way in which the national debt has been increased. Exchequer and navy bills, and other similar Government securities, originally issued for a temporary purpose, have frequently been funded, or converted into a portion of the permanent debt. Of course this is done by an arrangement with holders of the bills. During the latter part of the last war Exchequer bills were usually funded to a considerable amount every year. Exchequer bills were first issued in the reign of William III. These are bills issued by the Treasury and bearing interest, which (except when funded) are always recalled, and their place, if necessary, supplied by a new issue, after short periods. They were first resorted to during the scarcity of a circulating medium occasioned by the calling-in of all the silver money, preparatory to the great recoinage in 1696. "It was on this occasion," says Anderson, in his History of Commerce," "that Mr. Montague first set on foot a new circulating paper credit, by issuing bills from the Exchequer; at the same time contracting (as has ever since been done) for their being circulated for ready money on demand. And as many of those first Exchequer bills were for sums as low as 57. and 107., they were of very good use at this time, when there was so great a scarcity of silver money during this recoinage, as they were taken at the Exchequer for all payments of the revenue; and as, when re-issued, they were then allowed 77. 12s. per cent. interest, they soon rose from a small discount to be better than par.' The portion of the debt for which Exchequer bills are issued is called the floating or unfunded debt. This portion of the debt has in modern times occasionally risen to a great height; in 1815, when it was at the highest, it amounted to between 67,000,000% and 68,000,000. Exchequer bills are at present issued under the authority of Parliament for sums varying from 1007. to 10007., and bear interest. Although their amount has varied greatly at different times, the convenience which they afford to individuals and their advantage to the public have been such as to cause their constant issue. Their convenience to individuals arises from the circumstance of their passing from hand to hand without the necessity of making a formal transfer, of their bearing interest, and of their not being subject to such violent fluctua tions as sometimes occur in the prices of the funded debt. This comparative steadiness in value is caused by the option periodically given to the holders to be paid their amount at par, or to exchange them for new bills to which the same advantage is extended; besides this, when a certain limited period has elapsed from the date of their first issue, they may be paid to the government at par in discharge of duties and taxes. The amount of premium that may have been paid at the time of purchase is consequently all that the holder of an Exchequer bill risks in return for the interest which accrues during the time that it remains in his possession. The advantage to the public consists in the lower rate of interest which they carry compared with the permanent or funded debt of the nation, to which, however, they must in this respect bear some certain proportion. When the price of the public funds is high, the interest upon Exchequer bills will be low; and if, through any public or commercial derangement, the funds should fall in price so as to afford a much more profitable investment than Exchequer bills, the rate of interest upon these must be raised in order to prevent their payment into the Exchequer in discharge of duties: a thing which would embarrass the financial operations of government. When first issued in the reign of William III., the interest borne by Exchequer bills was 5d. per 100l. per diem, being at the rate of 71. 12s. 1d. per cent. per annum. In the same reign the interest was afterwards lowered to 4d. per 1007. per diem, or 61. ls. Ed. per cent. per annum; and in the following reign the rate was still further reduced to 2d. per diem, or 37. 0s. 10d. per cent. per annum. During the greater part of the war from 1793 to 1814, the rate of interest upon these securities was fixed at 3d. per cent. per diem, or 5l. 6s. 54d. per cent. per Since the last-mentioned year the rate has been progressively reduced to 24d., 2d., and 1d. per 1001. per diem, annum. at which latter rate they were in the market at the time of the derangement of the currency which was experienced in the beginning of 1837. Under these circumstances, it was considered important as far as possible to relieve the Bank of England, by which establishment a very large proportion of these securities were then held, and to place it in the most favourable position for affording relief to the commercial classes; and accordingly the rate of interest upon Exchequer bills was raised to 24d. per cent. per diem: at present (September, 1841) the interest is 24d. per cent. per diem. In periods of commercial pressure, arising from causes which are believed to be temporary, it has sometimes been considered advisable by Parliament to make advances to merchants upon the security of goods; these advances have been made by the issue of Exchequer bills, which have been cancelled when the exigency that called for them has passed away. A more permauent occasion for their issue, apart from the immediate wants of the government, has been the desire of aiding individuals or private associations in the prosecution of works of public utility, such as canals, roads, &c. In these cases the rate of interest charged to the borrowers is somewhat greater than that borne by the bills, and the difference has been applied to defray the expense of management on the part of the public. The amount of Exchequer bills "outstanding and unprovided for" at the end of each of the last twenty-five years was as follows: To return, however, to the history of the national debt. The year 1720 is memorable in the annals of British finance, for the passing of the South Sea Act, by which it was attempted to reduce all the public debts under one head of account, at a uniform rate of interest. For this end, the company was authorized to take in, either by subscription or purchase, both the redeemable and irredeemable debts of the nation, and to enlarge their capital to the extent of their purchases, being empowered, under the provisions of the Act, to raise the money required, either by calls upon the existing proprietors, or by receiving subscriptions for new stock, by the granting of annuities, or by the issue of bonds or debentures. In the accomplishment of this scheme the projectors only partially succeeded, while the disgraceful 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. The subscriptions received by the South Sea Company, under the Act of 1720, amounted to upwards of 26 millions, the interest upon which, as well as that upon the original capital of the company, was, by the terms of the Act of Parliament, to be prospectively reduced, in 1727, to 4 per cent. Throughout a great part of the reign of George I. (1714— 1727) the country was involved in continental wars, and additional loans to a considerable amount were accordingly resorted to. In 1717, as already stated, 2,000,0007. of Exchequer bills were funded, or made part of the permanent debt. As many temporary annuities, however, fell in, the total amount of the debt was not increased during this reign. Some relief was also obtained by the rate of interest having fallen, and the new loans being consequently effected by the government on more advantageous terms. At the end of the reign the total amount of the debt was 52,092,2381., bearing an interest of 2,217,5517. Of this sum the funded debt exceeded 46,000,000Z., on which the interest was about 1,900,000. The temporary annuities now amounted only to between 2,000,0007. and 3,000,000, bearing an interest of about 180,0007. In 1736 the public debt of 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 breaking out of the Seven Years' War, 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, in 1763, 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 9,512,2327. So little was done in the way of liquidation during the following ten years, that at the beginning of the war of the French Revolution the debt still amounted to 260,000,000%., and its annual charge to 9,137,862. The outlay occasioned 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 9,437,8627. to 19,945,6211. Between the recommencement 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 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 consequence 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 successively increased. The following summary, taken from Mr. M'Culloch's 'Dictionary of Commerce' (second edition, p. 585), shows, in an intelligible form, the state of the debt at several distinct periods : Interest. L. 2,217,551 2,634,500 4,852,051 380,480 Principal. 52,092,238 86,773,192 138,865,430 10,281,795 debt contracted amounted to 638,129,5777., and that in a period of nearly equal length, comprising sixty-one years of peace, the amount of debt paid off was only 39,594,3057. The Sinking Fund. The first sinking-fund was that established by Sir Robert Walpole (but suggested by Earl Stanhope) in 1716. At this time the taxes, the produce of which had been assigned to pay the interest on the several portions into which the debt was divided, and which had also been made perpetual for that purpose, yielded a somewhat larger revenue than was absorbed by the dividends; and the scheme in question was, that the surplus thus accruing should be formed into a fund for the discharge of the debt. Various sums, otherwise obtained, were afterwards added to this fund. On the other hand, the taxes, which had at first yielded a surplus, very soon ceased to do so; but the sinking-fund was still kept up by new loans being contracted to supply its annual demands. This system commenced in 1718. In 1733, again, the sum of half a million was taken from the sinking-fund towards the national expenses of the year; and the same violation of the principle of the scheme being afterwards annually repeated, the fund eventually almost ceased to produce any effect in the reduction of the debt. It appears that, in fifty-six years—namely, from its institution till 1772-it had only, after deducting the amount of the new loans that had been made for its support, yielded something above 11,000,0001. in all for that purpose. The next sinking-fund was that established by Mr. Pitt in 1786. It was to be supported by 1,000,000l. taken annually from the national revenue-the various branches of which were at the same time united, under the name of the consolidated fund. The sums thus obtained were vested in the hands of Commissioners for the Redemption of the National Debt, to be applied by them, as they should judge expedient, in the purchase of stock at the market prices. The hopes of this scheme rested in a great degree upon the supposed efficacy of the principle of compound interest, to which attention had some years before been strongly called by Dr. Price. Into any detail of the various modifications which the plan of the sinking-fund subsequently underwent, it is impossible for us here to enter. Suffice it to observe, that, after having had its form repeatedly changed, and having been supported for many years, as that of Sir Robert Walpole had been, by loans annually raised expressly to supply the sums necessary for keeping it up, it was finally abolished, in 18-9, by the Act 10 Geo. IV. c. 27, which enacted that the sums thenceforth annually applicable to the reduction of the national debt should consist simply of the actual surplus revenue beyond the expenditure. It is obvious that the principle declared in this enactment is really the only one on which a sinking-fund can be rationally established. A person in debt (and the case is precisely the same with a nation) will inanifestly never make any progress in relieving himself from his incumbrances, if, as fast as he pays his creditors with the one hand, he borrows with the other. Even if he could always borrow on the same terms on which he makes his payments, he would only be putting himself to a great deal of trouble for no purpose. In the case of the national debt, the apparatus of commissioners, and other public functionaries, by which the redemption of the debt was carried on, was, of course, maintained at a very considerable annual cost. But this was by no means the whole expense. From the manner in which loans are negotiated (as afterwards explained), it will be perceived that the nation can seldom borrow money except at some advance upon the market price of stocks at the time. It is true that the effect of a new loan being announced is usually, for the moment, to depress the price of stocks; and, on that account, the whole of the advantages accorded to the subscribers is not to be set down as a loss to the nation; but still there is in general a sacrifice to some extent. Hence the improvidence of such a transaction whenever it is needlessly resorted to. Dr. Price was so enamoured of his project of a sinking-fund accumulating at compound interest, as to recommend that it ought to be, in all circumstances, kept in operation, even if new loans were necessary for that purpose. But, in truth, this notion of any wonder being to be worked, or any benefit to be obtained, even in the most favourable case, by allowing the funds appropriated for the extinction of the debt to accumulate at compound interest, instead of applying them at once, whenever they become available, is a mere delusion—as a very few figures will at once make clear. Let us suppose an individual to be indebted to the amount of 1007., and to have an income exceeding his expenditure by the annual sum of 151. There are three ways in which he may apply this surplus to the discharge of his debts. First, he may, every year, pay the interest regularly, and also devote the whole remainder of the 157. to the reduction of the principal. The result of this will be, that (supposing the rate of interest to be 5 per cent.) at the end of the 1st year his debts will be reduced to £90 0 0 79 10 0 68 9 6 56 17 11% 44 14 10.97 200 years in the series, by subtracting from the debt the amoun of the fund that has accumulated for its discharge, will be found to be precisely the same as before. At the end of the fifth year, for instance, if the sinking-fund were to be applied to the reduction of the debt, the 1277. 12s. 6303d. would, by the sum of 827. 17s. 810d. being paid off, be reduced just to 441. 14s. 107d., as it would equally have been, although the principle of compound interest had never been brought into operation in the case. 200 400 It is unnecessary to carry the calculation further; but to whatever extent it might be carried out, the result would be found to be the same. In no length of time would a fund, accumulating by compound interest, get ahead by the smallest degree in the redemption of the debt. Indeed, were it not for the wild notions that have so generally taken hold of people's imaginations upon this subject, the question would neither require nor bear even the examination we have bestowed upon it. It is decided by a single consideration. The wonders of compound interest have been paraded as if the principle were one, of the operation of which no experience had ever been had till it was proposed to make it available in the project of the sinking-fund. But, in truth, its operation is the most common of all incidents in money transactions, and has been so ever since the lending and borrow Or, secondly, he may, every year, pay the interest only, and allow the remainder of the surplus to accumulate at compounding of money on interest has been practised among men. Cominterest. But is anything gained by this arrangement? The amount of the debt, of course, now remains unaffected; and it will be found that the sinking-fund, by which it is to be eventually discharged, arising from a yearly payment of 107, and the accumulations of interest upon preceding deposits, will increase as follows: At the end of the 1st year it will be 2nd 3rd 4th 5th دو دو دو 200 £10 0 0 20 10 0 31 10 6 43 2 03 55 5 1103 Now these sums, if severally subtracted from 1007., the constant amount of the debt, would leave precisely the same series of balances exhibited in the former table; that is to say, at whatever time the accumulations might be applied to the reduction of the debt, they would just reduce it as much as it would have been reduced by the first mode of operating upon it, and not a fraction of a farthing more. For example, the sum of 317. 10s. 6d., which has accumulated by the end of the third year, being applied to the reduction of the debt, would bring it down to exactly 681. 9s. 6d.; and the sum of 557. 58. 1183d., which has accumulated by the end of the fifth year, being so applied, would bring it down to 447. 14s. 10. In each case the reduction is the very same, as appears by the first table, which would have been effected by the simple and more direct process of applying the whole surplus regularly every year to the extinction of the debt, without any attempt being made to take advantage of the principle of compound interest at all. But, thirdly, and lastly, this vaunted principle may be applied to a still greater extent, by the entire annual surplus being allowed to accumulate, without any deduction being made from it, even to pay the interest of the debt. In that case, of course, the amount of the debt will be every year increased by the interest upon its original amount, and also by the interest upon the additions thus made to it; that is to say, it will accumulate at compound interest as well as the sinkingfund. Let us see what will be the race between the two. It is exhibited in the following statement : pound interest means nothing more than the augmentation of a debt by the addition to its sum of the annual interest due upon it, and by the payment of interest on the debt so augmented. The English nation had known enough of this process long before the date either of Mr. Pitt's sinking-fund or of Dr. Price's pamphlets. Whenever the national debt had been increased by the borrowing, within the year, of a sum of money equal to the annual interest paid upon its previous amount, the principle of compound interest had been called into action upon the whole debt; and, whenever a smaller sum than this had been borrowed, the same principle had been allowed to come into partial operation. So also in reducing the debt, any sum of money that may be directly applied to that purpose cuts away a portion of the debt equivalent to itself in amount, and which, unless so discharged, would have either continued to increase at compound interest, or could have only been kept stationary by the annual application to it of the whole interest of the sum by the outlay of which it has been discharged. That sum, therefore, if reserved in the hands of the State, never could have increased by a single farthing. In being used at once to discharge its own amount of the debt, it is laid out with the full effect with which, if allowed to accumulate at compound interest, it could possibly have acted. It does not provide a constantly augmenting fund to meet the augmentation of the debt, but it does the same thing,-it prevents (what could in no other way be prevented) the augmentation of its corresponding portion of the debt at the same rate with itself. It sweeps away at once as much of the present debt as it ever could extinguish were its accumulation as a sinkingfund, at compound interest, to be allowed to go on without interruption for twenty centuries. In short, as Dr. Hamilton has laid down the general principle, "the excess of revenue above expenditure is the only real sinking-fund by which public debt can be discharged. The increase of the revenue, and the diminution of expense, are the only means by which this sinking-fund can be enlarged, and its operations rendered more effectual; and all schemes for discharging the national debt, by sinking-funds operating by compound interest, or in any other manner, unless so far as they are founded upon this principle, are illusory.” It is never to be forgotten, however, in considering this subject, that it is always the duty of the State to make every effort in its power for the discharge of the principal of its debts, as well as for the regular payment of the interest. It ought, whenever it is possible to do so, to devote a part of its income to the one purpose as well as to the other; and it ought to find an income sufficient to answer both purposes, by either a diminution of its expenditure upon other objects, or an increase of taxation, if the one or the other of these two methods is at all practicable. In so far, therefore, as the original scheme of Mr. Pitt's sinking-fund proceeded upon the principle of providing for the repayment of every loan that was raised by setting apart annually for that end a certain amount of actual surplus revenue, its design was deserving of all commendation. Nay, further, it appears impossible to deny that injustice was done to the holders of all the stock that had been borrowed on condition of the means for its redemption being thus provided, when the scheme was departed from, and such provision no longer made. 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 apparent, it is difficult to account for the blindness with which the whole nation clung to this socalled fund as the certain means of extinguishing the debt, which in effect it contributed to augment, through the less advantageous terms upon which the money was borrowed thau 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 13,400,000l., 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 Sinkingfund 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; and, as already stated, the Act 10 Geo. IV. c. 27, which came into operation 5th July, 1829, enacted that thenceforth the sum annually applicable to the reduction of the national debt shall consist of the actual surplus revenue beyond the national expenditure. Reduction of Interest on the Debt. actually 11007. worth of property in the funds. Still, if the Government should determine to pay off the stock, he will not be entitled to receive more than 10007. for his share. Now, as he has not sold out when he might have done so any day for 1100, it is not probable that he will prefer accepting the 10007, thus offered by Government, if he shall have the option of remaining a creditor of the State on terms which, although less advantageous than those he has hitherto had the benefit of, shall yet afford him a better return for his capital than he could obtain for it by laying it out at interest in any other form. His capital is now only 10007.; and for that, according to our supposition, he could obtain from any other ordinary investment only 401. per annum. If the Government, therefore, should offer him 4 per cent. interest, he would make as much of his money by allowing it to remain in the hands of the State, as he would do by carrying it elsewhere. But the Government might probably offer him 44 per cent., which would produce 451. per annum instead of 404., which he would make of it otherwise. In that case he would have little or no inducement to transfer it. If, however, he should insist upon having his money, the State would be a gainer by paying him off rather than continuing to allow him the high rate of interest of which he had been heretofore in the receipt, even although it should be necessary to resort to a new loan for that purpose; for, in consequence of the reduction in the current rate of interest, the new loan could be obtained on terms which would entail a less burden upon the public than the present dividends occasion. In all the instances, accordingly, in which the operation we are here considering has been carried into effect, the number of holders of stock who have dissented from the Government proposals, and preferred being paid in money, has been very small. The offer of the Government, however, it is to be observed, has not always been in the simple form of a proposal to convert the stock bearing a high rate of interest into the same quantity of stock bearing a lower rate. It has sometimes been attempted to reduce the capital as well as the annual amount of the interest of the debt, by giving the holders of the stock to be operated upon the option of continuing to receive the same rate of interest as before, but of having a certain portion of their stock extinguished. Even a higher than the former rate of interest has sometimes been offered, on condition that a larger should be exchanged for a smaller quantity of stock. For instance, when in May, 1830, it was determined to reduce the burden of a certain amount of stock which bore an interest of 4 per cent., the option was given to the holders of receiving for every 1007. of the 4 per cent. stock, either 1007. of 3 per cent. stock, or 707. of a new stock to be created with an interest of 5 per cent. The interest on 1001. at 3 per cent. is the same as the interest on 707. at 5 per cent.; and, therefore, the stockholder would have been, in so far as regards the annual benefit derived from his capital, just as well off with the one investment as with the other, while the nation, by his acceptance of the 5 per cent. stock, would have gained the advantage of having the capital of the debt lessened at the same time that its annual burden was lightened. The danger, however, of accept There is another operation of the Government by which the burden of the national debt has frequently been materially diminished—namely, the reduction of the interest of certain portions of it. This reduction the State is enabled to effect by the power which it usually retains in negotiating a loan of paying off its creditors at any time it may find convenient. The operation may be resorted to whenever the actual rate of interest in the country falls in any considerable degree below the nominal rate of any particular species of stock. This state of❘ing the 5 per cent. stock would have been, that this stock might things is indicated by the stock in question being above par, or at a premium, in the money-market; that is to say, by a hundred pounds of it selling for more than that sum of money. In such circumstances Government may safely offer to the holders of the stock the repayment of their money, unless they will accept a diminished rate of interest. Thus, suppose the common rate of interest in the country to be 4 per cent., the real value of 100%. in a 5 per cent. stock will be 1254., that being the sum required to yield five pounds annually in any other investment. The price of the stock, therefore, will rise towards this point in the market, although it may very probably be prevented from quite reaching it, by the apprehension of the very reduction of interest to which the stock is in danger of being subjected. Let us suppose that the price actually rises to 110%. In that case the possessor of 1000l. in stock has have been paid off in the course of a short time; in which case the holders would have received 1007. in the 3 per cents., not for every 707. of stock which they possessed, but only for every 100%.; an amount for which they would have exchanged about 1437. of their former stock. To obviate this objection, therefore, the proposal was accompanied by an engagement on the part of the Government that the new 5 per cent. stock should not be subject to a reduction of interest for forty-five years. Still, even this security was not sufficient to induce many persons to prefer the new stock: the investments in it did not amount to quite half a million. On other occasions the operation of reducing the interest on a particular description of stock has been so managed as to be attended with an augmentation of the capital of the debt. Thus, in 1822, the holders of about 140,000,000%. of 5 ver cent. stock were converted into holders of 4 per cent. stock, by being allowed 1057. of the latter for every 1001. they had possessed of the former. The effect of this arrangement was to diminish the annual charge on the debt by 1,222,000., but at the same time to increase the capital of the debt by the sum of about 7,000,0002. An augmentation of the capital of the debt, however, even although unattended by any augmentation of the annual charge, is very far from being a matter of no importance. The practice, as already observed, that has been for a long period pursued by the Government of this country in the negotiation of loans and the general management of the debt, has been to prefer paying a low rate of interest upon a larger capital to paying an equivalent amount of interest at a higher rate upon the money which it has actually borrowed. If this reduction of the rate of interest had been only carried a little further, and the plan had been followed universally, it would have entirely prevented any diminution being effected in the burden of the debt by the process we have just been explaining, down to the present hour. If no stock of a higher denomination, for instance, than 3 per cent. stock had ever been create, the large savings that have from time to time been obtained by the reduction of the interest would have been rendered altogether impracticable. It is only upon stock of the higher denominations that the interest has been, or in the nature of things can be, reduced. Thus if the money be funded in stock bearing an interest of 5 per cent., the annual charge may be reduced as soon as the common rate of interest in the country shall fall below 5 per cent. But if it be funded in stock bearing an interest of only 3, or 2, or 1 per cent., no such reduction will be practicable until the common rate of inte1est in the country shall have fallen below 3, or 2, or 1 per cent. It is, however, to be remembered that Government never really can borrow money in a stock bearing a high rate of interest so cheaply as in a stock bearing a lower rate of inte rest, for the obvious reason that, in the latter case, the lender has to count, among his advantages, his much greater security from being paid off at the nominal value of his stock. Thus, we have just seen that, on the conversion of the Four per Cent. Annuities, in 1830, very few of the holders could be prevailed upou to accept of 5 per cent. stock in preference to as much 3 per cent. stock as would have yielded only the same annual return, notwithstanding even the guarantee from the Government with which the offer was accompanied. There can be no doubt, therefore, that much of the money borrowed by the nation has been obtained on easier terms than it otherwise would have been, in consequence of the particular mode of funding that has been adopted; and this gain is to be set against the disadvantages attending the practice, as just explained. Another Government operation in the management of the debt is the consolidation, which has at different times been effected, of several stocks into one. When the stocks thus united have borne different rates of interest, they have, of course, been reduced to a uniform rate, by an alteration, where necessary, of the amount of the capital, corresponding to the alteration made in the rate of interest. The most remarkable attempt in the history of English finance is that which was made in 1720, when, with the object of reducing the whole of the public debts then existing under one head of account, the South Sea Company, as already stated, was authorized to buy them all up. This scheme, however, was only partially successful. In 1751 the present fund called the Three per Cents. Consolidated Annuities was formed by the union of various funds which had till then been kept separate; but in this case no new arrangement was made as to the interest, all the several portions of the consolidated stock having previously borne interest at 3 per cent. The experience of the last twenty-five years has proved that the most important relief from the pressure of debt to be obtained, even during a profound and long-continued peace, will probably be derived from the lowering of the rate of interest. 32,457,141 29,306,431 Total annual charge Some little progress has been made since 1816 in the reduction of debt by the employment for that purpose of actual surplus revenue. An addition has on the other hand been made to the public burdens by means of the grant of 20,000,000. voted by Parliament for compensation to the owners of slaves in the British colonies who were emancipated by the Act of 1833, and which has created an annual charge of 631,0067. interest, and 101,8757. in Long Annuities. (See Tables in the last page. The diminution of the annual burden in the course of twenty-three years, from 1816 to 1839, was 3,150,710, at which rate the total extinction of the debt would not be effected until the year 2053. The slow progress made in this direction stands in striking contrast to the rapidity with which the load was accumulated, the entire diminution effected during twenty-three years of peace being scarcely equal to the additions made during some of the single years of the war. It will be seen, on comparing the above statements for 1815 and 1839, that the terminable annuities have increased from 1,894,6127. to 4,292,1737. By the Act 48 George III. and several subsequent Acts, the Commissioners for the Reduction of the National Debt were empowered to grant annuities, either for lives or for certain terms of years, the payment for such annuities being made in equivalent portions of permanent annuities which were therefore to be given up and cancelled. By this course, which it will be seen has been acted upon to some extent since the peace, some future relief will be obtained at the expense of a present sacrifice. This plan, provided it be not carried so far as to interfere with the onward progress of the country, through an overload of taxation, appears to be dictated by sound prudence. A part of the terminable annuities (nearly one-half their present amount) will expire in 1860, and after that time portions will rapidly fall in; so that without looking to any redemption of debt from surplus income, or to any further reductions in the rate of interest, the next twenty-three years will be productive of nearly as much relief as has been obtained since 1816. "If(says Lord Congleton, Financial Reform,' p. 294) all the loans which have been raised since the beginning of the war of 1739 had been borrowed in annuities for ninety-nine years, their extinction would already have commenced." In seventy-three years from the present time (1841) nearly the whole of the debt incurred up to 1815 would be paid off. The objection against borrowing in terminable annuities instead of in perpetual annuities is that the former plan is accompanied by a higher rate of annual charge; but the difference does not appear to be so great as to counterbalance the advantages of a terminable debt. On this point we quote Dr. Price's work on Annuities,' vol. i. p. 273, where he remarks :—“It is obvious that accumulating debt so rapidly, and mortgaging posterity for eternity, in order to pay * The terminable annuities being 4,292,173/. was equal to a capital of this amount. |