Chapter XV: Part III: Sect. I (4)

[144] What is here said has been verified, in the particular instance of a _million and a half_ borrowed in 1756, which was to carry 3½ _per cent._ interest till 1771, and then to become redeemable.—During the last war, and for about three years after the commencement of peace, there was a general expectation that the THREE _per cents._ would rise above _par_ as they had done in the former peace; and while this expectation continued, this stock reckoned no better than a THREE _per cent._ stock with a short annuity of a _half per cent._ annexed; and for this reason it bore, during that period, a lower price than another stock of 4 millions and a half which was to bear the same interest till 1782, and then to become redeemable, and to sink to an interest of 3 _per cent._—In the latter end of 1767 and beginning of 1768 the price of the former stock rose above that of the latter, and continued not far from _par_ from that time to the time of its redemption in 1771. The reason must have been, that being a small stock bearing a higher interest than the other stocks, it was expected, that it would be paid off at _par_, and therefore with a considerable profit, as soon as it became redeemable; which accordingly happened. See Postscript, (page 177).

[145] Nothing has been more undervalued in the ALLEY than _Annuities on lives_. They have been always granted, very unreasonably, without any limitation of age; and their value has been taken at no more than 12 or 13 years purchase; tho’ really worth one with another 16 or 17 years purchase. This is a strong reason for preferring short annuities to them in all schemes for raising money. Short annuities for 21 years will be taken for as much as life-annuities; and yet experience has proved that in this time not a _quarter_ of the life-annuities will drop; and the whole expence brought by them on the public will not be removed in less than 70 or 80 years. See Note 15, (Page 134).

[146] I would except here the first reduction in 1717. This was then necessary to gain a fund for sinking the public debts; and had the fund thus gained been applied, as the laws required, invariably to this purpose, and all farther reductions been avoided, we should now have been burthened with no debts.

[147] That is; never capable of being redeemed by substituting one debt for another; or of being saved from redemption by accepting lower interest.

[148] Supposing the 3 _per cents._ sold at 76½, the capital necessary to produce 4.850,000l. in money would be 6.339,869l. the interest of which at 3 _per cent._ is 190,195l.

[149] When the amount of interest, payable for a sum obtained by selling a 4 _per cent._ capital, is the same with the amount of interest, payable for an equal sum obtained by selling a 3 _per cent._ capital, which is nearly the present case, postponing, in the manner I have proposed, the redemption of the former, becomes as indifferent as it would be to postpone in the same manner the redemption of any 3 _per cents._

[150] In this case only a FIFTH of the _surplus_ to be at any time employed in redeeming debts could be applied to the redemption of this _particular_ loan. The rest after nine years might be employed in redeeming the 4 _per cent._ stock created last year; or jointly with it, such parts of future loans bearing high interest, as, in borrowing on the same plan, might be left redeemable. And thus no obligation would arise from this mode of borrowing to prefer the redemption of 3 _per cents._ to the redemption of capitals bearing higher interest. In particular; had this been the plan of borrowing through the last war, all surplus monies might have been ever since employed intirely in paying off 4, 4½ and 5 _per cent._ capitals preferably to any others; and at the same time, no _douceurs_ would have been granted in order to procure the loans, no artificial debt contracted, or extraordinary charge incurred.

[151] Should this be disregarded, and a long annuity offered, as a _douceur_, of 1½ _per cent._ for 90 or 100 years, _eight millions_ might perhaps be borrowed at an interest, including the long annuity, of 4½ _per cent._ even though the 3 _per cents._ should fall as low as 73.—And this, probably, would be the very scheme a minister would prefer, who, minding chiefly present ease, did not care how much he burdened the nation hereafter.

[152] In 1774, a million of the 3 _per cents._ was redeemed at this price; and in 1772, a million and a half at 90.

[153] I mean such a course of redemption as should not be liable to interruption by a WAR; or, as would be the effect of the establishment of such an unalienable _sinking_ fund as has been described in the _Appeal to the Public on the Subject of the National Debt_, and the _Observations on reversionary Payments_.—Nothing can save us from bankruptcy but such a fund; and were it established, the 3 _per cents._, when they came to be redeemed, would soon rise to _par_; and, consequently, the obligation implied in this scheme to pay a part of them at _par_ would occasion no additional expence. It is, however, so little to be expected, that such a fund will be ever established, that it would have been folly to have made the calculation given above, on any supposition less favourable, than that the 3 _per cents._ will bear the same price after the present war, that they bore after the last; and that we shall go on as we have hitherto done, paying off a _million_, or a _million and a half_, now and then in a time of peace.

[154] The conversion of a 3 _per cent._ stock into a 3½ _per cent._ stock gives the same advantage in redeeming it, that the power of redeeming it at 85¾ for every 100l. would give.—A million _per ann._ surplus would redeem 114 millions and a quarter of the latter stock in the same time, and therefore at the same expence, that it would redeem 100 millions of the former. I suppose here the 3 _per cents._ paid at _par_; and this I have before observed will be found to be necessary should a time (scarcely the object of hope) ever come when government will set itself in earnest and with any effect to pay the public debts.

CORRECTIONS and ADDITIONS.

Transcriber’s Note: Whilst minor typesetting errors have been corrected in the course of producing this e-text, the author’s list of corrections and additions below has not been addressed.

In THE SECOND TRACT, (page 120), after the words _Lent at 4 per cent. in 1746, charged on licences for retailing spirituous liquors, and reduced to 3 per cent. by 23d of George II. 1749_, add, _and consisting of old Exchequer Bills then cancelled and converted into a debt from Government to the Bank, for which the Bank was allowed to add to its capital an equal sum by 19th George II. Ch. 6_.

In (page 128), instead of the words, _In 1751, certain Exchequer tallies and orders, amounting to 129,750l._ read, _In 1751, the remainder of certain Exchequer tallies and orders charged on the duties on wrought plate, and amounting to 129,750l._

(Page 136), line 17, instead of 1758 read 1757.

(Page 137), line 2d from the bottom, for 205,000l. read 215,000l.

(Page 139), for 17.7401,32l. read 17.701,324l.

(Page 144), after _Exchequer Bills charged on a duty upon victuallers by 12th Geo. I. 1726_, add, _and afterwards by 16th Geo. II. 1743, charged on the duties on licences for retailing spirituous liquors. Now included in the Bank Capital by 19th Geo. II. Ch. 6_.

(Page 144), Note (b) after the words, _In this account I have omitted a million borrowed in 1734_, add, _and half a million borrowed in 1736; because these debts had for some time been in a fixed course of redemption by the salt-duties_.

In (page 145), line 2d, for 10.639,793l. read 10.739,793l.—Ibid, line 10th, for 146.582,844l. read 146.682,844l.—Ib. line 12th, for 15.639,793l. read 15.739,793l—Ibid. note, line 2d, for 1.118,000l. read 1.218,000l.

(P. 147). For 146.582,844l. read 146.682,844l.—For 71.505,580l. read 71.605,580l.—And for 10.639,793l. read 10.739,793.

FINIS.

A SUMMARY VIEW and COMPARISON of the different Schemes of Public Loans described in the SUPPLEMENT.

_N.B._ The Sum borrowed is always supposed FIVE MILLIONS; and the Price of the 3 _per cents._ 78l. But all the Schemes may be accommodated to any other Price of the 3 _per cents._ and to Schemes for borrowing any greater or smaller Sums.

+---------------------------------+-------------+
| | |
| OLD SCHEMES. | |
| | |
| I. II. |Scheme of the|
+----------------+----------------+loan in 1777.|
|Scheme described|Scheme described| Page 185. |
| Page 182. | Page 183. | |
| | | |
| | | III. |
| | | |
| £. | £. | £. |
SUM ADVANCED | 5.000,000 | 5.000,000 | 5.000,000 |
------------------------+----------------+----------------+-------------+
NEW CAPITAL, or sum | | | |
payable at redemption | 5.000,000 | 6.343,954 | 5.000,000, |
------------------------+----------------+----------------+-------------+
Interest offered | 3 _per cent._ | 3 _per cent._ |4 _per cent._|
------------------------+----------------+----------------+-------------+
ARTIFICIAL CAPITAL, | | | |
or sum payable at | 1.200,000 | 1.343,954 | 250,000 |
redemption more than | | | |
the value received | | | |
------------------------+----------------+----------------+-------------+
DOUCEURS consisting of | | | |
additional capitals | --0-- | 1.343,954 | --0-- |
Short Annuity worth | 1.200,000 | --0-- | 200,000 |
Lottery worth | --0-- | 150,000 | 150,000 |
------------------------+----------------+----------------+-------------+
ANNUAL CHARGE. | | | |
Perpetual | 150,000 | 100,318 | 200,000 |
Temporary | 100,000 | --0-- | 25,000 |
| For lives or | |for 10 years.|
| 17 yrs. | | |
------------------------+----------------+----------------+-------------+
Total of Annual Charge | 250,000 | 190,318 | 225,000 |
------------------------+----------------+----------------+-------------+

+-------------------------------+---------------+
| Scheme of 1777, altered |Scheme of 1777;|
| to avoid douceurs and |supposing 100l.|
| an artificial capital. |four _per ct._ |
+---------------+---------------+ stock worth |
| See Page 186. | See Page 188. | 91l. when the |
| | | 3 _per cts._ |
| | | are at 78l. |
| | | Page 200. |
| IV. | V. | VI. |
| | | |
| £. | £. | £. |
SUM ADVANCED | 5.000,000 | 5.000,000 | 5.000,000 |
------------------------+---------------+---------------+---------------+
NEW CAPITAL, or sum | | | |
payable at redemption | 4.750,000 | 3.750,000 | 5.000,000 |
------------------------+---------------+---------------+---------------+
Interest offered | 4¼ _per cent._| 4¼ _per cent._| 4 _per cent._|
------------------------+---------------+---------------+---------------+
ARTIFICIAL CAPITAL, | | | |
or sum payable at | --0-- | --0-- |[155]450,000 |
redemption more than | | | |
the value received | | | |
------------------------+---------------+---------------+---------------+
DOUCEURS consisting of | | | |
additional capitals | --0-- | --0-- | --0-- |
Short Annuity worth | --0-- | --0-- | 450,000 |
Lottery worth | 150,000 | 150,000 | 150,000 |
------------------------+---------------+---------------+---------------+
ANNUAL CHARGE. | | | |
Perpetual | 201,875 | 159,375 | 200,000 |
Temporary | 25,000 | 75,000 | 56,250 |
| For 10 years. | for 27 years. | for 10 years.|
------------------------+---------------+---------------+---------------+
Total of Annual Charge | 226,875 | 234,375 | 256,250 |
------------------------+---------------+---------------+---------------+

+---------------+-------------------------------+
| | Schemes of loans by changing |
| Scheme | the 3 _per cent._ stocks to |
| founded | stocks bearing higher |
| on the | interest. |
| regulations +--------------+----------------+
| proposed | See Page 209.| See Page 214. |
| Page 205, &c. | | |
| | | |
| VII. | VIII. | IX. |
| | | |
| £. | £. | £. |
SUM ADVANCED | 5.000,000 | 5.000,000 | 5.000,000 |
------------------------+---------------+--------------+----------------+
NEW CAPITAL, or sum | | | |
payable at redemption | 4.850,000 | 2.500,000 | --0-- |
------------------------+---------------+--------------+----------------+
Interest offered | _4 per cent._ |4¼ _per cent._| 4 _per cent._ |
------------------------+---------------+--------------+----------------+
ARTIFICIAL CAPITAL, | | | |
or sum payable at | --0-- | --0-- | --0-- |
redemption more than | | | |
the value received | | | |
------------------------+---------------+--------------+----------------+
DOUCEURS consisting of | | | |
additional capitals | --0-- | --0-- | --0-- |
Short Annuity worth | --0-- | --0-- | --0-- |
Lottery worth | --0-- | --0-- | --0-- |
------------------------+---------------+--------------+----------------+
ANNUAL CHARGE. | | | |
Perpetual | 194,000 | 212,500 | 200,000 |
Temporary | --0-- | --0-- | --0-- |
| | | |
------------------------+---------------+--------------+----------------+
Total of Annual Charge | 194,000 | 212,500 | 200,000 |
------------------------+---------------+--------------+----------------+

[To be placed last of all, facing Page 216.]

[155] This Scheme may be altered to avoid the artificial Capital and 450,000l. Douceur (preserving nearly the same annual Charge) in the Manner directed in the 4th or 5th Scheme.