They have frequently overloaded the fund even upon the first anticipation, and when this happened not to be the case, they have generally taken care to overload it by anticipating a second and a third time before the expiration of the first anticipation.
The fund becoming in this manner altogether insufficient for paying both principal and interest of the money borrowed upon it, it became necessary to charge it with the interest only, or a perpetual annuity equal to the interest, and such unprovident anticipations necessarily gave birth to the more ruinous practice of perpetual funding.But though this practice necessarily puts off the liberation of the public revenue from a fixed period to one so indefinite that it is not very likely ever to arrive, yet as a greater sum can in all cases be raised by this new practice than by the old one of anticipations, the former, when men have once become familiar with it, has in the great exigencies of the state been universally preferred to the latter.To relieve the present exigency is always the object which principally interests those immediately concerned in the administration of public affairs.The future liberation of the public revenue they leave to the care of posterity.
During the reign of Queen Anne, the market rate of interest had fallen from six to five per cent, and in the twelfth year of her reign five per cent was declared to be the highest rate which could lawfully be taken for money borrowed upon private security.
Soon after the greater part of the temporary taxes of Great Britain had been rendered perpetual, and distributed into the Aggregate, South Sea, and General Funds, the creditors of the public, like those of private persons, were induced to accept of five per cent for the interest of their money, which occasioned a saving of one per cent upon the capital of the greater part of the debts which had been thus funded for perpetuity, or of one-sixth of the greater part of the annuities which were paid out of the three great funds above mentioned.This saving left a considerable surplus in the produce of the different taxes which had been accumulated into those funds over and above what was necessary for paying the annuities which were now charged upon them, and laid the foundation of what has since been called the Sinking Fund.In 1717, it amounted to L323,434 7s.7 1/2d.In 1727, the interest of the greater part of the public debts was still further reduced to four per cent; and in 1753 and 1757, to three and a half and three per cent; which reductions still further augmented the sinking fund.
A sinking fund, though instituted for the payment of old, facilitates very much the contracting of new debts.It is a subsidiary fund always at hand to be mortgaged in aid of any other doubtful fund upon which money is proposed to be raised in an exigency of the state.Whether the sinking fund of Great Britain has been more frequently applied to the one or to the other of those two purposes will sufficiently appear by and by.
Besides those two methods of borrowing, by anticipations and by perpetual funding, there are two other methods which hold a sort of middle place between them.These are, that of borrowing upon annuities for terms of years, and that of borrowing upon annuities for lives.
During the reigns of King William and Queen Anne, large sums were frequently borrowed upon annuities for terms of years, which were sometimes longer and sometimes shorter.In 1693, an act was passed for borrowing one million upon an annuity of fourteen per cent, or of L140,000 a year for sixteen years.In 1691, an act was passed for borrowing a million upon annuities for lives, upon terms which in the present times would appear very advantageous.
But the subscription was not filled up.In the following year the deficiency was made good by borrowing upon annuities for lives at fourteen per cent, or at little more than seven years' purchase.
In 1695, the persons who had purchased those annuities were allowed to exchange them for others of ninety-six years upon paying into the Exchequer sixty-three pounds in the hundred; that is, the difference between fourteen per cent for life, and fourteen per cent for ninety-six years, was sold for sixty-three pounds, or for four and a half years' purchase.Such was the supposed instability of government that even these terms procured few purchasers.In the reign of Queen Anne money was upon different occasions borrowed both upon annuities for lives, and upon annuities for terms of thirty-two, of eighty-nine, of ninety-eight, and of ninety-nine years.In 1719, the proprietors of the annuities for thirty-two years were induced to accept in lieu of them South Sea stock to the amount of eleven and a half years' purchase of the annuities, together with an additional quantity of stock equal to the arrears which happened then to be due upon them.In 1720, the greater part of the other annuities for terms of years both long and short were subscribed into the same fund.The long annuities at that time amounted to L666,8218s.3 1/2d.a year.On the 5th of January 1775, the remainder of them, or what was not subscribed at that time, amounted only to L136,453 12s.8d.