If we examine carefully the many criticisms that have been levelled against Pitt’s Sinking Fund, they apply only to his handling of the fund during the Great War with France. Every sciolist in finance can now see the folly of borrowing money at a high rate of interest in order to provide the fund with its quarterly supply.[259] It is clearly a case of feeding a dog on his own tail. But such a proceeding, though lauded by Price, was quite contrary to Pitt’s original intention, which was the thoroughly sound one of paying off debt by a steady application of the annual surplus. He departed from this only under stress of circumstances which he looked on as exceptional and temporary.
Strange to say, even the officials of the Treasury seem to have overlooked the fact that the nation was thereby increasing its debt in a cumbrous attempt to lessen it. In 1799, when the pinch caused by the withdrawal of a million a year was severely felt, George Rose, the Secretary of the Treasury, praised the Sinking Fund as an example of integrity and economy which must in the highest degree promote the prosperity of the nation. And Lord Henry Petty, who succeeded Pitt as Chancellor of the Exchequer, stated in his first Budget Speech in March 1806 that “it was owing to the institution of the Sinking Fund that the country was not charged with a much larger amount of debt. It was an advantage gained by nothing.” This extraordinary statement, coming from a political opponent, shows how that generation was mesmerized by the potency of Compound Interest.
Yet, delusive as the scheme came to be, it conferred two benefits on Great Britain. Firstly, it tended to the reduction of the National Debt during the time of peace. Nearly eleven millions were written off in the years 1784–1792;[260] and the country felt no inconvenience until the million had to be borrowed at ruinous rates. But, far more than this, faith in the Sinking Fund buoyed up British credit at a time when confidence was the first essential of the public safety. In the dark days of 1797 and 1805 Britons were nerved by the spirit of their leader, who never quailed even in face of mutiny, disaster, and the near approach of bankruptcy. There are times when unjustifiable trust is better than the most searching scrutiny. Finally, it is the barest justice to the memory of Pitt to remember that his whole financial policy in the early part of the Great War rested on the assumption that France would soon be overborne; and, as we shall see, that assumption was justified by the experience of the past and by every outward sign in her present life. It was the incalculable element in the French Revolution, from the levée en masse of 1793 down to Austerlitz in 1805, which baffled Pitt and metamorphosed his Sinking Fund into a load of lead.
CHAPTER IX
REFORM
Unblest by Virtue, Government a league
Becomes, a circling junto of the great
To rob by law; Religion mild, a yoke
To tame the stooping soul, a trick of State
To mask their rapine, and to share their prey.
Thomson, Liberty.