Joseph Lowe.

The present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France online

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by our annual loans in a far greater ratio. After
all that we have been told of the operation of the
sinking fund ; after the pompous statements of
hundreds of millions redeemed by it; after all the
eloquent effusions in its praise by both sides of the
House, the public will learn with some surprise,
that since I786, this fund has had a real o])eration
during twelve years only, and that the actual re-
duction effected by it, has not averaged a single
million a year! In this we are to be understood, as
leaving the twenty-three years of war wholly out of
the question, and coniining our calculation to the
six yeai's })receding 171)3, and tlie six years subse-
quent to 181.5.

Compound Interest. — The surj)rising results
ascribed in our time to compound interesi will be
cited by the future historian, :us alfbrding a striking
example of tiie ))ower of enthusiasm in the original
calculator, and of the exteni of credulity on the
])art of tlie jniblic, in Nvar, llir ^inking linid i5


,'^58 Our Finances ;

supported by loans, and is it not apparent, tfiat
whatever may be the beneficial result of accinnu-
lation in the hands of the commissioners of the
sinking fund, tlie loss to the public from the addi-
tional loans required by it must be in the same
compound ratio ? We might even add, that in all
cases of taxation, where the impost has not (and it
very rarely has) the effect of inducing economy in
the individual, the loss is to be reckoned by com-
pound interest, since, had the money been lefl in
the hands of the subject, tlie increase would have
been in the compound form.

Without entering into any arithmetical statement,
or even pressing the argument in an abstract form,
we may safely make the general assertion, tliat the
power of the sinking fund, whatever it may have
been, has arisen " not from actual payments, but
from its influence on the public mind;** — from its
presenting ^possibility of an ultimate repayment of
the debt; — a possibility transformed into confident
expectation by the ardour of the public and our
natural inclination to belie^'e what we wish.

Present State of the Sinking Fund. — Such was
the state of our financial concerns until the begin-
ning of 1322, when, by the double effect of reduc-
tion of expenditure and increase of revenue, an
actual surplus was produced, and the sinking fund
was likely to become efficient to the extent of 4 or
5,000,000/. a year. We seemed now on the eve of
attaining the result so long represented as desirable
by ministers ; the possession of an engine for raising
the price of stocks, or, in other words, for reducing
the rate of interest on private securities. In wliat
manner, it may be asked, would the latter prove a
consequence of the former ? In France, where the

the Smhin: Fund. 3.59

interest of the public debt does not Ibrni 10 per
cent, of the income arising from ])ro])erly, and
government securities do not connnand general
confidence, the interest of money vested in land,
iiouses, and trade, is not materially affected by the
j)rice of the public fimds. Land continues to be
bought with eagerness, though yiekling only .'3,
3^7, or i per cent, on the })urchase money, at a
time when the same capital would yield between
5 and (') per cent, in the funds. In this country
the case is otherwise. Our })ublic divitlends iorm
a considerable propoition of the income arising
fi'om property ; they are held by individuals in all
[)arts of the country ; and their value naturally
uifluences that of other investments of capital. It
follows that a rise in the price of stock, in other
words, our obtaining less interest from purchasing
in the funds, has a chrect tendency to lower the
interest on private securities, as has been exempli-
fied by the general diminution of the interest on
mortgages diu'ing the last and })resent year.

What, in a statistical sense, are the ciuuacteristics
or accompaniments of a low rate of interest ? It is
indicative of abundant ca})ital, and of a very ad-
vanced state of productive industry. It was this
which formed the great featiue in the situation of
Holland during the chief part of the 17th and 18th
centuries, and enabled her government to lower
her dividends at a time (l651) when Fnuice and
other states borrowed at very high interest. It was
this which, under Sir R. Walpole, afforded the
strongest proof of the revival of our financial credit,
and which in I7ID enableil Mr. IVlham to ctlect
a well-known and highly beneficial reductii)n. But,
neither hi these cases, or in any otiier of whicli
history has preserved the recoril, did the I'all of

A A 1'

;3(J0 O/cr FiiKuire.s ;

interest proceed from tlie operation of a sinking
fund. It rested on a much broader ])asis : it was
the natural consequence of confirmed peace ; of
the diminished demand for capital ; of a fall, or
tendency to fall, in the rate of interest on all secu-
rities whether public or private ; it was to a con-
currence of these circumstances, much more than
to any surplus in the revenue, tliat we attributed
the fortunate accomplishment of that great oper-
ation, the reduction of the five per cents.

If our readers see with some surprise these de-
ductions from the efficiency of a measure so much
vaunted, they will be no less struck with the farther
part of our argument ; viz., tliat a large sinking
fund, or, to describe it in the most simple terms, a
large surplus revenue applied to the redemption of
stock, would be productive of public injury. By
lowering unnaturally the rate of interest, it would
send capital abroad, and operate as a fund to raise
the stocks of France or America. This result is
too obvious to have escaped the observation of
either the Bank directors or ministers : in fact, the
readiness wdth which ministers consented both in
the last and present year to relinquish their surplus
revenue by remitting taxes, seems to indicate a
conviction, that a rise in the value of stock, pro-
duced artificially, would be replete with injury to
the public. They cannot fail to be aware, that
since the reduction of the 5 per cents., there
remains no adequate motive for interfering with the
current rate of interest, or for discovering a soli-
citude on the part of government, to raise the value
of the funds more than of land, or au}^ other de-
scription of property. If, in commercial affairs,
ministers have, during the last ten years, evinced a
prudent forbearance, and abstained from the inter-

the Sinking Fund. 36l

vention so unfortunately exercised by tlieir prede-
cessors, is it likely that in finance tliey ^vill follow
a different course ? Our debt will hardly admit
of direct reduction : our hope of relief is in that
diminution of pressure which will follow the in-
crease of our means; — the augmentation of na-
tional income; — a result most likely to be ])romoted,
by strict impartiality as to property, whether vested
in land or the public funds.

But, if such be the conviction of our rulers,
why, it may be asked, do tliey still cling to a name,
and hold forth the sinking fund to parliament and
the country, as an institution entitled to such
zealous support ? Partly, we believe, from a wish
to retain a surplus of revenue at their disposal,
for the relief of suffering interests, or to facilitate
measures of evident utility, such as the commu-
tation of tithe in Ireland : partly perhajis, from
a deficient acquaintance with the backwardness of
other countries, and a consequent difh'dence in cal-
culating the relative progress of our own. Our
true sinking fund is to be sought in the more rapid
increase of our national i?iconie, an increase that
rests on no visionary basis, but on our mines, our
navigation, our capital. Yet no speaker in parlia-
ment, whether ministerialist or oppositionist, ap-
pears to have as yet studied the comparati\e
prospects of England and her neighbours, oi- lo be
sufficiently aware of the inferences whicii they

The admissions successively nv.xdv by the siip-
])orters of the sinking fund (Aj)j)endi\, j). [1().'3].)
liave removed part of the mystery which, by the aid
of such phrases as " inviolability of de])osit" and
*' operation of compound interest," luul so long
encircled it. Our present Chancellor of the Exclie-

;if)2 Our l^'uianccs ;

(iiicr lias liad tlie good sense to reliiHiuisli the
nominal part of" tlie sinking fund, and to describe
the remainder merely as a surplus revenue ap[)ro-
priated to tlie redemption of stock. As such we
request our readers to consider it, and to enable
them to compute its amount without unravelling
a long list of finance papers, we subjoin an

Estimate of our Annual Expenditure for 1823 and 1824'.

Half pay and pensions for tlic Army,

Navy, and Ordnance, about - £ 4,800,000
Ofwhich advanced by the Bank, nearly - 2,0(X),000

Remainder to be paid out of the ■■

current revenue - - - 2,800,000

Army, exclusive of half pay and

pensions - - - 7,000,000

Navy - - - - .5,5(X),0(K)

Ordnance - . » . 1,200,000

Miscellaneous - ... 1,500,000

C-'ivil list ; pensions for Civil Services ; Courts of
Justice ; civil Government of Scotland, and
some lesser heads, all charged on the Consoli-
dated Fund. ... . 2,000,000

Amount of expenditure distinct from the interest

of the debt 20,000,000

Interest of the public debt - ... 30,000,000

Total - € 50,000,000

Such is our present expenditure ; and our bo7id
fide sinking fund can, of course, be nothing else
than the siu'plus of our income above it : it will
be found to amount to three, four or more mil-
lions, according to the productiveness of tlie

The next and equally important question is,
whether a surplus when found to exist, '* ought to
be applied to the redemption of stock, or made a
ground lor the further remission oi' taxes." We

the Sinking Fund. 363

subscribe, without hesitation, to the hitter, not
merely for tJie sake of" rehefto tlie j)ubhc, but on
the less-understood ground ol" the injurious con-
sequences of interfering with the price of stocks.
Against this, liowever, it may be urged, that men
of the most opposite views in politics have con-
curred in eulogising the sinking limd — that Mr.
Fox, was, in this respect, no less zealous than his
great antagonist. Mr. Fox, it is well known,
never made a study of finance, still less of political
economy ; his conclusions in these, as in many
other respects, when well founded, owed their
justness less to continued research or careful com-
parison, than to rectitude of feeling, to a manliness
of character, which, in a question like the present,
woidd prompt him to adopt without much inves-
tigation that course, which should place the burden
on the shoulders of ourselves, instead of our pos-
terity. Again, Mr. Pitt, when he introduced the
sinking fund, was only in his twenty-seventh year,
and could not, from the pressure of other a\ oca-
tions, have been able to study very closely the
operation of a surplus revenue, ap])lied to the pur-
chase of stock. He was necessarily unacquainted
with the statistical returns which we ])ossess,
and which shall be more fiilly noticed in the
tbllowdng pages. He had before him no example
of a measure tending, by mniatural interference
with the rate of interest, to send capital out of the
country: still less could he foresee the raj)id increase
of our numbers, the sur})rising extension of our
productive industry, and the consequent motives
for pursuing a system, the reverse of that wliich
maintains a sinking fund — we mean, heaiing light
on the present generation, and transferring a por-
tion of taxation to then' les^ burdeneil successors.

,'30 J< (hir Finances ; Dis/'nir/ion iif

If these remarks are at all useful in correcting
])()])ular niisa|)i)re]iension, we shall hope somewhat
of a similar result from the following paragra})hs,
ralating to the situation of difterent classes of

StockJioldcrs : Disli/iclioti helxveen Permanent and
Temporari/ Depositors. — Those of our country-
men who have travelled and paid attention to topics
of this nature, must have remarked that in France,
Germany, Spain, in short, in every country on the
Continent, except Holland, the public funds are
comparatively little resorted to as a deposit for
private property. The governments of these coun-
tries have not as yet acquired the confidence at-
tached to a representative assembly, and the inha-
bitants are little acquainted with the security con-
ferred on property by public register, the power of
transfer, the steady observance of good faith to-
wards the public creditor. Continental lenders
require the visible, and, as they account it, solitl
security of land and houses. Such, a century and
a half ago, was the case throughout England
generally, and such, in no small degree, was the
case in the provincial part of the kingdom at the
beginning of the late war. The general ardour of
our countrymen in the contest, their confidence in
government, and the comparatively high interest
then given by the Treasury, led to the deposit in
that ready absorbent, of sums of which the magni-
tude would have startled the caution of our fore-
fathers. The result of the whole is, that funded
property so insignificant in a former age, when
compared to the general wealth of the kingdom, is
now of an amount approaching to the value of our
land, ])articularly if we estimate it not by capital,
but (seo p. '258.) by income.

Permanent and Tempnrarif SloclJiolders. 80.5

Annuitants on our public funds, instead of
being confined, as in the last age, to London,
Bristol, and a few of our principal towns, are now
found in every district, and in every variety of
occupation. The great majority of them are })er-
manent depositors, strangers to tlie manani\)-c's of
the stock exchange, speculating neither on buy-
ing or selling, and attentive merely to the lialfl
yearly receipt of their dividends. These persons
consider the stocks as a fund ])ermanently eligible
for themselves and their families, confiding, on
the one hand, in the good faith of Parliament, and
aware, on the other, of the serious drawbacks at-
tendant on property in land and houses, — the dif-
ficidty of collecting rents, the heavy charge at-
tendant on transfers. The funds, they are aware,
involve neither delays nor lawsuits, while, with a
view to bequest, they admit of an easy and direct
repartition. It is in results such as these, that
we recognize all the advantage of established in-
stitutions, of the steady observance of good faith
on the part of government. Viewed in a national
sense, they render a people capable of efforts such
as those which maintained the independence, of
Holland against the successive attacks of Spain,
England, and France: — Viewed in regard to the
individual, they ofler a mode of investment almost
as much superior to that of the circle of pri\ate
connexion, as is afforded by Saving Banks, when
compared with the precarious deposits to which
the lower orders were formerly accustomed to trust
their petty savings.

What proportion do these persons, the perma-
nent depositors in our funds, bear to the body of
stockholders at large ? Not less, we believe, than
fonr-Jifths of the xv/iok% whether we look to number

3(]G Our Finmiccs ; JYis tine lion of

or piopcrty. The temporary depositors, liowcvor,
few IIS tliey are, fill a more conspicuous ])iact! in
the public eye : it is they who bustle on the Slock
Exchange, who confer with tlie Chancellor of the
Exchequer, and who come conspicuously forward
to bear a part in loan contracts. But these persons
consider the funds merely as a transient property,
a security in which, as in Exchequer bills or mer-
cantile acceptances, they may vest a floating sum
until the occurrence of a more eligible mode of
appropriation. Their calculations as to the price
of stocks go no farther than the month or the
quarter which may elapse ere it suit them to with-
draw their money, for the purpose, perhaps, of
transferring it to the funds of the United States of
America, France, or the lesser Continental powers.
Merchants, it has long been said, are citizens of the
world, but of all mercantile men, that is particu-
larly the case with temporary stockholders, to whom
London, Amsterdam, and Paris, present but one
vast exchange. How different this from the jier-
manent depositor who exhibits so many character-
istics of the retired capitalist, of the inheritor of
real property, preferring British security, even at a
reduced interest, and not seeking to escape his
portion of sacrifice, when satisfied that it is con-
ducive to the general relief ! These persons are
much more interested in preserving than in ac-
quiring ; their object is not a rise of price for the
purpose of sale, but secuiity in regard to their
capital and strict punctuality in the payment of
the interest.

This disposition has been strikingly exemplified
in the late reduction of the five per cents., of which
not a jifticth part was sent out of the country y not-
withstanding the great temptation offered by foreign

Permanent and Tcmporarii Stockholders. 307

funds. And if in the three per cents, the perma-
nent depositors do not sur})ass the teni})orary in so
great a proportion, they form, even in these, beyond
all comparison, the majority.

With what view, it may be asked, do we enter
into this discrimination of tem])orary antl peinia-
nent depositors ? Partly because it is little under-
stood, but more for the purpose of showing the
unimportance in a national sense, of the class who
come forward as the representatives of the fund-
holders at large. It follows, that any measures
that may be taken in regard to the funds, should
be adapted to the unobtrusive, we may almost say,
the silent majority of stockholders. Persons cir-
cumstanced as they are, can desire no aid at the
expence of the community ; no addition to the
market price of stock, except such as shall natu-
rally arise from the continuance of peace, the
growing abundance of capital. — An artificial proj),
such as the sinking fund, they will not hesitate to
forego, when a])prized, that in peace it is of inju-
rious tendency, and should be considered only as
an ingenious scheme by which the financier, in a
season of difficulty, seeks to stimulate the avidity of
capitalists, and to })rovide lor the calls of the
Treasury, without an extravagant sacrifice.

After these preliminary explanations and (he
removal from the mind of the reader of certain po-
pular impressions, we shall proceed with ad\ autage
to our farther illustrations.

3()S Coinpdralivc Taocufum of

Comparative Taxation of Hits Cnuntrij and France.


Computed fur 182;i, after dcdnclin^ llie taxes on salt, leather., and
vialt lately reduced : also a portion of the Assessed Taxes.

Gross amount, inclusive of the expence of collection.

Assessed taxes - - - £5,000,000

Customs .... 11,000,000

Excise .... 27,00O,fXK)

Stamps .... 6,800,000

Land-tax .... 1,200,000

Post-office (nett amount) - - 1;400,000

Crown lands - - - 200,000

All other government receipts - - 1,400.000

Tithe (including Ireland) - . 5,000,000

Poor-rate, after deducting the portion

paid (see page 199.) in lieu of wages - 5,000,000

Total - ^G4-,000,0()0

being 25 per cent, on our national income
as computed in page 257.


Gross amount, inclusive of expence of collection.
Fancier, or land and house tax - - 9,000,000

Mobilier a farther house tax; also the window

tax ?Lwi\.patentes, or tax on professions - 3,000,000

Customs .... 2,300,000

Excise, viz. duties on salt, tobacco, snuff, wine,
spirits, beer, and some lesser articles, the
whole comprised under the name of droits
remiis ... . 9,000,000

Stamps, viz. enregistremcnt, doinaine ct timbre - 6,000,000
Post-office (nett receipt) - - - 600,000

Sale of wood from the public forests - - 800,000

All other receipts and contingencies, including
a large municipal revenue collected from
octrois and other charges borne by the inha-
bitants of towns -^ - " - .- 6,300,000


Enf>;Jan(l and France. 369

Kqual, alter adding a Htth for the greater value

of money, in France than in England, to - 45,000,000

This forms nearly 18 per cent, on the national
income of France, as computed in page 270.

In this table of comparative taxation, the chief
distinctive feature is tiie magnitude of our excise,
customs, and assessed taxes, tlie proportion of
which to the same taxes in France, is as forty to
twenty milhons. This puts in a striking' Hght the
greater ability to pay on tlie part of a connnercial
community, of whicli so large a proportion are re-
sident in towns, a circumstance conducive equally
to ease of collection on the part of government,
and to free consumption on that of the public.
Hence, the magnitude of our receipts on spirits,
beer, tea, sugar, wine, fruit ; on certain articles of
dress, as silk ; or on that which more immediately
marks a mercantile society, postage. It lessens, at
the same time, the weight of an argument, fre-
quently brought against our taxation, but which
we are far from adopting in a literal sense, viz. that
when computed at so much a head, it amounts to
more than twice the average capitation of our

Com Larvs. — These laws may be termed an in-
direct impost on the public, payable to landholders
as an indemnity for the huul-tax, tithe, and j)oor-
rate. They have in particidar years foinied an
addition to our j)ayments greatly beyond the
amount expended by the landed interest for these
burdens ; l)ut at })resent the case is so different,
that our corn laws may, in some measure, be con-
sidered a dead letter. In oiu- table accordingly we
have avoided noticing their operation, and have
preferred introducing the amount of the charges


370 Comparative Taxation.

which they are intended to counterbalance. In
France also there exist restrictions on the import
of foreign corn, but they are of little consequence
in a country where the growth is, in general, fully
equal to the consumption, particularly as import
becomes free whenever the average of wheat of
home growth approaches to 50^. the Winchester

What, it may be asked, is the object of the pre-
ceding tables? To draw with distinctness and
precision, that which is so often attempted in a
loose and exaggerating manner, — a comparison
between the burdens of this and other countries,
our competitors in the sale of manufactures. The
Agricultural Committee of 1821 advanced an opi-
nion (Report, p. 22.), that the taxation of other
countries compared to their resources is as high as
our own. This conclusion our statement does not
confirm, but it will probably be instrumental in
modifying a very general impression of an opposite
nature ; viz. that oui' burdens exceed those of our
neighbours, to a degree which, in a manner, baffles
all hope of approaching to an equality. Far from
joining in this discouraging view of our situation,
we are inclined to augur very favourable results
from a perseverance in the course of reduction
lately adopted by ministers.



Our Prospects in Commerce and Finance,

Jtrobability of continued Peace. — The events
that liave recently occurred on the Continent,
unsatisfactory as they are to the friends of con-
stitutional freedom, have had at least one i^ood
effect, that of putting beyond doubt the determin-
ation of our ministers to maintain peace. The
debates of 29th and 30th April last, will be me-
morable for the declarations to that eflf'ect, made
by Mr. Canning and Mr. Robinson, and confirmed
by the votes of an overpowering majority. But
this, we may be assured, was no new determination
on the part of our rulers, the course of circum-
stances having long since shown to the reflecting
part of our public men, tiiat the only eflectual
remedy for the national embarrassment was to be
sought in a steady adherence to a pacific system.
It will be in the recollection of many of our
readers, that the late Lord Lonilonderry, in his
speech of 29th April (1822), dwelt strongly on the
improbability of our being again called on to bear
a part in war, on a scale at all similar to that ot" our
late contest. Had the reserve of office permitted
his lordship to express himself at large, he might,
we believe, have gi/ven the most conc/usit'c argu-
ments for this opinion, avowing that the magnitude
of our loss, by the war, was unperceived at the

Online LibraryJoseph LoweThe present state of England in regard to agriculture, trade and finance; with a comparison of the prospects of England and France → online text (page 27 of 40)