Chapter XIV: Part III: Sect. I (3)

I shall beg leave to illustrate what has been now said by having recourse again to the last loan of FIVE MILLIONS.—During the last 60 years, or from the first establishment of the sinking fund to the year 1777, no more than about FIFTEEN MILLIONS of the public funded debts have been paid. An order, therefore, that the capital of five millions bearing 4 _per cent._ created by the last loan, should not be discharged unless a capital of twenty-five or thirty millions in the three _per cents._ shall have been _first_ discharged, would have carried its redemption to so distant a period, as might probably have raised it to the same comparative value with any 3 _per cent._ capitals.

Let it, however, be supposed to advance its price only to 102l. when the 3 _per cents._ are at 78; that is, when the ratio of the rates of interest required the price to be at 104. In these circumstances, 4.850,000l. of the five millions would have been advanced for an equal capital carrying 194,000l. interest at 4 _per cent._; and the remaining 150,000l. would have been advanced for the lottery: And thus the whole expence of the short annuity, and 150,000l. capital, would have been saved.—And had the same sum been obtained by selling a 3 _per cent._ capital, the amount of interest, though the least possible, would not have been much less;[148] but, at redemption, there would have been a necessity of paying above a MILLION AND A QUARTER for which no value had been received.—When such advantages, uncompensated by any loss, can be obtained by so easy and simple a regulation as only changing the ORDER of paying the public debts,[149] what possible reason can there be against adopting it?

There is another method by which the value of any stocks bearing high interest might be raised, which would probably be no less effectual; I mean, by ordering that no part of such stocks shall be redeemed, without at the same time redeeming an _equal_, or any _larger_ sum, in other capitals. This is the regulation proposed in the section on public loans, (page 98); and it will not be amiss here to give an illustration of it, by supposing, that EIGHT MILLIONS will be wanted for the necessary supplies of this year; and that this sum will be procured by selling, as was done in the last loan, a capital equal to the sum advanced, bearing 4 _per cent._ interest. Were the interest in this case made irreducible, and the capital incapable of being redeemed without at the same time redeeming four times as much of the 3 _per ct._ or some other stocks, an increase of value would be communicated to it which would render all DOUCEURS unnecessary. For it would be a capital, the redemption of which could not be completed without discharging in all FORTY[150] MILLIONS of the public debts.—I cannot doubt but that, in these circumstances (supposing the price of the 3 _per cents._ to continue near 78) a 100l. in money would be given for 100l. in such a stock, and the whole extravagant expence of short annuities, lotteries, and artificial capitals would be saved.

In short. With the aid of such regulations as those now proposed, EIGHT MILLIONS might this year be borrowed (supposing the 3 _per cents._ not lower than 78 or 77) _probably_ at an interest of 4 _per cent._, but _certainly_ at an interest an EIGHTH or a QUARTER higher, without offering any _premiums_. Whereas, if no such regulations are established, either an artificial debt of near[151] _two millions and a half_ must be created; or 5 _per cent._ for 15 or 20 years certain, together with the profits of a lottery, must be given; and a new tax laid which will produce 400,000l. _per ann._

It may deserve to be added, that an unprosperous state of public affairs, and apprehensions of public danger, would have a tendency, by placing the redemption of our debts at a greater distance, to promote, rather than obstruct the success of schemes attended with such regulations.

* * * * *

There remains one proposal more on this subject which I wish may be attended to.

I have observed, that our reductions of interest have been the effect of too narrow a policy. It seems to me, that one of the best measures that could now be adopted, would be to undo what we have done in this instance, by restoring the 3 _per cent._ capitals to a higher interest, and making this restoration, one of the means of raising the necessary supplies. That this is practicable, and that it would be advantageous, will appear from the following scheme, and observations.

For 20l. in money, let 110l. stock bearing 3½ _per cent._ interest, be offered, in exchange for every 100l. of the 3 _per cent._ stocks; and let the new 3½ _per cent._ flock be capable of being redeemed at any time, but never under _par_, unless when the price of the 3 _per cents._ happens to be below 85l.—By this scheme the public would procure 20l. from the conversion of every 100l. 3 _per cent._ stock into 110l. stock carrying 3½ _per cent._; or FIVE MILLIONS from the conversion of TWENTY-FIVE MILLIONS. The new _additional_ capital would be only TWO MILLIONS AND A HALF, (or 10 _per cent._ of the old capital); and the _additional_ interest would be 17s. (that is, a half _per cent._ added to 7s. the interest of 10l. at 3½ _per cent._) for every 20l. advanced; or 4¼ _per cent._ for the whole loan.

That such a scheme would afford ample encouragement to subscriptions, supposing the 3 _per cents._ at or near 78, will appear from considering, that the interest offered is above a _quarter per cent._ more than could be made by purchasing any perpetual annuities, and at the same time, in consequence of forming a part of the interest of a THREE AND A HALF _per cent._ capital, is incapable of reduction, and therefore nearly on an equal footing with the interest of any 3 _per cent._ capital.—But to be a little more explicit.

The new capital of 110l. bearing 3½ _per cent._ interest would be better than the 100l. THREE _per cent._ capitals for which it would be substituted, in the following respects.—1st. It would carry 17s. _per ann._ more interest; and such an interest, when the price of an annuity of 3l. is 78l., ought to be worth 22l. 2s. The additional interest, therefore, would be disposed of at 2l. 2s. for every sum of 22l. 2s. (or at 9½ _per cent._) less than its true value, compared with the price of the 3 _per cent._ annuities.

Secondly. The 3 _per cents._ when _peace_ comes, will probably be capable of being redeemed at 88l.[152] But this stock, in the same circumstances, must be redeemed at _par_. It will, therefore, produce 12l. more in every 100l. at redemption. Add the 10l. additional stock; and the whole additional sum to be received at redemption will be 22l.—There will, therefore, be a profit at redemption of 10l. _per cent._ of the money advanced; and this profit deserves the more notice, because the stock to which it is annexed, being redeemable at any time, and bearing a higher interest than the 3 _per cents._ will be selected for redemption before them; and therefore its price will be so much the more likely always to keep near _par_.—Setting aside, however, this advantage, and supposing only the 20l. advanced likely to be received at redemption, it may be found by calculating in the manner explained in (p. 194), &c. that the substitution of 110l. flock carrying THREE AND A HALF _per cent._ for 100l. carrying THREE _per cent._, or, in other words, that 20l. to be received some time hereafter, besides an annuity of 17s. for the intermediate time, is worth in present money more than 20l., reckoning compound interest at 4 _per cent._

Such a scheme, therefore, in whatever way its value was rightly calculated, would appear to offer an advantageous bargain. Should there, however, be reason to fear that the public might judge otherwise; or should the 3 _per cents._ be at 74 or 75, the value might be easily increased near nine _per cent._ by making the substituted stock 112l. instead of 110l. in which case, the interest for the 20l. advanced would become 18s. 5d. _per ann._, or a little more than four and a half _per cent._ instead of _four and a quarter_.

The advantages to the public which would arise from such a scheme are—1st. That it would be one of the best preparations for measures that must some time or other be entered into for putting the public debts into a _fixed_ course of redemption.[153]—In consequence of being raised to a higher interest, a considerable part of them would be made capable of being redeemed with more ease and expedition; and for this reason, it is certain that, if there remains a possibility of our escaping a public bankruptcy, the time must come when we shall wish all our debts bore a high interest.[154]

Secondly. A capital of TWO MILLIONS AND A HALF would be saved in raising FIVE MILLIONS. That is; the nation in procuring _five millions_ would incur a debt of only _half_ that sum; and instead of having a QUARTER or a THIRD _more_ to pay at redemption than had been received, it would have ONE HALF _less_ to pay.

Thirdly. Such a scheme would keep up public credit; and, by its necessary operation, contribute to carry _itself_ into execution. For the advantages attending it being grounded entirely upon the old 3 _per cent._ stocks, few at such a time would chuse to sell them, but many would be induced to buy, and, consequently, their price would be advanced, contrary to the common effect of public loans.—These seem to me advantages so unspeakably important, that I cannot but think it would be right to go to some extraordinary expence, in making at least one experiment of this kind. If, in consequence of offering high terms in _one_ trial for a small sum, such an experiment should succeed, it might be renewed on lower terms; and the way might be discovered of managing, in the best manner, larger loans on the same plan.—I cannot help thinking indeed, that it would be found that in this way great sums might be raised without creating _any_ new capitals, or making any addition to the public debts. I fancy, for instance, that few, when the 3 _per cents._ are about 78, would scruple to pay 25l. for the conversion of 100l. THREE _per cent._ stock into a 100l. FOUR _per cent._ stock, provided this last stock was not to become redeemable till THIRTY or FORTY MILLIONS of our present debts have been discharged: And supposing this true, money for public services would be raised at 4 _per cent._ or at an interest nearly as low as possible; and, at the same time, a sum equal to the whole money advanced would be saved. But were it necessary to take for such a substitution 24l. or even 23l. (that is, to pay about 4¼ _per cent._ for money) the gain, if our debts are ever to be redeemed, would abundantly overbalance the increased expence of interest.

FOOTNOTES

[48] See Observations on Civil Liberty, page 74.

[49] Of all the writers against this war, the learned Dr. TUCKER is the severest. For if, as he maintains, contrary to repeated declarations from the throne, a separation from the Colonies would be an advantage to us, the attempt to keep them, by invasion and bloodshed, deserves a harsher censure than words can convey.

[50] See Observations on Civil Liberty, Part I. sect. 1.

[51] See Observations, Part I. sect. 2.

[52] The greatest part of Mr. _Goodricke_’s remarks are founded on this misunderstanding. He is so candid that I know he did not mean to misrepresent me; and yet I cannot help thinking it hard, after repeated declarations of my preference of such a constitution as our own, to be considered as an advocate for a pure Democracy. See _Observations on Dr. Price’s Theory and Principles of Civil Liberty and Government_, by Mr. GOODRICKE.

[53] One of the best plans of this kind has been with much ability, described by Mr. DE LOLME, in his account of the Constitution of England.

[54] “As in a free state, every man who is supposed a free agent, ought to be his own governor; so the legislative power should reside in the whole body of the people.” _Spirit of Laws_, Book XI. chap. vi. See likewise Justice Blackstone’s Commentaries on the Laws of England, page 158. 1st Vol. oct. edition.—_Demosthenes_ speaking in his first Philippic, sect. 3d. of certain free states, calls them _their own legislators_, αυτονομουμηνα καὶ ελευθερα.

[55] See _Remarks_, printed for Mr. Cadell, _on a pamphlet published by Dr. Price. In a letter from a gentleman in the country to a member of parliament_, page 10.

[56] Rom. vii.

[57] Dr. PRIESTLY, in his Essay on the _first principles of Government_, makes a distinction between _civil_ Liberty and _political_ Liberty; the former of which he defines to be “the power which the members of a state ought to enjoy over their actions;” and the latter, “their power of arriving at public offices, or, at least, of having votes in the nomination of those who fill them.”—This distinction forms a very proper subdivision of _the liberty of the citizen_ here mentioned; and it may be accommodated to all I have said on this subject, by only giving some less general name to that which Dr. Priestly calls _civil_ Liberty.

[58] See on this Subject an excellent Sermon entitled, _The Principles of the REVOLUTION vindicated_. By Dr. Watson, Regius Professor of Divinity, at Cambridge.

[59] Some who maintain this doctrine concerning government, overthrow their own system by acknowledging the right of resistance in certain cases. For, if there is such a right, the people must be judges _when_ it ought to be exercised; a right to resist only when civil governors _think_ there is reason, being a gross absurdity and nullity.—The right of resistance, therefore, cannot mean less than a right in the people, whenever they think it necessary, to change their governors, and to limit their power. And from the moment this is done, government becomes the work of the people, and governors become their trustees or agents.

[60] It has been commonly reckoned, that it is the end of civil government and civil laws to protect the _property_ and _rights_ of men; but, according to this writer, civil government and civil laws create _property_ and _rights_. It follows therefore, that, antecedently to civil laws, men could have no _property_ or _rights_; and that civil governors, being the makers of civil laws, it is a contradiction to suppose, that mankind can have any property or rights which are valid against the claims of their governors. See Three Letters to Dr. _Price_, p. 21, &c. And Remarks on the principal Acts of the 13th Parliament of Great-Britain, p. 58, &c. and p. 191.

[61] This has been done in a lower instance. Parents have been furnished with a particular affection for their children, in order to prevent any abuse of their power over them.

[62] “In ages of darkness, and too often also in those of greater knowledge, by the perfidious arts of designing princes, and by the base servility of too many ecclesiastics, who managed the superstition of the populace, by the violent restraints put upon divulging any juster sentiments about the rights of mankind, the natural notions of polity were erased out of the minds of men; and they were filled with some confused imaginations of something adorable in monarchs, some representation of the Divinity; and that even in the worst of them; and of some certain Divine claims in certain families.—No wonder this! that millions thus look upon themselves as a piece of property to one of their fellows as silly and worthless as the meanest of them; when the like arts of superstition have made millions, nay the very artificers themselves, fall down before the block or stone they had set up; or adore monkies, cats, and crocodiles, as the sovereign disposers of their fortunes.” See Dr. HUTCHESON’S System of Moral Philosophy. Vol. ii. p. 280.

[63] “Let not, therefore, these _pretended masters_ of the people be allowed even to do good against the general consent.—Let it be considered, that the condition of rulers is exactly the same as that of the Cacique, who being asked whether he had any slaves, answered; _Slaves? I know but one slave in all my district, and that is myself._” See the Philosophical and Political History of the Settlements and Trade of the _Europeans_ in the EAST AND WEST INDIES. Translated from the French of the Abbe _Raynal_, by Mr. _Justamond_. Vol. v. page 414.

[64] See Obs. p. 25. “The rights of mankind are so sacred that no prescription of tyranny or arbitrary power can have authority enough to abolish them.” Mr. _Hume_’s Essays, vol. iii. Essay on the Coalition of Parties.

[65] “Mankind have been generally a great deal too tractable; and hence so many wretched forms of power have always enslaved nine tenths of the nations of the world, where they have the fullest right to make all efforts for a change.” Dr. _Hutcheson_’s Moral Philosophy. Vol. ii. p. 280.

[66] See Remarks on the Acts of the Thirteenth Parliament of _Great Britain_. P. 34, &c.—“Is not the same reasoning applicable to taxes paid for the support of civil government? Are not these too the property of the civil magistrate?” Ibid. p. 56.—If I understand this writer, his meaning is, not only that the taxes which the civil magistrate _has_ imposed are his property; but also, _any_ which he shall please to impose.

[67] Matth. xxiii. 8-12.—John xiii. 14.

[68] Luke xxii. 25, &c.

[69] 1 Pet. v. 3.—2 Cor. i. 24.

[70] He who wants to be convinced of the _practicability_, even in this country, of a complete representation, should read a pamphlet lately published, the title of which is, TAKE YOUR CHOICE.

[71] “A _free_ subject of a free state” is a contradiction in terms. See the Proclamation for a Fast.

[72] Mr. Hume’s Essays. Vol. i. Essay iv. p. 31.

[73] Spirit of Laws. Book xix. ch. 27.

[74] Introduction to the Commentaries on the Laws of England, p. 48. See also Book i. ch. 8.

[75] In 1692 King William rejected a bill for triennial Parliaments, after it had passed both Houses. But in a following year he thought proper to give his assent to it.

[76] Spirit of Laws. Book xix. ch. 27.

[77] History of Civil Society. Part vi. sect. 5.

[78] _Political_ Discourses. Essay xii. p. 301.

[79] History of Civil Society. Part iv. sect. 5.

[80] See Mr. Hume’s Essays. Vol. i. p. 91.

[81] See the conclusion of the Third Part.

[82] This was confirmed by the account of the noble Lord at opening the last Budget.

[83] I have mentioned this sum at random. It is not of great consequence whether it is half a million too little or half a million too much.

[84] The quantity of coin within all equal degrees of deficiency would be equal, were equal quantities issued every year, and were there also no cause which diminished or destroyed it, except the _uniform_ operation of time in wearing it. Any cause, therefore, which destroys it more, or diminishes it faster at first than at last, must render the quantity less in the first degrees of deficiency. And the same must be the consequence of a greater proportion issued formerly, in any given time, than of late.—The causes of diminution never probably operated so much on the gold coin as they did for about twelve years before 1773; and this will balance the greater proportion coined during that time. The very reason of the increase of coinage in those years was, a necessity created by the loss of the new coin, and never before felt in an equal degree. The coinage, however, in those years, was not so much more than usual as some may imagine. In ten years before 1770, eight millions and a half were coined; and in twelve years after the _Accession_, the same quantity was coined; and in twenty-seven years after the _Accession_, more was coined than in twenty-seven years before 1770. See _Considerations on Money, Bullion_, &c. p. 2.—The whole quantity of gold coined from the Accession to 1770, was near 29 millions; more than one half of which must have been melted and exported; and, the greatest part of the remainder must have been precipitated in its progress towards deficiency by being clipped and sweated.

[85] When the silver _specie_ was recoined in King William’s time, it appeared, that a great treasure had been hoarded before the _Revolution_, in consequence of the danger of public liberty at that time. See Davenant’s Works, Vol. I. p. 439, &c.

In _Russia_ it is reckoned, that as much money lies buried under ground, as exists above ground.

[86] In these sums is included all the coin which the late Proclamations have brought in from HOLLAND and other foreign countries; and which, I think, ought not to be deemed a part of the resting stock of the kingdom.

[87] Or deducting a million for the _Irish_ coin, seventeen or eighteen millions.

[88] This is said on the supposition, that the last call would bring in no more than was expected, or about three millions. Its having brought in above double this sum makes little difference. For it proves, that the whole quantity of gold coin must have been (according to Lord NORTH’s method of computing) 21 or 22 millions; and the quantity deficient more than a grain about 15 millions; and, consequently, six or seven millions (that is, near a _third_) will still remain to be the quantity deficient less than a grain.

[89] It has been thought very strange, that a piece of metal should bear a higher price, merely because it wants the stamp of the mint. But the reason is, that bullion alone being exportable in any considerable quantity, the price of it must vary as the demand for it varies; or, in other words, as the _balance of payment_ between us and the rest of the world is favourable or unfavourable.—This will be explained at the beginning of the Third Part, where it will appear that, in consequence of the increase of luxury and the national debt, this balance has been generally against us ever since the end of the last war.

[90] The coin brought in last Summer, added to near 14 millions coined from the beginning of 1772 to the time of the last call, amounts to about 20 millions and a half; but only 16 millions and a half have been brought in, including the coin from _Ireland_ and foreign countries.

[91] Or EIGHTEEN MILLIONS AND A HALF. See Dr. DAVENANT’s Works, Vol. i. p. 363, &c. 443, &c. A great part of this specie was carried out of the nation in King WILLIAM’s wars; and the consequence was, that the taxes became unproductive; and that Government fell under great difficulties, from which it was afterwards relieved by the establishment of the _Bank_ and the increase of trade. See the beginning of the Third Part.

[92] The paper currency of the Colonies is one of the greatest disadvantages under which they labour; but it is of a more safe and permanent nature than ours. Were it not so, it could not have been of the least use to them for the last year and a half. He who doubts this, need only consider what our paper would be worth were we now invaded as they are.

This difference depends chiefly, on the following circumstances.—Their paper is not payable on demand.—It is a legal tender.—It represents fixed property which is mortgaged for it.—It does not support such a monstrous debt as ours.—And when public emergencies require any extraordinary emissions, they are generally sunk by taxes in four or five years.—It is the first of these circumstances that gives our paper its currency; and it is also this circumstance that creates the danger attending it, by rendering it incapable of sustaining any great shock or panic.—The possession of securities equal in nominal value to the amount of the paper emitted, or the debts contracted, is of little consequence when the value of these securities depends on the paper, and is created by it; that is, in other words, when the debts themselves are the very cash which must pay the debts.—Nothing can be more unnatural than such a state of things; and it may hereafter be a curious object of enquiry, how it could be ever possible that it should subsist any long time.

In page 78 of the _Observations on Civil Liberty_, I have said, “that the kingdom of FRANCE has no such dependence as we have on paper-credit; and that its specie amounts to 67 millions sterling.” In mentioning this sum I took the lowest of different accounts which I had then received from different authorities. I have since received accounts which make it 87 millions and a half; or 2000 millions of _livres_. This, in particular, is the account of an author whom all know to be likely to be well informed on this subject; I mean the author of the Treatise on the _Legislation_ and _Commerce of Corn_, Part I. chap. v.—In the same treatise it is said, (Part I. chap. viii,) that it appears, from the returns made by the intendants of the different Provinces, that the number of _annual_ deaths in the whole kingdom of France, for three years ended in 1772, was 780,040. I have been informed by the ingenious author, that this account may be depended on; and if so, _France_ must contain 26 millions of inhabitants; for the best observations prove, that no more than a thirty-third part of a whole kingdom dies annually. See Observations on Reversionary Payments, page 200.—In _Sweden_, though a nineteenth part die in the capital every year, only a thirty-fifth part die in the whole kingdom. See Philosophical Transactions, Vol. lxv. for 1775, p. 426. The particulars now mentioned, added to the nature of the debts of FRANCE as mentioned in page 78 of the _Observations on Civil Liberty_, form a striking contrast between the state of that kingdom and ours. Nothing gives us our superiority but the advantages we derive from our RELIGION and our LIBERTY. Even in these respects, however, they seem to be improving, while we are declining. _Montesquieu_, _Abbe Raynal_, and others of their most admired writers, inculcate principles of government, and breathe a spirit of Liberty, which, to the shame of this country, are become offensive in it.

[93] See the proposals and observations in a pamphlet lately published by Lord Viscount MAHON on this subject.

[94] “There is something (says a great writer) so unnatural in supposing a large society, sufficient for all the good purposes of an independent political union, remaining subject to the direction and government of a distant body of men who know not sufficiently the circumstances and exigencies of this society; or in supposing this society obliged to be governed solely for the benefit of a distant country; that it is not easy to imagine there can be any foundation for it in justice or equity. The insisting on _old claims_ and _tacit conventions_, to extend civil power over distant nations, and form grand unwieldy empires, without regard to the obvious maxims of humanity, has been one great source of human misery.” _System of Moral Philosophy_, by Dr. HUTCHESON, vol. ii. p. 309. In the section from whence this quotation is taken, Dr. HUTCHESON discusses the question, “When colonies have a right to be released from the dominion of the parent state?” And his general sentiment seems to be, that they acquire such a right, “Whenever they are so increased in numbers and strength, as to be sufficient by themselves for all the good ends of a political union.”—Such a decision given by a wise man, long before we had any disputes with the colonies, deserves, I think, particular notice.

[95] See COMMON SENSE, and PLAIN TRUTH, p. 44. Published for Mr. _Almon_.

[96] The Colonies, I am assured, were not perfectly unanimous till they saw this answer.

[97] I am sorry to differ from those respectable persons who have proposed placing _America_ on the same ground with _Ireland_. If the same ground of LAW is meant, it is already done; for our laws give us the same power over _Ireland_, that we claim over _America_. If the same ground of PRACTICE is meant; it has been most unfortunate for _Ireland_, and would be equally so for _America_.

[98] See the Abbe RAYNAL’s Reflections on this subject at the end of the 18th book of his History of the _European Settlements_ in the East and West-Indies.—“Is it not likely, says this writer, that the distrust and hatred which have of late taken place of that regard and attachment which the _English_ Colonies felt for the parent country, may hasten their separation from one another? Every thing conspires to produce this great disruption; the æra of which it is impossible to know.—Every thing tends to this point: The progress of good in the new hemisphere, and the progress of evil in the old.—In proportion as our people are weakened, and resign themselves to each other’s dominion, population and agriculture will flourish in _America_; and the arts make a rapid progress: And that country rising out nothing, will be fired with the ambition of appearing with glory in its turn on the face of the globe—O posterity! ye, peradventure, will be more happy than your unfortunate and contemptible ancestors.”—Mr. _Justamond_’s Translation.

[99] Had this interest been insufficient, it might have been increased a 16th or even an 8th _per cent._ without any material difference; or, (which would have been better) 3½ _per cent._ might have been offered for _four fifths_ of the sum borrowed, and 4 _per cent._ for the remainder; in which case, the annuity payable by the public would have been 65,790l.

[100] It should be remembered here, that tho’ Government, when its debts are at a discount, may be able, with the consent of the creditors, to redeem a given capital by paying a less sum than that capital; yet it can never be obliged to pay _more_.—In other words; a 100l. capital in the 3 _per cents_; 3½ _per cents_; or 4, or 5 _per cents_, Government is always at liberty to redeem by paying 100l. whatever the market price of it may be, and whether the creditors will consent or not.

[101] There is another very great advantage which would attend these annuities.—One and the same _surplus_ would discharge a given capital in less time. For example. A surplus of a million _per ann._ invariably applied, and the first payment to be made immediately, would discharge a capital of a _hundred millions_ bearing 3 _per cent._ interest in 46 years. But if the same capital bore 3½ _per cent._ interest, it would be discharged in 43½ years; if 4 _per cent._ in 40 years; if 5 _per cent._ in 37¼ years.—A capital _less_ than a 100 millions, in the same proportion that the interest is _more_ than 3 _per cent._ and for which, therefore, the same annuity is paid, (as in the present case) the same surplus would discharge in 39 years, if the interest is 3½; in 34¼ years, if the interest is 4 _per cent._ in 27¼ years if the interest is 5 _per cent._—Supposing, therefore, 75 millions borrowed in the manner of our Government, by creating a capital of a 100 millions bearing 3 _per cent._ (that is, by selling 3 _per cent._ stock for 75l. in money) which might have been borrowed by creating a capital of only 75 millions bearing 4 _per cent._ (that is by selling 4 _per cent._ stock at 100) there will not only be a loss of 25 millions by a needless increase of the capital; but also a loss of 14 millions, by an increase of the time in which one and the same saving will discharge the two capitals.—This may be proved in the following manner.—A million, _per ann._ will, in 34 years and a quarter, very nearly discharge a debt of 75 millions bearing interest at 4 _per cent._; but the same saving will, in the same time, discharge only a capital of 61 millions, if it bears interest at 3 _per cent._ When, therefore, such a saving has compleated the redemption of the _one_ capital, there will remain unpaid of the other, 39 millions.—What has been now applied to a large sum holds true in proportion of any smaller sums.

It appears from hence to be a very wrong observation which some have made; “that provided the annual charge is the same, it signifies little what the _principal_ of the public debt is.”—As there is no way of removing the annual charge but by paying the _principal_, it is of just as much consequence what it is, as whether it is practicable or impracticable, to remove a burden which weakens and cripples, and must in time sink the public. An annuity of SIX MILLIONS, if the principal is HUNDRED MILLIONS borrowed at 6 _per cent._ might be redeemed in 33 years with a million _per ann._ surplus. But if the principal is TWO HUNDRED MILLIONS bearing 3 _per cent._ the same surplus would, in the same time, pay off only 56 millions; and but little more than a _quarter_ of the annuity would be redeemed. If, therefore, the same sum might as well have been obtained by creating a principal of a hundred millions bearing 6 _per cent._ as by creating a capital of two hundred millions bearing 3 _per cent._ there will be a needless expence, in discharging the debt, of 144 millions.

[102] The price of the 3 _per cents_ at the time of this loan (in the beginning of Feb. 1759) was 88½ and 89.

[103] The 3 _per cents_ just before this loan were at 69l. and, consequently, 5 _per cent._ interest, (or 3l. _per ann._ for 60l.) would have afforded subscribers a profit of 9l. for every 60l. advanced. The long annuity was worth, as the stocks then stood, 21 years purchase, and the short annuity, 13 years purchase. Upon the whole loan, therefore, the profit would have been 3 _per cent._

[104] That is, the difference between 12 millions, and the sum bearing interest at 3 _per cent._ which a million _per ann._ would pay off, in five years and a quarter.

[105] The 3 _per cents_ being at this time at 80l. an annuity of 3l. purchased for 75l. would have produced a profit of 5l. Therefore these schemes are of exactly the same value. But they are too narrow; and the subscription this year fell immediately to one _per cent._ discount. But in the scheme I have proposed this might have been prevented by only offering 4 _per cent._ for 77l. or 78l. (instead of 75l.) of every 100l.

[106] It is plain, that this capital, as well as the former, might have been a quarter (or 60,000_l._) less, which would have made the whole saving of capital 2.060,000_l._

[107] At the time of this loan, the 3 _per cents._ were above 75; and, therefore, a perpetual annuity of 3_l._ could not be purchased for 75_l._ and an annuity of 1_l._ 2_s._ 6_d._ for 99 years, was worth at least 27_l._ This, therefore, would have been a scheme very profitable to subscribers.

[108] The life-annuity granted in this case could not have been worth so little as 16_l._ or 14 years purchase; and, therefore, a capital of 100_l._ in the 3 _per cents_ was sold for 84_l_; or a capital of three millions, for 2.520,000_l._—A premium, therefore, was granted of 480,000_l_; and this was done without the least reason. For the 3 _per cents_ being at that time at 87 and 88, 2.520,000_l._ would undoubtedly have been lent at 3½ _per cent._ interest; and the remaining 480,000_l._ necessary to make up three millions, would have been given for the life annuities; in which case, the annual charge occasioned by the new capital would have been somewhat less; and 480,000_l._ would have been saved, together with the additional expence occasioned by the longer time which a given surplus would require to discharge a debt bearing 3 _per cent._ interest, as explained in the note, p. 94.

[109] It is a general and certain maxim “that whenever money is borrowed by a lottery which gives a right to _stock_ equal to the sum advanced, there is a loss equal to the sum which might have been received for the profits of the lottery.”—When the 3 _per cents._ are at 76 or 77, half a million might be borrowed by a lottery, consisting of 50,000 tickets, each of the same value with 10l. three _per cent._ stock: and hitherto such a method of borrowing has been reckoned advantageous. But it only gives a fallacious appearance of borrowing at 3 _per cent._ It is the same with selling the profits of a lottery, and at the same time absurdly converting the purchase-money into a debt due to the purchaser.—Since the last war we have had seven of these lotteries, including two in 1763; and above a million has been lost by them.

In Queen _Anne_’s time, there were several lotteries, consisting of all _prizes_ and no _blanks_. This is so curious, and most persons may be so much at a loss to conceive of the possibility of it, that I cannot help explaining it.

A capital, equal to the whole money advanced, was distributed _equally_ among all the tickets in the lottery; and, in order to make them prizes of different values, there was farther distributed among them different shares of an additional capital, to which a right was given, though no money had been paid for it.—For example—In 1711, two millions were raised by a lottery of this kind, called a class lottery. The whole sum advanced was divided into 20,000 tickets, each 100_l._ stock bearing 6 _per cent._ interest. This capital was increased by a gratuitous capital of 602,200_l._ bearing the same interest, and divided into shares which were added to the tickets, in order to form prizes.—This was the same with giving near 8 _per cent._ for money, besides a _premium_ of 30 _per cent._—As the interest of money was at this time 6 _per cent._ the sum borrowed would most certainly have been advanced at 8 _per cent._ without any _premium_; but it was, I suppose, reckoned necessary that government should not _seem_ to give such high interest.—In the same year, 1.500,000_l._ was borrowed by another such lottery, and creating a capital of 1.928,570_l._ And in 1712, 3.600,000_l._ was borrowed by two more such lotteries, and creating a capital of 4.683,080_l._—The greatest part of the debts contracted by these lotteries (amounting to 9.213,850_l._ though only 7.100,000_l._ was advanced) remains at this hour an incumbrance on the public; and the duties constituting the _general fund_ are charged with the interest of it.

In 1714, the national interest was reduced to 5 _per cent._ But in that very year 1.400,000_l._ was borrowed by a lottery, which gave a right to a capital of 1.876,000_l._ bearing 4 _per cent._ that is, by giving near 5½ _per cent._ interest, besides a _premium_ of 34 _per cent._—Thus have our debts been increased. But even worse has been done. The taxes charged with the interest of the public debts proving often deficient, the shortest way of discharging the arrears has been often taken, by adding them to the principal, and paying _compound_ interest for money.—Is it a wonder, that a nation which has been so careless in contracting debts, should have done so little towards discharging them?

[110] That is, in other words; there is no one who would not be glad to lend to government on any higher interest than that which he can make in the funds. There is no one, for instance, who would not be glad to lend 75_l._ at 4 _per cent._ when the 3 _per cents._ are at 76, and when, therefore, he cannot make 4 _per cent._ by purchasing them.

[111] The expectation of receiving back some time or other the purchase-money would probably, in private loans, influence a purchaser. But in the cases to which I allude, this certainly was not considered, and did not at all influence. And if it had influenced, the observations I have made as I have gone along, demonstrate that the same loans would have been made without any such expectation.

[112] See the Postscript.

[113] SIXTEEN MILLIONS have been specified. It will come in my way to mention above FOUR MILLIONS more in the second section of the next part. Notes 1, 12, 14.—No notice has been here taken of the loans of the war before the last; but losses of the same kind to a great amount were incurred by them.

[114] In the exports, as delivered to the _House of Commons_, is included bullion exported. If this, as well as the other sums I have mentioned, is deducted, there will be still a balance left in favour of _Britain_ during this period. Since 1764, it does not appear, from the accounts laid before the _House of Commons_, as published by Sir _Charles Whitworth_, that any bullion has been entered for exportation.

[115] The 3 _per cent._ annuities were then at 105; and, during the first five years of the war which began in 1755, they were higher than they have generally been _since_ the war.

[116] These duties were appropriated to the payment of the interest at 4 _per cent._ of a capital of 4.400,000l. created in 1747, for which four millions only had been advanced. It is now a part of the capital of the reduced 3 _per cent._ annuities.

[117] The whole of this sum, (except 16.437,821l. consisting of the old Bank capital, the consolidated 3 _per cents_, the South-Sea 3 _per cent._ annuities 1751, the Civil List million, and the East-India annuity) that is, 54.413,433l. was reduced by 23 Geo. II. 1749. from an interest of 4 _per cent._ to 3½ till 1757, and afterwards to 3 _per cent._—The proprietors of a capital of 3.290,042l. refused to consent to this reduction, which, therefore, was paid off; 1.190,042l. with _Exchequer_ Bills (afterwards cancelled); and 2.100,000l. with money borrowed at 3 _per cent._ and added to the capital of the _South-Sea_ annuities. The whole sum, therefore, reduced and paid off, was 57.703,475l. which produced a saving to the public, and an addition to the Sinking Fund after 1757, of 612,735l. _per ann._

The SALT DUTIES in 1753 had been for some time mortgaged to pay the principal and interest of a million borrowed in 1745. In 1757, after clearing the mortgage, they became free, and were carried into the Sinking Fund, of which they have ever since formed a part. This produced a farther addition to the _Sinking Fund_, after 1757, of about 220,000l. _per ann._

I have not included the million now mentioned in the account given above of the public debts in 1753, because it was in a fixed course of redemption; nor have I included 499,600l. in Exchequer Bills charged on the duty on sweets, because these Exchequer Bills were paid off in 1754.

[118] Having met with no account of the Navy Debt at this time, I have chosen, rather than omit it, to suppose it nearly the same that it was at the commencement of the last war; which, probably, is reckoning it too high.

[119] In this account I have omitted a million borrowed in 1734, because the redemption of it was near being completed by the Salt Duties. I have also omitted _Short Annuities_ amounting to 24,334l. being the remainder of 9 _per cent._ annuities for 32 years created in 1710, because the term for which they were created was near expiring.

[120] The author of the _Considerations on the Trade and Finances of this Kingdom_ makes this debt 1.318,000l. more than the sum at which I have here stated it. See page 22; and _State of the Nation_ by the same author, page 15, quarto editions.—The reason of this difference is, that this writer has included in the unfunded debt left by the war the deficiencies of grants and funds in 1763 and 1764, and the _whole_ army debt not provided for in those years; whereas I have excluded the former entirely; and admitted only as much of the latter as exceeded the army debts common in subsequent years. See the Postscript.

[121] In 1751 there was applied to the payment of Navy debts 200,000l. and in 1752, the sum of 900,000l. But I have not reckoned these sums, because they did little more than make up the constant deficiency in the _Peace Establishment_ for the Navy.

[122] See the Postscript.

[123] “Either the nation (Mr. Hume says) must destroy public credit, or public credit will destroy the nation.” Political Essays, page 135.

[124] The number of inhabitants in _France_ is 26 millions. In _Britain_ it cannot exceed six or seven millions. See p. 66. And _Observations on Reversionary Payments_, page 185, third edition.

[125] Near one half of all this importation is made into _Bourdeaux_ only; and the rest into _Rochelle_, _Marseilles_, _Nantz_, _Havre_, and _Honfleur_.

[126] In order to defray the expence of coinage, a duty of 10s. _per_ ton has been laid on wines imported; and, as far as this duty happens to fall short of 15,000 l. the deficiency is made good out of the supplies.

[127] I am not able to give the exact amount of this part of the appropriated revenue. I have, therefore, reckoned it at such a round sum, as, I think, cannot much exceed or fall short of it.

[128] The Land-tax at 3s. is given by Parliament for 1.500,000l.; and the Malt-tax for 750,000l. but they are always greatly deficient.—Both these taxes (and also sometimes the income of the Sinking Fund) are borrowed of the _Bank_, and spent long before they come into the Exchequer; and therefore, are debts constantly due to the Bank, for which interest is paid.

[129] The account given by Lord North at opening the Budget in 1775, was, that the public debt had been diminished since 1763, near nine millions and a half. The grounds on which I have stated this diminution at 10.639,793l. may be seen in the POSTSCRIPT, (p. 171).

[130] Four of these lotteries have been annexed to annuities; but it would be a great mistake to think that they have not been equally profitable with the other lotteries. For instance; in 1767, a million and a half was borrowed on an annuity of 45,000l. with a lottery of 60,000 tickets annexed. In the same year, 2.616,777l. was paid off; but, had it not been for the lottery, only 1.350,000l. could have been raised on the annuity; and 150,000l. less must have been paid off.

[131] The discounts on a million and a half paid off in 1772, and two millions paid off in 1774 and 1775, amounted nearly to this sum.

[132] The particular sums may be found in a pamphlet, entitled, _The Present State of the Nation_, p. 28, quarto edition. But I have not included all the sums there enumerated; nor have I admitted the Army savings in 1772, and some other smaller sums.

[133] This surplus, being the medium for the whole 12 years of peace, is less than that in p. 160, which is the medium at the end of this period, when the Sinking-Fund produced above a quarter more than it did at the beginning of it.

[134] I have here taken the average of two years before and after 1766.

[135] The annual medium of the payments into the Exchequer from the CUSTOMS in ENGLAND, for the last five years, has been 2.521,769l.—In 1774 the payment into the Exchequer was 2.547,717l.—In 1775, it was 2.476,302l.—The produce of the CUSTOMS, therefore, has been given rather too high.

The produce of the EXCISES in England has been higher, in 1772 and 1775, than in any two years before 1776; but the average of any three successive years, or of all the five years since 1770, will not differ much from the sum I have given.—In 1754, or the year before the last war, the CUSTOMS produced only 1.558,254l.—The Excises, exclusive of the Malt-tax, produced 2.819,702l,—And the whole revenue, exclusive of the Malt-tax and Land-tax at 2s. was 5.097,617l.—In 1753 the whole revenue was 5.189,745l. And the appropriation or annual charge upon it, (consisting of the Civil List, 834,443l. interest of the national debt, exclusive of navy debt, 2.628,087l. expences of management, 43,691l. 4½ _per cent._ from the Leeward Islands 27,378l. annuity to the late Duke of Cumberland 25,000l. first-fruits and tenths of the Clergy 13,597l. &c. &c.) was 3.733,713l. The Sinking-Fund, therefore, produced 1.456,000l.; which, added to 1.500,000l. (the neat produce, at that time, of Land at 2s. and Malt-tax) made the unappropriated revenue 2.956,032l.—The expence of the peace establishment, consisting of 10,000 seamen, and 18,857 landmen, was, in 1753 and 1754, (including an allowance for the increase of the Navy-debt) 2.400,000l. nearly; which left an annual surplus in the national income of 556,000l. _without_ lotteries, and land at 2s. This surplus (with land at 3s.) has of late scarcely exceeded 300,000l.; and, therefore, has not been a THIRD of what it was in the last peace, and before the reduction of interest to 3 _per cent._ was compleated.

[136] This article was omitted in the former editions of this _Postscript_; and its insertion here makes the diminution of the public debts, since 1763, half a million less than the sum at which it is taken in p. 104 and 108.—It might have been proper also to add, the excess of Navy debts _contracted_ above the Navy debts _discharged_, from 1763 to 1775; and had this been done, the surplus in p. 165, would have been reduced to 150,000l.

[137] See _The Present State of the Nation_, page 26.

[138] This article was omitted in the first editions of this _Postscript_.—It might have been proper to add, the excess of Navy debts _contracted_ above the Navy debts _discharged_, from 1763 to 1775; and had this been done, the surplus in p. 166, would have been reduced to 150,000l. _per ann._

[139] Or, for every 105l. contributed, 100l. STOCK irredeemable for 10 years might have been given, carrying 4¼ _per cent._ interest, with the same short annuity and a lottery ticket annexed; and then the new capital would have been 4.762,000l. carrying (at 4¼ _per cent._) 202,385l. _per ann._ interest. The amount of the short annuity would have been 23,810l. and the number of lottery tickets 47,620.

[140] 211,375l. the interest at 4½ of 4.750,000l. and 12,500l. a short annuity of a QUARTER _per cent._ annexed to every 100l. contributed, make 223,875l. This last sum, therefore, would have been the annual charge for 10 years; and the first sum the annual charge after ten years till redemption.

[141] Ten payments of 9,650l. and seventeen payments of 34,375l. make 680,875l.

[142] It may be worth observing, that during this whole war they never fell below 82, except for a few months during the rebellion in 1745; that after the PEACE in 1748 they rose to 105, and in the succeeding war never fell so low as they are now, except in the two last years; that after the PEACE in 1763 it was expected they would again rise above _par_; but that, instead of this, they have in general during the whole peace kept 12 or 13 _per cent._ below _par_, and 15 or 16 _per cent._ below the price they bore before the two last wars.—One of the reasons of the great alteration which has taken place since the last war is, I think, pointed out in the 3d Section of the 3d Part of this Tract.

[143] Since the reduction in 1749 there has been no FOUR _per cent._ capital created except that of the last year.