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ART. V. Reflections on the financial System of Great Britain, and particularly on the Sinking Fund, written in France, in the Summer of 1812. By Walter Boyd, Esq. 46 pp. Hatchard.

1815.

THE author of this pamphlet bears a name of celebrity in the annals of our finance. We believe that he was honored by the confidence of Mr. Pitt; and, in our view, it is a high eulogium on the integrity and talent of any one to state, that he enjoyed the confidence of that great Minister. But the vicissitudes of fortune in this commercial country are among the common incidents of every passing day. Early in the last war, Mr, Boyd experienced a fatal reverse of circumstances in a house which, till then, enjoyed the highest credit, and fell from distinguished opulence into great necessity; but he bore with him into retirement the commiseration of many, and the respect of all who knew him.

It was the fate of Mr. Boyd to pass into still greater calamity. He was one of those who, during the short peace of 1802, had trusted in the plighted faith of the Consular Government; and, by the unprecedented violence of that government, was detained at the renewal of the war in hopeless imprisonment. He wrote this pamphlet

In the tenth year of his detention in France, under circumstances more calculated to drive him to despair, than to lead him to look for consolation in any endeavour to be useful to his country.

Stifling however the sense of his personal sufferings, and elevating, as well as circumstances permitted, his mind to the importance of the subject, he employed his time, during several months, in establishing a chain of reasoning, from assumed data (for such only he possessed) tending to shew the utility, and even the necessity of some change in the management of the Sinking Fund, in order to derive from thence part of the permanent taxes, which an indefinite prolongation of the war would render necessary."

Ex

Whatever comes from Mr. Boyd is worthy of attention. perienced in the doctrines of Finance, he forms no hasty judgement. His opinions are entitled to attention even where they fail of convincing.

The plans here laid before us are founded on a view of the National Debt and of the Sinking Fund, not according to the annual amount of the one and the gross amount of the other, but according to the relation which the produce of the one may bear to the charge for ultimately redeeming and in the mean time defraying the interests of the other. Thus, in the year 1786, when our finances were reduced to order by Mr. Pitt, the Sinking

Fund

Fund of the annual million then established bore the proportion of nearly 1 to 9 to the then existing interest of the National Debt, which was nearly eight millions, with the charge for redemption added. By the uninterrupted operation of that fund upon that debt, it would redeem the whole in 45 years. Mr. Boyd assumes that the interest of the debt, at the time that he wrote, is 24 millions, and the Sinking Fund, in its natural pro. gress, and by the additions made on account of the subsequent loans, increased to 12 millions, making the amount of the annual charge 36 millions. The proportion therefore between the augmented Sinking Fund and the annual charge, for payment of the interest, and for its ultimate redemption, is as 1 to 3. By extending the calculation it will appear, that while the Sinking Fund is left in uninterrupted operation, and the usual provision of 1 per cent. made for the redemption of every new loan added to the debt, the proportion of the Sinking Fund to the total charge for interest and redemption will continually increase, notwithstanding the increase of the debt by frequent loans, till at last its amount must be the same, and the debt be extinguished.

"It is made a question whether a perseverance in this system, which burthens the country with the whole charge of the publick funded debt, and all the additions to it," till a great or complete progress be made in its redemption, "be preferable to such a present modification of the Sinking Fund as may have the effect of gradually relieving us of taxes, as they have been and may be gradually imposed."

Mr. Boyd proposes three schemes of modification.

By the first scheme the Sinking Fund is to proceed in its present course of operation for five years. At the end of that period it is to be reduced to bear the same proportion to the then annual charge which it now bears to the present annual charge. The surplus produce is to be still applied in the purchase of stock-and the interest of that stock is to be appropriated by Parliament to such purposes as may be deemed expedient. At the end of the next and of every succeeding period of five years the proportion which now subsists between the Sinking Fund and the annual charge is to be again restored, and the surplus produce in like manner to be applied.

By the second scheme the Sinking Fund is to be reduced, at the end of every period of five years, to its present proportion, and its surplus produce be applied, not in the purchase of stock, the interest of which might be appropriated to the reduction of taxes, but to the immediate aid of the publick for the current expences of each year.

Without

Without entering into the details used by Mr. Boyd to render these schemes luminous to those who delight in prolix calculation, we shall only observe that the simple effect of either of them is to arrest the grand progression of the Sinking Fund at the end of fiveyears from the present period, and to limit its maximum of operation to that increase which would be attained in the continuance of the established system during that five years.

The third scheme proposed by Mr. Boyd is engrafted on the first, so as that whatever sums should be withdrawn from the Sinking Fund, by the operation of that scheme, are to be an nually issued by Government (either raised by new loans or by new taxes) to replace the same amount in that fund. For the details we must refer to the publication itself.

Now though our respect for Mr. Boyd's calculation is consi derable, yet we cannot extract from those, which he has now published, any novel result. We were taught at school that the operation of compound interest, continued uninterruptedly, would produce prodigious accumulation. As children, we raised many a splendid fabrick of imagination on that glittering foundation. But parsimonious expenditure and multiplication of resources are the only sure means of avoiding the pressure of subsisting debts, or of adding to the mass of acquired wealth, either in private or in publick economy. Schemes of calculation, whether simple or abstruse, have no magical power. The British Government has incurred a heavy load of debt, because its expenditure has continually exceeded the amount of its resources. The reduction of it, as far as expedient, can only be effectuated by rendering its expenditure less than its revenue, and reserving the excess of revenue for the discharge of a portion of its debts. The statement of that principle exhausts the science of the Sinking Fund. The main utility of that institution is to provide a growing revenue appropriated to the liberation of the State from past obligations. Whatever scheme may arrest the growth of that appropriated revenue, however ingeniously devised, is in fact illusive, and a partial abandonment of its principle.

The reduction of the National Debt very far below its present amount is desirable, because the taxes now raised for the payment of its interest are of so great an amount that they weaken the political energies of the country. We trust that the peace, now happily established in Europe, will be of long continuance; but a day must come when we, or our childreu, shall again contend against powerful enemies, if not for our constitution and independance, yet for honour and the security of our rights.

"Alter erit tum Tiphys, et altera quæ vehat Argo
Dilectos Heroas: erunt eliam altera bella."

We

We are now to provide not only for the relief of the present generation, entitled for its vigour and fortitude to high reward, but for future exigences which must inevitably occur. This great nation must not be enfeebled by a weight of past debt.

In all our speculations upon the Sinking Fund, we ought to bear in mind the primary object of creating a national debt, and the political effects which it has produced. We should then be more able to ascertain the rational object of a Sinking Fund, and to estimate the beneficial effects which it is capable of producing.

The first object of creating a public debt was ostensibly to enable the State to execute a national undertaking permanently beneficial to the community to which its immediate resources were inadequate. The first funded debt was established in 1697, but it was to provide for the expences of the revolution war, which had been sustained by loans to Government advanced on no specific pledge. In every succeeding war, the funding system has been progressively increased till the debt has attained its present prodigious amount. If these wars, or any of them, had been projected for the peculiar advantage of the generation which carried them on, it would have been most unjust to charge the expences of them upon the inheritance of the national estate. But if that inheritance was secured and augmented in the series of wars, undertaken for the establishment of civil and religious liberty under the Prince of Orange; for preventing the union of the great monarchies of France and Spain; for maintaining against France the independence of the Germanic Confederation; for founding and maturing our great colonial empire; for acquiring decisive maritime superiority; and, lastly, for preserving all social and moral institutions from impending destruction, and all political power from subjection to one savage military domination; then it is most equitable that all who shall come to the enjoyment of that inheritance, by such great exertions secured and augmented, should sustain their share in the expences incurred for such great objects. Let those who reap the advantage bear a portion of the charge.

Justice and prudence concur in sustaining a national debt. By that institution he duty of loyalty has been strengthened by the tie of interest. While the Government remains faithful to its engagements, the proprietor of money, being always its creditor, considers the safety of the State as the security of his wealth, and his title to property. By the operation of the National Debt, the Bill of Rights, and the Act of Settlement, became the feoffient and the assurance of every man's estate. By the funding system, extended as we have seen it, every capitalist, of whatever degree, becomes a partner in the royal exchequer.

He

He regards the Sovereign as the natural protector of his private fortune; and the servants of the Sovereign as his responsible accountants. The public revenue, primarily appropriated to his service, he sees augmented without jealous apprehension that it can be diverted to oppress him: and persuades himself that, in adding strength to the State, it gives stability to private opulence. Any portion of capital, actively employed in commercial adventure, is to yield a profit exceeding the ordinary rate of interest. The speculations of trade have no other end or object. Men may become rich by trading on borrowed capital. Supposing that all our wars could have been carried on by immediate taxation, then the whole amount of the national debt would have been gradually withdrawn from the active capital of the country, in which it has produced and reproduced itself many ́ times, and the country would have saved simply the interest which has been paid to the proprietors of stock. The absolute redemption of any part of that debt, now or hereafter, will indeed relieve the country from the burthen of its interest; but a portion will be withdrawn for that purpose from the great mass of active capital, which yields a profit far exceeding the interest of the debt discharged.

The uses of a national debt are eminently conspicuous in pro ducing facilities for rendering capital, of the smallest or of the greatest amount, at all times productive, for promoting the cir culation of wealth wherever it is wanted, for affording undoubted securities to persons unable to embark in commercial or other speculation, and perplexed at the mention of securities which are to be deduced by legal inference, and often prove unsubstantial, Government exercises a function almost parental, by an institution which stimulates the industrious to exertion, and all classes to economy; by rendering the gain of industry and the saving of economy instantly productive of augmented income; by making capital fruitful without the hazard of adventure; and all this by sparing the community itself, and leaving in general circulation a great mass, of acquired wealth, charged only with a quit-rent which it is well competent to bear.

We cannot deny that, in the progress of the funding system, the growth of taxation, necessary to support it, has often operated, and does operate to occasion much private distress. But, in an extended view, if the country has not grown opulent and powerful by means of the National Debt, yet its progress has not impeded the rapid increase of national wealth and power.

"While the capital has become more splendid and enlarged, while other flourishing towns have been created and extended; while a hardy population has advanced to fructify the soil, to convert the sterile deserts into fruitful plains, and to sustain the use.

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