754
The Wealth of Nations
but partly, too, to the want of the support of the bank of England.
When this resource is exhausted, and it becomes necessary, in
order to raise money, to assign or mortgage some particular branch
of the public revenue for the payment of the debt, government
has, upon different occasions, done this in two different ways.
Sometimes it has made this assignment or mortgage for a short
period of time only, a year, or a few years, for example; and some-
times for perpetuity. In the one case, the fund was supposed suffi-
cient to pay, within the limited time, both principal and interest
of the money borrowed. In the other, it was supposed sufficient to
pay the interest only, or a perpetual annuity equivalent to the in-
terest, government being at liberty to redeem, at any time, this
annuity, upon paying back the principal sum borrowed. When
money was raised in the one way, it was said to be raised by antici-
pation; when in the other, by perpetual funding, or, more shortly,
by funding.
In Great Britain, the annual land and malt taxes are regularly
anticipated every year, by virtue of a borrowing clause constantly
inserted into the acts which impose them. The bank of England
generally advances at an interest, which, since the Revolution, has
varied from eight to three per cent., the sums of which those taxes
are granted, and receives payment as their produce gradually comes
in. If there is a deficiency, which there always is, it is provided for
in the supplies of the ensuing year. The only considerable branch
of the public revenue which yet remains unmortgaged, is thus
regularly spent before it comes in. Like an improvident spend-
thrift, whose pressing occasions will not allow him to wait for the
regular payment of his revenue, the state is in the constant prac-
tice of borrowing of its own factors and agents, and of paying
interest for the use of its own money.
In the reign of king William, and during a great part of that of
queen Anne, before we had become so familiar as we are now with
the practice of perpetual funding, the greater part of the new taxes
were imposed but for a short period of time (for four, five, six, or
seven years only), and a great part of the grants of every year con-
sisted in loans upon anticipations of the produce of those taxes.
The produce being frequently insufficient for paying, within the
limited term, the principal and interest of the money borrowed,
deficiencies arose; to make good which, it became necessary to
prolong the term.
In 1697, by the 8th of William III., c. 20, the deficiencies of
several taxes were charged upon what was then called the first
general mortgage or fund, consisting of a prolongation to the first
of August 1706, of several different taxes, which would have ex-
pired within a shorter term, and of which the produce was accu-
mulated into one general fund. The deficiencies charged upon
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Adam Smith
this prolonged term amounted to £5,160,459: 14: 9½.
In 1701, those duties, with some others, were still further pro-
longed, for the like purposes, till the first of August 1710, and
were called the second general mortgage or fund. The deficiencies
charged upon it amounted to £2,055,999: 7: 11½.
In 1707, those duties were still further prolonged, as a fund for
new loans, to the first of August 1712, and were called the third
general mortgage or fund. The sum borrowed upon it was
£983,254:11:9¼.
In 1708, those duties were all (except the old subsidy of ton-
nage and poundage, of which one moiety only was made a part of
this fund, and a duty upon the importation of Scotch linen, which
had been taken off by the articles of union) still further contin-
ued, as a fund for new loans, to the first of August 1714, and were
called the fourth general mortgage or fund. The sum borrowed
upon it was £925,176:9:2¼.
In 1709, those duties were all ( except the old subsidy of ton-
nage and poundage, which was now left out of this fund alto-
gether ) still further continued, for the same purpose, to the first
of August 1716, and were called the fifth general mortgage or
fund. The sum borrowed upon it was £922,029:6s.
In 1710, those duties were again prolonged to the first of Au-
gust 1720, and were called the sixth general mortgage or fund.
The sum borrowed upon it was £1,296,552:9:11¾.
In 1711, the same duties (which at this time were thus subject
to four different anticipations), together with several others, were
continued for ever, and made a fund for paying the interest of the
capital of the South-sea company, which had that year advanced
to government, for paying debts, and making good deficiencies,
the sum of £9,177,967:15:4d, the greatest loan which at that time
had ever been made.
Before this period, the principal, so far as I have been able to
observe, the only taxes, which, in order to pay the interest of a debt,
had been imposed for perpetuity, were those for paying the interest
of the money which had been advanced to government by the bank
and East-India company, and of what it was expected would be
advanced, but which was never advanced, by a projected land bank.
The bank fund at this time amounted to £3,375,027:17:10½, for
which was paid an annuity or interest of £206,501:15:5d. The East-
India fund amounted to £3,200,000, for which was paid an annu-
ity or interest of £160,000; the bank fund being at six per cent., the
East-India fund at five per cent. interest.
In 1715, by the first of George I., c. 12, the different taxes which
had been mortgaged for paying the bank annuity, together with
several others, which, by this act, were likewise rendered perpetual,
were accumulated into one common fund, called the aggregate