6 injuries or even affronts on the part of our neighbours.' 'It has been a generally received notion among political arithmeticians,' wrote Mr. Hannay in 1756, that we may increase our debt to 100,000,000l., but they acknowledge that it must then cease by the debtor becoming bankrupt.' 'The ruinous effects of it (the debt),' wrote Hume in 1778, 'are now become apparent, and threaten the very existence of the nation.'1 The anticipations, which were thus freely hazarded of the consequences which would result from the vast debt under which the country was labouring, were signally falsified. The debt grew: but the wealth of the country grew much more rapidly. In 1806 the country raised by taxation a larger sum than that which Bolingbroke had declared would appear incredible to future generations as an eight years' yield. But even this sum was soon surpassed. In 1815 the country raised more than 74,000,000l. by taxation alone. The expenditure of the twenty-four years ending January 5, 1816, exceeded 1,500,000,000l., or averaged more than sixty millions a year, and no less than 1,280,000,000l. (832,000,000l. of which were, however, applied to the reduction of debt) were borrowed in the same period. This statement, however, suggestive as it is, only imperfectly indicates the real growth of the debt during the great revolutionary war. Most of the money was raised at 3 per cent.: and, as the funds were frequently as low as 50, the stock created usually largely exceeded the money received by the Government. The capital of the debt rose by much more than the difference between the amount of money borrowed and the amount applied to the liquidation of old liabilities. The total capital of the debt amounted in 1815 to 861,000,000l., the charge upon it, excluding the sinking fund, to 32,645,000l.3 1 See all these quotations in Porter's Progress of the Nation, p. 482. 2 Ibid. P. 489. VOL. I. D 3 Return, National Debt, Sess. 1858, No. 443. CHAP. CHAP. The Sink The interest on the National Debt, however, did not include the whole charge thrown by it on the taxpayer. ing Fund. The country, while it was steadily increasing its liabilities, was pleasing itself with the delusion that it was rapidly extinguishing them. A certain addition was voluntarily made to the interest of the debt raised, and the sum so added to it was annually invested in stock, which was set religiously apart as a sinking fund. The interest of the stock so purchased was permitted to swell this fund, which became in consequence larger and of greater importance in every succeeding year. The plan was commended to the generation, which approved it, by the support which it had received from Pitt. Pitt's immediate successors did not venture to disregard a device introduced on his high authority, and the sinking fund was accordingly maintained with the utmost confidence in its merits. Had the ordinary income of the year been sufficient to cover all the charges thrown upon it, the sinking fund might have proved as advantageous as its supporters anticipated. But, throughout the whole of the war, the revenue at the disposal of the Government was insufficient for the expenditure of the country. Large sums of money were necessarily borrowed, and the determination to preserve the sinking fund inviolate only made the nation borrow more largely than would otherwise have been necessary. Many millions were annually raised by loans, and applied to the redemption of the debt. The country borrowed money from one set of creditors and paid it to another, and gained nothing by the process save a sop to its vanity. The vanity of the public was indeed flattered beyond measure by the expedient. The sinking fund, which was in reality reducing no more debt than its existence compelled the ministry to create, seemed on paper to be as powerful as its originators had intended it to be. At the close of the war it amounted to more than 14,000,000. annually and it seemed mathematically demonstrable that I. a sinking fund of 14,000,000l., accruing at compound in- CHAP. terest, would pay off the entire debt in less than half a century. Unfortunately, however, all these calculations depended on the assumption that the revenue at the disposal of the Government would be sufficient to defray the whole cost of the public service, of the charge on the debt, and of the sinking fund itself. Unfortunately, too, every addition to the cost of government, every reduction of taxation, every decrease of revenue, were liable to falsify them. The scheme, in fact, depended on the surplus income of the country being equal to the whole amount of the sinking fund, and, as the result proved, it rarely exceeded one tenth of it. The plan, in a heavily taxed country, with constituencies clamouring for fiscal relief, was certain to fail. It required its failure to prove that the only way of reducing debt is to apply an unexpended surplus to its redemption. The war then had burdened the country with a for- Revenue. midable debt, and had, of course, necessitated a resort to heavy taxation. In 1792, when the United Kingdom was still at peace, the entire expenditure of the nation had not reached 20,000,000l. During the three last years of the great war the expenditure had averaged upwards of 100,000,000l. a year. In 1816 the interest and sinking fund of the debt alone absorbed more than 46,000,000. Though then the restoration of peace made reductions of expenditure possible, it was clear to all parties that heavy taxation would still be necessary. people had been taxed severely during the preceding twenty-four years to support the war. But the burdens, which the war had occasioned, were to necessitate taxation almost equally severe being levied upon their descendants. The There is, perhaps, nothing more marvellous in the history of the world than the growth of the revenue of 1 Porter's Progress of the Nation, p. 480. CHAP. I. the United Kingdom. A little more than one hundred years before the French Revolution commenced, the United Kingdom could hardly be said to have had a revenue. The king, indeed, enjoyed an enormous property. As lord paramount, he was entitled to various lucrative and inconvenient feudal incidents; and the forfeiture of estates, either for treason or felony, was perpetually tending to increase the income at his disposal. With ordinary prudence and care the kings of England might easily have carried on the government of the country without asking for additional assistance from their subjects. Happily, however, for the future of this country, the kings of England did not possess ordinary prudence, or exercise ordinary care. They squandered their vast estates on their ministers or their favourites, and were compelled in consequence to apply to Parliament for assistance to enable them to conduct the government. Had they been less extravagant, they might have dispensed with a legislature: the Petition of Right, in that case, might never have been drawn up; the Grand Remonstrance might never have been framed; and England even now might not have gained the full blessings of a free and constitutional monarchy. England in this way may be said to owe more to her bad kings than her good ones. The good monarchs reconciled their subjects to arbitrary rule, the bad ones induced them to establish their liberties. It required, however, a long series of lessons before the people of England learned that the only guarantee for the constitutional rule of a sovereign lay in the retention of the power of the purse by the people: and that, so long as the revenues were granted absolutely to a king, the king would be free to govern in his own way. The worst evils of the old financial system were reproduced on the restoration of Charles II., and some of them were, in fact, intensified by the Parliament of the day. A I. The Ex Parliament of landlords was naturally anxious to relieve CHAP. the land of the country from the burden of feudal incidents, and Charles II. offered to abandon the emoluments of signiory for 100,000l. a year. The feudal incidents had constituted a landlord's burden, and justice therefore required that the compensating impost should be raised by a direct tax on land. Unfortunately, however, the Parliament had before it the example of an excise. The excise had originally been introduced in Holland, where cise. no article was either too insignificant or too costly to escape the impost of the exciseman. Half seriously, half in jest, it was stated that in that country the dish of fish and its sauce had paid the duty thirty times before it was sent up to the table. It was certain that a tax, so universal in its application and so productive in its results, would be ultimately extended to other countries, and both royalists and parliamentarians had, as a matter of fact, recourse to it during the Civil War. Both parties, indeed, were loud in their declarations that the tax should be terminated at the close of the war. All unpopular taxes, when first proposed, are usually granted under a similar promise. The promise, when the nation is accustomed to the burden, is forgotten: the usefulness of the tax alone is remembered. So was it with the excise. At the Restoration the landlords desired to escape from some disagreeable burdens. The king was ready to relieve them if he were only compensated. Justice required that the compensation should be found in a tax on land. Interest suggested the expediency of shifting the burden on to the consumer. By a very narrow majority of only two votes the latter alternative was preferred, and a moiety of the excise was settled on the crown. The bargain, however unjust to the people, proved profitable to the king. The moiety of the excise increased rapidly in value, till, at the close of Charles II.'s reign, it yielded three times the sum for which the |