William Pitt and national revival

by J. Holland Rose

Such was the scheme which fired Pitt with hope; but it is very questionable whether he accepted all its details. Certainly he did not act precipitately. On 11th April 1785 he felt the pulse of the House of Commons by stating his confident hope of having a surplus of one million available for the present plan, and his determination next year to found “a real Sinking Fund” on a basis which would absolutely preclude pilfering in the future. It is also noteworthy that he resolved to raise that million by taxation, not by borrowing. This is a fact which has been ignored by Hamilton, McCulloch, Lecky, and other critics of Pitt’s experiment; but the debate just referred to and those soon to be considered place it beyond possibility of denial. Mr. Dempster urged him to begin at once, even if he had to borrow, seeing that France had started a Sinking Fund which “would enable her in a few years to get rid of the greatest part of her National Debt.” But the Prime Minister declined to be hurried, especially if he had to borrow at a high rate of interest.[248] Clearly, then, Pitt did not share the extravagant hopes of Price.

His relations to Price cannot be wholly cleared up. Early in January 1786 he wrote to him in the following terms:

The situation of the revenue certainly makes this the time to establish an effectual Sinking Fund. The general idea of converting the 3 per cents with a fund bearing a higher rate of interest, with a view to facilitate redemption, you have on many occasions suggested, and particularly in the papers you were so good as to send me last year. The rise of the stocks has made a material change since that period, and I am inclined to think something like the plan I now send you may be more adapted to the present circumstances.[249] There may be, I believe, some inaccuracies in the calculations, but not such as to be very material. Before I form any decisive opinion, I wish to learn your sentiments upon it, and shall think myself obliged to you for any improvement you can suggest if you think the principle a right one, or for any other proposal which from your knowledge of the subject you may think preferable.

With his reply Price sent the three alternative plans which the curious may peruse in his “Memoir and Works.” Unfortunately the ten volumes consecrated to his fame by his nephew, William Morgan, are instinct with so bitter a prejudice against Pitt as to be worthless on all questions affecting him. Morgan does not print Pitt’s proposal, but brushes it aside as puerile, and gives the impression that Price did so; he gives no account of the interview which Pitt had with Price in the middle of January, but asserts that the Minister threw aside his own proposals, adopted the third and least efficient of Price’s plans, mangled it in the process, and never acknowledged his debt to his benefactor.[250] The first of these charges can be refuted by Price’s reply to Pitt’s letter given above. He pronounced the Prime Minister’s proposals “very just,” but pointed out some defects, especially the proviso which placed the Sinking Fund at the disposal of Parliament when the interest on it amounted to £4,000,000, as he expected it would by the year 1812.[251] Morgan’s unfairness is further revealed by his statement that Pitt did not choose to increase the taxes in 1786 so as to provide the million surplus which ought to have been forthcoming. Whereas the fact is that in the Budget of 1785 the Minister imposed taxes for that very purpose; and when these proved scarcely sufficient, he imposed others on 29th March 1786.[252]

False and acrid charges such as these do not surprise us in the partisan biographies of that age. What is surprising is that McCulloch and Lecky should have endorsed some of Morgan’s statements, especially respecting Pitt’s omission of his acknowledgements to Price.[253] On this I must observe, firstly, that it is not proven that Pitt owed to Price everything that was good in his Sinking Fund, and spoiled the plan by his own alterations of it; for the omission of Pitt’s proposal by Morgan leaves us without means of comparing the original proposals of the two men; secondly, that the official reports of the three debates of the spring of 1786 on this subject are so meagre as to furnish no decisive evidence on what was, after all, a minor detail. Further, it is probable that Price’s influence on Pitt’s proposal was less than has been supposed. In the Pitt Papers is a letter of Pulteney to Pitt dated 18th April 1786, in which he urges him carefully to reconsider Price’s third plan before finally adopting it. He states that Sir John Sinclair, Sir Edward Ferguson, Mr. Beaufoy, and Mr. Dempster had yesterday met Dr. Price at Bath House in order to discuss the merits of Price’s plan, and also one by Mr. Gale. The discussion left Pulteney with the conviction that Gale’s plan was “infinitely preferable to any of the three produced by Dr. Price,” and he begged Pitt to add it to his Bill as an alternative.[254] I have not found a copy of Gale’s plan or any evidence as to its adoption in part by Pitt; but the statesman certainly repudiated the notion of borrowing in order to pay off debt, on which Price had laid stress. And yet by a strange irony of fate, this expedient, to which the statesman had temporary recourse only under the strain of war, is that which has been pronounced by nearly all critics the characteristic part of his scheme.

The chief features of Pitt’s proposals were his efforts to raise the whole of the annual million from revenue, and to safeguard this fund from the depredations of wasteful financiers in the future.[255] He therefore placed it under the control of six responsible persons, among whom were the Chancellor of the Exchequer and the Governor of the Bank of England. The disposal by Parliament of the fund when the yearly income arising from it should amount to four millions, may be termed a concession of the financier to the parliamentary spirit.

The scheme met merely with indirect criticism, the debates turning on general policy, or on the question whether there was a surplus of a million, or any surplus at all. These were the issues to which the eager partisanship of Fox and Sheridan sought to divert the attention of the House. Let them beware, exclaimed Fox, of tying up a sum of a million a year, when they might want all their available resources for a war. As for Sheridan, he sought to ridicule the experiment, not on financial grounds, but because it was the height of folly to add to the present enormous burdens when “we had but one foe, and that the whole world.”

There seems to have been in these debates no reference to Dr. Price’s schemes, though they then enjoyed considerable notoriety. Mention was made of the writings of Baron Maseres on the efficacy of Compound Interest; but the Opposition confined itself almost entirely to complaints about the taxes, and gloomy prophecies about the advent of another war. Surely some member of that angry and disappointed group would have accused Pitt of filching his scheme wholesale from that of Price, if the charge had been possible. We can imagine that Sheridan, instead of croaking over the impending coalition of Europe against England, would in that case have declaimed against Pitt as the thief of the magic wand of the real Prospero of finance. Would not Fox also have brought his sound and sturdy sense to the congenial task of exposing the fallacies of Price and the imposture of Pitt? The darling of Brooks’s Club, who well knew the perils of borrowing in order to pay off old debts, would have fastened on the folly of borrowing at high rates in order to gain the advantage of Compound Interest. We can picture him asking how a plan, which was admittedly foolish for an individual, could be profitable for a nation, and where the taxes could be raised that would make good the interest on the sums set apart every year for the wonder-working fund. Surely the Opposition was not so ignorant of finance and of Price’s proposals as not to detect the weakness of the Prime Minister’s plan, had it been modelled solely on them.[256]

The debates in which the Commons dealt with this great and complex subject seem to have been fruitful only in personalities. At the final stage of the Bill, however, Fox moved an amendment with the aim of lightening the burdens on the nation in time of war. He proposed that, whenever a new loan should be raised, the Minister should be pledged to raise moneys sufficient to pay the interest on the loan, and also to make good to the Sinking Fund what might be taken from it. He stated as a concrete example that, if a new loan of £6,000,000 were required in time of war, and if £1,000,000 were in the hands of the Commissioners of the National Debt, that sum should be transferred to the account of the loan; for this, he claimed, would save the public the expense of raising that million through bankers and the Stock Exchange, and the Sinking Fund would not be injured if the million temporarily borrowed from it were made good by taxation. His speech contained one statement of personal interest, namely, that he had shown his proposal to the Chancellor of the Exchequer, who approved of it. This, then, was one of the few occasions on which Pitt conferred with Fox. He now accepted Fox’s amendment, because (to take the supposed case), apart from the saving of commission on the million, Government would be able to raise the five millions on better terms than the six millions. Pitt also expressed the hope that the addition of the amendment to his Bill would do away with all temptation to a Minister to rob the Sinking Fund.[257]

This last argument cut both ways. As Earl Stanhope (formerly Lord Mahon) pointed out to the Lords, when he introduced a rival scheme a few days later, it would be absurd to lessen the temptation to commit an offence which he (Pitt) had declared to be thenceforth impossible. In fact, the permission to transfer the yearly million to another fund rather tended to strengthen the argument for alienation in any other case where expediency might be urged. Stanhope’s plan for rendering the Sinking Fund permanent is too complex to be discussed here; the debates on it were closed by the royal assent being given to Pitt’s measure on 26th May.[258]