During this first war of George the Second, the land-tax was constantly at 4s. in the pound; and new branches of customs, excise, or other inland duties, were created in proportion to the swelling of the national debts, which, on the 31st of December 1748, amounted to 78 293 313l. sterling, bearing 3 005 325l. interest; and the sinking fund, or surplus of all permanent taxes then imposed, after paying the civil list, and the interest upon this capital, amounted to 1 060 948l. sterling. During this war, the debts were increased above what they were at the end of 1738, by 31 631 546l. sterling capital, and by 1 043 272l. of interest or annuities.

The war was no sooner over, and the national expence diminished, than money began to regorge in the hands of the monied interest: an infallible consequence of such a violent revolution, when extraneous circumstances, such as occurred after the peace 1763, do not prevent it.

To profit of this conjuncture, government, early in 1749, proposed that all the public creditors upon capitals bearing 4 per cent. interest, redeemable by parliament, and amounting to upwards of 57 millions, who should accept of 3 per cent. from December 1757, should have their debts made irredeemable until that time; and in the interval should continue to have 4 per cent. till December 1750; and 3½ per cent. from thence, until the total reduction to per cent. in December 1757.

This bold undertaking had the desired effect. Many obstacles were thrown in the way; but the regorging capitals in the hands of many, made every one fear the reimbursement for himself; and the credit of France was then so low, that very few chose its funds as an outlet for their superfluous money.

But an outlet, unfortunately, was not wanting at the end of the last war in 1763, as we shall shew in its proper place.

Here then is a notable instance of the effects of regorging money. A small sum, when compared with a nation’s debt, operates upon the whole capital; as a small balance upon trade affects the whole mass of reciprocal payments.

The reimbursement of 57 millions offered by government, in 1749, was, to the conviction of all the world, an impracticable scheme; but the stockholders seeing a large sum ready to be subscribed, at the interest offered, and feeling the effects which that regorging money must, in all events, have produced, willingly, and wisely perhaps, consented to the offer made them. Had they refused, and had the scheme proposed become abortive thereby, perhaps the nation might have been so far animated against the creditors, from the disappointment, as to have consented to be at the expence of defraying the service of the following years, without encroaching upon the sinking fund. What effect this would have produced upon the rate of interest, in that conjuncture, no man can tell, nor will the real consequence of such a measure ever be known, until the happy trial be made. That it would have brought interest below 3 per cent. in December 1757, is, I think, evident: for as matters stood, had the creditors of 57 millions been able to hold out, I must do them the justice to believe, they would not have consented to the proposal made to them; and an addition of all the sinking fund thrown among them annually, at a time they could not dispose of what they had, upon better terms than those offered them, would undoubtedly then, as at all times, operate a very great national relief, in bringing down the interest.

During the tranquillity which continued from the peace of Aix-la-Chapelle, in 1748, to the commencement of hostilities in 1755, the money expended for extraordinary services amounted on an average to above four millions per annum. The expence of government was then increased, by supporting the colonies, and by several great and uncommon outgoings at home, for purposes mentioned in the supplies of those years.

A little before the breaking out of the last war, that is to say, on the 5th of January 1755, the national funded debt was reduced to 72 289 674l. upon which was paid an annuity of 2 654 500l. and the sinking fund amounted to 1 308 814l^[27]. At the end of 1763, the year of the peace, the funded debt amounted to 130 586 789l. 10s. besides above 9 millions not provided for. So that at the end of last war the national debt exceeded 140 millions; besides the value of the annuities granted in 1757, 1761, and 1762. Hence it appears, that the war occasioned an augmentation of upwards of 58 297 116l. upon the funded national debt; besides the difference between the unfunded debts at the beginning and end of the war; and also the value of those annuities^[28].

I shall, before I conclude this chapter, present a short scheme of the state of the nation at that time: but first let us take a view of the methods used to borrow so large a sum in the short period of eight years.

Until 1757, money was borrowed by government, at a little above 3 per cent. but then a loan of 5 millions being necessary, government consented to create annuities of 4½ per cent. irredeemable for 24 years. By this expedient the monied people eluded the operation of reducing the interest of this fund, upon the return of peace. How far this expedient was to be preferred to the former, of increasing the capital beyond the money paid; or whether it would not have been still better to have paid for the money wanted, according to the current rate of interest in the market at the time, waiting until a peace might afford a favourable opportunity of reducing it, I shall not take upon me to determine.

I have observed how rash it is for any one to censure acts of administration, when the motives of a statesman’s conduct are unknown. This, however, I have sometimes ventured to do, in speaking of things which happened many years ago; but we ought to be more cautious as we come nearer to our own times, because not having, as in this case, a course of experience to point out the errors, we must entirely rely upon our own sagacity, and reason only from analogy.

During the last war, as in that preceeding it, taxes were increased in proportion to the interest of the money borrowed; and new impositions were now laid on the articles of great consumption, which produced abundantly. The new malt-duty of 3d. per bushel, and the new beer-duty of 3s. per barrel, bring in net into the exchequer near 820 000l. per annum, and discharge the interest of above 27 millions sterling, at 3 per cent. Such a sum raised at the end of a war so very expensive, and at the very time when the credit of France was totally fallen, must have operated in the strongest manner, and did in fact operate more, perhaps, than any other consideration to put an end to that war, the most glorious that Europe has beheld since the beginning of this century, or perhaps in any age whatever: advantageous to Great Britain, notwithstanding all the expence, providing that the consequences happen to correspond to what may be reasonably expected.

I shall now set before my reader a short state of the taxes, debts, and public funds of Great Britain, at this bright period of her history.

From the best authority I have been able to procure, the revenue of the state, considered under the three general branches of customs, excise, and other inland duties, which comprehend the whole permanent income of this kingdom, was then as follows:

Let us next state the annual charges and appropriations settled upon this fund.

In that state, nearly, stood the affairs of Great Britain after the conclusion of the peace in 1763.

It now only remains to offer some conjectures why, after this period, money was not found to regorge, as after the peace of Aix-la-Chapelle, so as to furnish an opportunity of reducing the rate of interest upon all redeemable debts, and by that of raising the amount of the sinking fund, and more firmly establishing the national credit.

After the fall of the credit of France towards the end of 1759, Great Britain had the command of all the money to be lent in Europe; and accordingly amazing sums were borrowed in 1760, 1761, and 1762. Of the sums borrowed, a great part, no doubt, was the property of strangers; but they, not being so well acquainted with the affairs of this nation as the English themselves, instead of subscribing to the loans, lent the money to our own country people, who, in hopes of a great rise upon the return of peace, filled the subscriptions with borrowed money.

The consequence was, that no sooner did the funds begin to rise after the peace, than every creditor demanded his money of those who had invested it in the public funds. This obliged the latter to bring their stock to market, and this again had naturally the effect of keeping the funds very low. Some, more prudent than the rest, had borrowed upon a long term of repayment; which had the effect of putting off still longer the settlement of the funds in the hands of the real proprietors, and of taking them out of those who only held them nominally.

Besides this accidental cause of the low price of the funds, other circumstances, no doubt, greatly contributed to produce the same effect.

However great the balance of trade, that is, of exportations above importations, may have been of late in favour of England, still the mighty sums drawn out by strangers have certainly, upon the whole, prevented much money from coming home on the general or grand balance of payments. While that remains the case, it is impossible money should regorge at home in the hands of the natives, and until this happens, there is no hope of seeing the 3 per cents. above par. But then the rise, small as it is, since the peace, may encourage us to hope that that time is not far off: for had the profits of our trade been quite unable to balance the loss upon our foreign debts, the funds would undoubtedly still continue to fall, which is demonstrably not the case from the circumstances of the loan in April 1766, obtained by government, with the assistance of a lottery indeed, at 3 per cent.^[30]

Here then was an outlet provided for more money than all that could regorge at home, viz. the payment of those foreign creditors, to whom the stock-holders were indebted. Besides this, the sale by government, of such tracts of land in the new acquired islands in the West Indies, provided another; money was even placed in the funds of France soon after the peace, until the adventurers were checked by the operations of the King’s council, in reducing both capitals and interest upon them, contrary to the original stipulations with the creditors. A lucky circumstance for Great Britain, as it forces, in a manner, all the money of the continent into the English funds, which equally remain a debt upon the nation, whether high or low in the market.

Were it as easy to get information of the political state of France as of Britain, one might attempt to give such a sketch of their affairs as we have now done of the other; but when we consider the lame accounts given by French authors who have made researches of that kind their particular study, it would be inconsiderate in a stranger ever to undertake a task so difficult.

In France, the finances are considered as a political arcanum, of great consequence to the state to conceal from vulgar eyes. It is not long ago, since the farmers of the greatest part of the revenue used regularly to burn their books at the end of the year, to prevent the King’s servants from knowing the state of the most essential part of his affairs. Cardinal de Fleuri abolished this custom, and obliged them to lay every thing open to his eyes.

I shall now endeavour to communicate, in as short and distinct a manner as I can, an idea of the present state of the French revenue; of the taxes from which it proceeds; of the manner they are administred; of the purposes to which they are appropriated; and of the state of the King’s debts at the end of the last war.

From this view we shall form a general notion of their public expences; of their public debts; and of what is most material, of the resources of that kingdom in time to come.

For this purpose, I shall divide the whole revenue of France, that is, all that is raised on the people, to whatever purpose it may be applied, into five branches; and after having first explained the nature of each, I shall give a general detail of them in their order.

The first branch is what is called the King’s ordinary revenue. This is composed of about twelve articles of permanent taxes, supposed to be sufficient for defraying the whole expence of government, civil and military, in time of peace.

The second is composed of all the extraordinary impositions which were laid upon the people, in consequence of debts contracted in the former war, ended in 1748.

The third, what was imposed during the last war, for the service of the state, and for paying off the debts then contracted.

The debts of France, contracted in periods anterior to those two wars, are charged on the ordinary revenue, as we shall presently see.

The fourth branch consists of two articles. The first comprehends certain perpetual taxes appropriated for certain state expences, not charged upon the ordinary revenue. The second, what is computed to be the expence of levying all the taxes, and also the profit of the farmers: or in other words, what the people pay more than the public receives from the hands of the tax-gatherers.

The fifth and last branch, comprehends the taxes paid to the court of Rome, to the clergy, and to the poor; with other duties belonging to private persons. Under one or other of these five branches, may be very properly arranged all the taxes paid by the French nation.

This article of 16 millions of annuities on lives is the only charge cast upon the King’s ordinary revenue, in consequence of the last war.

Besides the articles of expence here stated, there are many others, to which no limit can be set. The comptant, or the King’s private orders for secret service, and many different expences, form a great article. Subsidies also to foreign courts: in short, much more, in all human probability, is spent, than all the produce of this permanent revenue can answer. So that from this no relief from debts can be expected, except so far as it may be augmented by the falling in of the annuities on lives. But public debts are to be paid only by funds appropriated for that purpose: and were this revenue to be relieved of the whole 45 millions of interest charged upon it, I have little doubt but the King’s expence would augment in proportion.

I shall delay making any observation upon the nature of the impositions which produce this revenue, until we come to the subject of taxes, to which it naturally belongs.

Besides this ordinary revenue of the Kings of France, which (if we except 26 600 000 livres, or 1 182 222 l. 4 s. 5¼ d. upon the capitation, added on account of the war only for a time) may be considered as their civil list; there are other branches of revenue, which are to be looked on as extraordinary supplies, imposed for raising money in time of war, and for paying off the debts contracted, upon the return of peace. Of this nature are dixiemes and vingtiemes; taxes very contrary to the spirit of the French nation, and to which they never have submitted without the greatest reluctance, and only on very urgent occasions.

The credit of France fell very low towards the end of the former war, which began in 1744, and ended in 1748. The parliament registred with great unwillingness every edict imposing new burthens. The dixieme was a great augmentation of revenue, for the time it lasted; but being an imposition which the Kings of France never have been able to make perpetual, it could not be pledged for such large sums as are required in time of war, and which no nation, however wealthy, can furnish annually, as they are demanded.

To supply, therefore, the want of a fund to be mortgaged, and consequently the want of public credit, the King’s banker M. de Monmartel, with other men in business, joined their credit, and supplied the King’s extraordinary occasions. They opened a sort of bank anno 1745, where they received money at ½ per cent. per month, the principal payable on demand. This fund gained credit; payments being regularly made as soon as demanded.

Upon settling accounts after the peace, anno 1748, the King was found indebted to this bank for a vast sum of money. In order to pay it, lotteries were set on foot. The tickets were given to the bankers, and they by the sale of them withdrew their own paper, which was circulating with very good credit on the exchange of Paris. In order to furnish a fund for this lottery, the King had interest with the parliament to get a twentieth penny established, or one shilling in the pound, upon all the revenues of private people in France, except the clergy, and some hospitals. The same was charged upon the industry of all corporations of trades and merchants; and to these was added a capitation upon the Jews.

This was thrown into what they call the caisse d’amortissement, or sinking fund; and appropriated for paying off the lotteries, and some of the antient debts which were to be drawn, for this purpose, by lot; and for other extraordinary expences incurred in consequence of the war. This tax was to subsist, I believe, till 1767. It was this caisse d’amortissement which was shut up in 1759, by which step a mortal blow was given to French credit.

Besides this first twentieth penny, there were five other taxes imposed, and appropriated during a determinate number of years, not exceeding 15 in some, 12 in others, for paying off the debts contracted in the war ended 1748, and for some extraordinary expences of government.

These shall be specified in the following general view of this branch of the French revenue.

Extraordinary taxes established after the peace of Aix-la-Chapelle, with their appropriations.

This branch of revenue appears, by this state, to be totally appropriated to certain purposes.

Were appropriations adhered to in France, and could one be certain that debts are actually discharged, at the period appointed, in consequence of the appropriation for that purpose, we might form a better judgment of the actual amount of the debts of France, than in fact any man can do who is not in the administration.

Of this second branch of taxes I consider the twentieth penny, the two shillings in the pound augmentation upon it, and a like augmentation upon the double capitation; amounting in all to above 40 millions a year, as a resource which France may have at all times, in cases of necessity; although I do not suppose it will be possible to establish them as a fixed revenue. They will probably, however, as matters stand, be continued, either in whole or in part, until the great load of debts, recently contracted, shall be considerably diminished.

As for the remaining sum, arising from the posts, leather, and saltpetre, these I consider as perpetual; because by their nature they are not burdensome to the people.

We are not to understand that the annual sum of five millions of livres, appropriated for paying off the capital of 990 millions of the old annuities, bearing 2½ per cent. stated in art. 1st, was intended to be applied to these capitals, at the rate they stand. In France it is supposed that he who gets 20 years purchase of the interest of his debt, is always fairly paid off; and people there are so fond of reimbursements, even at this rate of making them, that when, about the year 1755, a like scheme of paying off those old annuities was suggested, it was upon condition that every one having, for instance, an annuity of 100 livres, should, in order to be intitled to this reimbursement, pay to the King 20 years purchase of it, or 2000 livres ready money; and that being complied with, his contract was to be put into the lottery wheel, with all the rest subscribed for, and if it happened to be drawn, he was to receive 4000 livres; to wit, the 2000 he had paid down, and the other 2000 as the value of a capital of 4000 livres, at 2½ per cent.

This every body must allow procures a wonderful facility in paying off debts. If the English creditors could be engaged to enter into the spirit of such reimbursements, government, I am persuaded, would not apply so closely as they do, to reduce the interest upon them; whereby a great distress comes upon poor widows and orphans, who have their all vested in the funds. This inconvenience is avoided in France: the poor are cherished by the comfort of high interest; the state is set free; and the creditors rejoice in getting back their money, in any shape whatever.

The war of 1756 breaking out, obliged the King to think of every expedient to increase his income. Had he set out by borrowing upon annuities for lives, at 10 per cent. and by mortgaging his ordinary revenue for the payment of them, his credit would have been more solid, and the plan of running in debt more systematical: but in the end, it would have involved him in the terrible dilemma of either making a bankruptcy, in order to re-instate himself in the possession of his ordinary revenue, or of making him depend more than he inclined upon his parliament; whose authority is absolutely necessary for laying a perpetual and regular imposition, which alone can form a solid basis of national credit.

He was therefore resolved, in one way or other, to increase the impositions on the people in the time of war, in order to avoid the consequences he foresaw from the loss of his fixed revenue.

The King’s ministers at this time could not convince the parliament of Paris, that in order to borrow money upon the best terms, it was necessary to have a sure fund for paying the interest of it.

It had been usual to borrow money, on pressing occasions, from the farmers of the revenue, bankers, and financiers, as they are called, at 7 and even 10 per cent. They understanding the chain of the affairs of France, used to obtain credit both abroad and at home, from people who would not lend directly to the King; although they knew at the time of the loan that the money was borrowed for his use. The reason was, that the King was under an absolute necessity to keep faith with this set of men, upon whom the credit of France has depended for many ages: and as the profits they used to make were very great, ministers knew, by a sort of instinct, when they had gained enough; and in clearing their accounts in the usual way, a sufficiency was left to them, to repay what they had borrowed from others.

Perhaps the parliament thought, and perhaps with reason, that in the main it was cheaper to borrow in this way, at 10 per cent. than in the English way, at 3 per cent. because of the great facility in paying off the debts which attended it; but this is only a conjecture. That there was however a contrast of sentiments between the parliament, and the minister of the finances at that time, who had contracted English ideas of credit, is most undoubted; and it was this contrast which brought on the bankruptcy in 1759, when the sinking fund was shut up against the creditors by an act of power. To judge of the sentiments of both parties with candour, let us then examine the plan of borrowing proposed by the one, and by the other.

The minister, M. de Silhouëtte, proposed to the King, to levy, as a solid fund of credit to borrow upon, a general subvention, as it was called, over all France; or in other words, to make the repartition of a large annual payment, over all the cities, towns, villages, and suburbs in France.

This was to be divided according to the supposed wealth and quantity of circulation every where. Every district was ordered to report to the King’s council their opinion concerning the particular mode of raising their proportional part of it, in the best way relative to their situation. This report the council was to examine, and to approve or amend the proposal given in, according to information.

This was perhaps the best plan of taxation, if properly executed, that ever has been thought of, for a nation already under a regular administration of government, and accustomed to pay considerable impositions.

It removes the inconvenience attending all general taxes, which never fail to affect unequally different places and districts. It admits of a prudent mixture of excises, with taxes upon possessions, according to the internal circumstances of every place. It confines them to towns, where alone all excises at least can be levied with propriety. It lightens the oppression of tax-gatherers; because the corporation may employ whom they will for that purpose. In a word, it is a tax administred with all the advantages of a farm.

This tax, the general subvention, after it had been imposed by edict, registred in a Bed of justice September 1759, fell to the ground, from the nature of the French constitution; because it could not be levied without a systematic administration, supported by the authority of the courts of law, to which the parliament would not give their concurrence, for a very plain reason.

The general subvention being very extensive, and calculated for a fund of credit to borrow upon, was, by its nature, of a species proper to become a perpetual tax, as all excises are. The parliament of Paris seemed to think it agreeable to the constitution, which they are sworn to maintain, to preserve at all times in their hands a certain power over the King’s purse, in order to prevent an extravagant minister from impoverishing the King and the kingdom at once, or running them into the inextricable confusion of an infallible bankruptcy.

This circumspection of the parliament was represented in another light at court; and odious parallels were drawn between what had happened in England about the middle of the last century, and what soon might be expected in France.

Upon such topics every one judges as he is affected. The minister was railed at by the parliament-party, in the most virulent manner. Who was in the right, and who was in the wrong, upon the general question, of the propriety of raising so large an imposition, to serve as a fund of credit, under a government like that of France, I shall not here examine. But that a solid fund should be provided, in one way or other, proportional to the actual deficiency of the annual supplies, and to what could not be raised within the year, for the uses of the war, was, I think, entirely agreeable to principles.

This the minister had proposed in the subvention, though perhaps the plan was too great; and the parliament, when they rejected the proposal, sensible that the exigencies of the state demanded a supply of money, proposed in their turn, as an equivalent for the general subvention, to coin for 600 millions of notes, which were to have the sanction of parliament for their fund of payment; but no provision was made for the ready circulation of them in the interim.

Here then is an example where the sentiments of the French nation were divided upon the principles of public credit. And this affords a good opportunity of reconciling them, and of confirming the doctrine we have been endeavouring to establish.

The minister felt the disadvantage of the King’s borrowing upon a lame security; he therefore proposed a solid and permanent fund of credit for performing the obligations to be contracted with the creditors.

The parliament, on the other hand, examined the situation of the people, who, they thought, were no longer in a capacity to pay the taxes already imposed; and therefore concluded, that it was unnecessary to establish any new one. They therefore proposed to augment circulation, by providing a means whereby alienations might be carried on, and by that they expected to render the taxes already imposed more productive.

Both parties were in the right, as commonly is the case in such disputes; but they did not perceive how their opinions could be reconciled.

Had circulation been facilitated by the establishment of a bank upon true principles, perhaps the taxes already imposed, might have produced a sufficient fund for carrying on the war, without the expedient of the general subvention.

But the manner proposed by the parliament to increase circulation, by paying with paper money, and not providing a fund for realizing it when it came to stagnate, was an expedient entirely delusive. The paper would soon have fallen to a great discount: the remembrance of the Missisippi would probably have been revived, which would have occasioned the locking up of the coin; and the kingdom might have been involved in the greatest distress and bankruptcy.

The minister should therefore have concurred with the parliament in a scheme for establishing a bank: the King might safely have entrusted the administration of it to parliament, and even have supplied coin from the royal treasury for circulating the paper. But the minister, I suppose, took it for granted, that taxes would be paid, providing they were imposed; and the parliament, that the paper would circulate, providing it was issued.

The reasonings I have ascribed to each party in this dispute, are not founded upon information: they are only natural conjectures which I form from the opposition of sentiments between men who were all, I suppose, well acquainted with the situation of France, and who respectively took part according to the combinations which occurred to them.

The remonstrances of the parliament at that time were filled with an enumeration of distresses, all of which are the necessary effects of a scanty circulation. In the King’s edicts there is strong reasoning upon the principles of public credit. The candour I feel in my breast, while I examine the merits of this important dispute, will I hope serve as an apology for all mistakes in point of exact information.

The result upon the whole was what might have been expected. The subvention was dropt, and the proposal of the paper was rejected by the King.

The middle term adopted by the parties, shewed however, I think, that in the main the minister had been in the right; because the taxes were increased and paid: had the paper been issued, the success, I am persuaded, would not have been favourable in proportion.

But instead of a permanent subvention, a tax of the most odious nature was established, which, from this very circumstance, there was little danger of seeing long continued.

In the preceeding year, a second twentieth penny upon possessions had been imposed, to which had been added 2 shillings in the pound of the tax itself; a new poll-tax upon certain classes of the people in proportion to the number of their servants; an additional duty upon the stamps upon silver and gold plate; higher duties on foreign manufactures imported; and 20 per cent. on all former duties on consumption. The second twentieth was to continue until two years after the peace; the other duties for eight years longer.

Notwithstanding this heavy load already laid upon property, the parliament, rather than consent to the subvention, agreed to impose a third twentieth penny upon possessions; and to render this tax more productive, additional poll-taxes upon place-men, &c. were comprehended in that edict. Thus ended the dispute: the minister was dismissed, and the edict for the general subvention was withdrawn.

Besides the second and third twentieth penny, several augmentations of revenue were obtained during the last war, which I shall presently mention, two of which, for their peculiarity, I shall briefly explain.

The clergy of France, strongly pressed by the King, supported by his parliaments, to give in a declaration of their income, in order to be taxed at so many shillings in the pound, like other subjects, after many evasions, at last succeeded in disappointing the scheme. They offered an extraordinary free gift equivalent to the two twentieths, to be paid annually until 1765, and this was accepted.

The ordinary free gift of the clergy is at the rate of a million and a half of livres a year; this they doubled and paid at the rate of three millions a year, which we may consider as two shillings in the pound of all the clergy possess in France, which makes their revenue to be about thirty millions a year, and I believe it does not far exceed it.

The other branch of revenue is something analogous to a circumstance in the history of English taxes: it was called an extraordinary free gift to be paid by every corporation in France. Charles I. had a very exact valuation put upon all England, when he proposed to levy ship-money. This was found so correct that it served for a basis to regulate the distribution of the sum of 100 000l. a year paid to Charles II. for his courts of wards and liveries^[32].