Soon after the peace in 1763, an unfunded debt, amounting to 6.983,553l. was funded on the Sinking Fund, and on new duties on wine and cyder, at 4 per cent. There has been since borrowed and funded on coals exported, window-lights, &c. 6.400,000l. The funded debt, therefore, has increased since the war 13.383,553l. It has decreased (as may appear from [page 177]) 11.983,553l. and, consequently, there has been on the whole an addition to it of 1.400,000l.—During seven years, from 1768 to 1774, 1.115,883l. navy-debt was paid off. See [page 178]. But, as this is a debt arising from constant deficiencies in the peace estimates for the navy, it is a part of the current peace expences.—On the 31st of December, 1767, this debt was 1.213,072l.—On the 31st of December, 1774, it was 1.850,000l. and consequently, though 1.115,883l. was paid off, an addition was made to it, in seven years, of 673,028l. It increased, therefore, at the rate of 255,558l. per ann.
SUPPLEMENT TO SECTION III PART II.
Containing additional Observations on Schemes for raising Money by Public Loans.
It is impossible, that any attentive person can reflect without concern, on that monstrous accumulation of artificial debt for which no value has been received, which has been pointed out in different parts of the preceding Tract; and, particularly in the third Section of the second Part. This being a subject which, in the present state of our finances, is highly interesting; I have been induced to return to it in this place; and to offer some further observations and proposals which have occurred to me in reconsidering it, and which I think necessary to explain and confirm those which have been already offered.
There are two methods in which money is capable of being borrowed for public services. The first is, by offering such high interest as may of itself be sufficient to induce lenders to advance the sums that are wanted: And the second is, by offering a low interest, with a gratuity or douceur to produce the acceptance of it.—The last has been the method in which our government has most commonly borrowed money; and the gratuity offered has been either a right to a greater capital than the sum advanced, or a long or short or life annuity, or the profits of a lottery, or some advantages of trade.—The first without doubt, is the most rational method of borrowing; and the latter is so absurd and extravagant as to be incapable of being adopted in the common transactions of life.—In order to give a just and full idea of this, I shall instance in the last loan; specifying the manner in which it would have been made if the usual method of borrowing had been followed; and comparing this with the manner in which it was made; and the manner in which, I think, it might have been made to the greatest advantage.
Five millions, it is well known, were borrowed last year; and, had the old plan of borrowing been adopted, this sum would have been borrowed by some such scheme as one of the two following.
First. Interest in the public funds being then near 4 per cent. per ann. an interest of only 3 per cent. would have been offered; or, in other words, for every 100l. in money, 100l. stock carrying 3 per cent. (worth then 78l.) would have been given; but at the same time, as a premium or compensation for accepting such low interest, a life-annuity, or a short annuity would have been offered worth somewhat more than the difference between 100l. and 78l. or about 24l. The whole premium, therefore, in raising five millions, would have been equal in value to about 1.200,000l. and, supposing it to have been either a life-annuity, or a short annuity for 17 years of 2l. worth 12 years purchase, annexed to every 100l. stock, the whole annual charge incurred by the loan would have been 250,000l. for a term of years, and 150,000l. for ever till the capital is redeemed.
It is manifest that the capital including in it according to this account almost the whole premium, the public makes itself, by this mode of borrowing, a debtor for the very thing it gives; and, besides paying the annuity, obliges itself to advance at redemption the whole value of it.—It is proper to add, that this is done unnecessarily, because 1.200,000 might have been procured by selling the annuity, and the remaining 3.800,000l. necessary to make up five millions, might have been procured, as will be shewn presently, without any douceur by giving higher interest.
But there is another method of borrowing which has been practised by government on former occasions, and which might have been adopted in the last loan.