adoption will therefore redeeming fund of one-per-cent. while, in this respect, the proposed Plan be stated in the first instance; after which will revert to the original arrangements it will be proper to take a view of the of the Sinking Fund, it will also conform most beneficial application of which the to them by returning, with much greater principles of the plan may appear to be advantage, to the principle of those provi- capable on the supposition of peace. sions, by which relief would before this time have been obtained to the public by the limitation of the Sinking Fund, as established by the Act of 1786, and then restricted in its accumulation to the annual sum of four millions. And may be It is not intended to offer any opinion of the amount of the loans to be raised in future in the event of the continuance of the war: but for the purpose of illustrating the operation of the proposed Plan in comparison with that of the present sys In the first it is assumed that the loans in future, for a great number of years, will be equal to that raised in 1812, which, including the Exchequer Bills funded, amounted to 28,000,000l. [See Table A. 1, 2, 3.] In connexion with this part of the sub-tem, in a variety of cases, Tables have been ject, should be mentioned the great in- annexed, shewing the effects of each on crease of the debt in unprovided Exche- different suppositions. which quer Bills, of late years; considered as a departure from the spirit of the Sinking Fund Act of 1792. It was certainly the intention of that Act, that every increase of public debt, except mere temporary anticipations of income, should have a provision made for its extinction, at the time when it was incurred. But large sums, now amounting in the whole to 26,000,000. have been raised at different times, and continued from year to year, in the shape of Exchequer Bills, without any provision for the extinction of the debt so created. To remedy this inconvenience, the most proper method appears to be, that a sum should be annually granted to the Commissioners for the reduction of the National Debt, equal to one-per-cent on all unprovided Exchequer Bills outstanding on the 5th of January last, and should continue to be annually issued till they shall be funded, or otherwise permanently provided for. It is not probable that these To fund this sum at 5 per cent for four years to come, would, according to the present system, require the imposition of taxes to the amount of nearly new 7,500,000.; and in the whole, to the year 1830, about which time the debt consolidated in 1802, would, at that rate of interest, be redeemed by the system now existing, taxes would be required, supposing the war to last so long, to the amount of upwards of 31,000,000l. But according to the new Plan, it would require no taxes for the next four years, except about 1,100,000l. in the present year, for the purpose of making those immediate additions to the Sinking Fund, which have been above specified: and in the whole, to 1830, only about 18,000,000l. would be required. |
