The Sun.
London, England, 1822-07-08 00:00:00

LITERARY NOTICE.

A PLAN for REDUCING the CAPITAL and the AN.
MIAL CHARGES ofthe NATIONAL DEBT; humbly
suggested to the Consideration of Members of Parliament.
By Joit' BRICKWOOD, jun. May, 1822. 3rd Edition.
This is a very ingenious production. •In our
humble opinion the Author -has demonstrated,
that a'great part of the 3 per cents. and the whole
of the 4 per cents. may be converted into a new
5 per cent, stock, irredeemable for at least 25
years, by an operation, the result of which would
be to diminish the capital of the National Debt
by more than two hundred millions, and at the
same time to effect a large reduction of the an-
nual charge. By adopting the mode recom-
mended, too, be contends that the Public may
save more than one-hundred and fifty millions of
money; which must be thrown away by continuing
the present method of redeeming the debt.—The
plan of our Author, it.appears, was subthitted to
the CHANCELLOR of the ExciteOuta, long before
he had' taken his measures for effecting the late
reduction of the 5 per cents. We are at a loss
to conceive on what grounds Mr. VANSITTART
can have rejected the propositions ; and we con-
fess that from the confidence which we place in
Otis financial skill and abilities, ,we were for some
time inclined to .doubt the accuracy of Mr.
BRICK WOOD'S calculations, and the practicability
of his project, since they had not received Mr.
VANSITTART'S approbation. After a most care-.
ful examination of the scheme, however, we are
satisfied that it might have been successfully carried
into effect. Perhaps even
_the best and ablest Mi-
•nisters are sometimes influenced by personal con-
siderations ; iand feel reluctant to enter upon
magnificent- undertakings, the merit of originat-
ing which does not belong. .to themselves.—Mr.
BR.ICKWOOD'S plan is grounded on the Principle,
that, when' the rate of interest in the money
market is low, the value of a certain fixed an-
nuity is high in proportion ; and it proposes that
a new 5 per cent. stock, not to be redeemed for
at least 25 years, shall be established, on the
that the value of such annuity. in the
market will - considerably exceed one" hundred
pounds. •Three and Four per cents., therefore,
might, under certain. circumstances, be converted
into this new stock'With extraordinary advantage
to the Country, .while the income of the present
fund-holders would be improved rather than
injured by the change.—The following are ex-
tracts :
" In the existing circumstances of the money-market, th 6
greatly -increased ,National Debt, and the 5 per cents. ex-
ceeding one hundred and forty:eight millions, it was humbly
submitted to the Chancellor of the Exchequer, by: a' plan laid
before him in January, 1818, that a reduction and 'saving of
capital, as well as annual charge to a far greater amount, might
be immediately effected, by an operation exactly the converse
Of the proposition of the. Finance Committee. 'By establishing
a new 5 per cent. stock, the interest of which should be pledged
not to be reduced for twenty-five or thirty years, such a stock
would bear a higher price in the market than any other, and
considerably above par_; and then 3,4, and 5 per cents. might
be converted into this new fund at an immense saving to the
public, both of capital and annual charge.
The plan was conceived upon this principle, that, when
the market-rate of interest is low, the value of a certain an.
nuity is high in proportion. And I preferred applying the
principle to a 5 per cent. stock, being the favourite and best
understood fund among persons holding stock for actual in-
come. Although the saving of capital would be far greater
if the principle were applied to a 6, 7, or 8 per cent. stock ; but
which, on account of its novelty, might be unfavourable to the
practicability of the plan.
As the -5 per cents. were at 120 ;.1 January, 1790, when
the 3 per cents. were at 80, and in January, 1791, at 123 when
the 3 per cents: were at 83, notwithstanding the prospect of the
redemption of the-5 percents. it was reasonable to believe, in
1817,,that, if the impression made by the Finance Report had
not induced the public to act upon the expectation that the 5
per cents. would soon be'reduced, this stock would have risen
much above par.* And, -therefore, if a 5 per cent. stock were
created 2 by.funding, for example, Exchequer Bills, and this
rate of interest were declared permanent for at least twenty-
five-years„ it could not be doubted that such stock (all other
circumstances being equal). would- command in the market a
price approaching to the ratio of the actual interest upOn money
invested therein, according, in some degree, to the following
table of relative prices of several funds and rates of interest
upon money invested in them. By establishing such a stock
the state rmght remedy thedefect in,the existing system and,
instead of borrowing a small sum to pay a large one, would re-
ceive a large sum to pay a smaller one ultiMately. •
' Rate of
3 per Cent. 4 per Cent. 5 per Cent. Interest upon
• Money invested.
X. X. s. d. X. s. d. s. d.
When at 70 - 93 6 8 - 116 13 4 - 4 5 8 per Ct.
72 - 96 0 0 - . 120. 0 0 - 4 3 3
75 - 100 0 0 - 125 0 0 - 4 0 0
78 - 104 0 0 - 130 0 0 .; 3 16 11
80 - 106 13 4 - 134 68 - 315 0
85 - 113 6 8 - 141 13 4 - 3 10 7
90 - 120 0 0 - 150 0 0 - 3 6 8
100 - 133 6 8 - 166 13 4 . 3 • 0 .0 •
According to Baily's Tables, the value of a 5 per cent. stock
to be redeemed at par at the end of twenty-five years, is
1151.125. 6d., calculating interest at 4 per cent.; or 1171.55. 10d.
if redeemed at the end of thirty years: As the value.of such
annuity increases in proportion as the market-rate of interest
diminishes, if interest be calculated at 31 per cent. the value of.
the annuity will be 124/. 14s. 5d., if to be redeemed at the end
of twenty-five years ; or 1271. 1 ls. 9d., if to be redeemed at the
end of thirty years.- These values, merely as arithmetical cal-

° The Navy 5 per Cents. have been continually above par
since 1817. In January, 1822, at 1071 to 108, dividend de-
ducted.

* Baily on the Doctrine of Intexest and Annuities is a work
of the highest authority. To enter more into detail,- at the end
a table is given, which shows, for example, the present value of
an annuity of one pound per annum for twenty-five years to be
15,622,:0r 151. 12s. 50., calculating interest at 4 per cent. being
781. 2s. 3d. for five pounds per annum. And another table
shows the present value of one pound, payable at the end 'of
twenty-five years, 37,512, or 37/. 10s. 3d. for one-hundred
pounds. These two sums amount together to. 115/. 12s. 6d.
Mr. Baily himself and Mr. Benjamin Gompertz have kindly
taken the trouble to verify the estimates of value grounded
upon those tables. And these values prove to mathematical
demonstration the validity of the principle forming the basis of
this plan.
t if the 3 per cents.' were rated at 75., and the new 5 per
cents. at 125, 166/. 13s. 4(1. of 3 per cent. stock would be equal
to 100/. new 5 per cents. ; 450 millions of 3 per cents. would
be converted into 270 millions of new 5 per cents. ; and 3 per
cent. upon 450 millions being equal to 5 per cent. upon 270 mil-
lions, the annual interest, in either case, would amount to the
same sum, 13,500,0001.