Front Page Titles (by Subject) 490.: ricardo to trower1 - The Works and Correspondence of David Ricardo, Vol. 9 Letters 1821-1823
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490.: ricardo to trower1 - David Ricardo, The Works and Correspondence of David Ricardo, Vol. 9 Letters 1821-1823 
The Works and Correspondence of David Ricardo, ed. Piero Sraffa with the Collaboration of M.H. Dobb (Indianapolis: Liberty Fund, 2005). Vol. 9 Letters 1821-1823.
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First published by Cambridge University Press in 1951. Copyright 1951, 1952, 1955, 1973 by the Royal Economic Society. This edition of The Works and Correspondence of David Ricardo is published by Liberty Fund, Inc., under license from the Royal Economic Society.
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ricardo to trower1
London 5 March 1822
My Dear Trower
I have not been able to examine your plan of paying off a considerable portion of debt, by allowing persons to compound for their assessed taxes; but on a cursory view I should conclude that it contained some fallacy which would be detected on a close examination. You propose to allow at the rate of 5 pct.. to those who purchase their life interest in the assessed taxes, and the money obtained is to be employed at 4 pct. in paying off debt. You do not add to the whole burden of taxation, and yet with the disadvantage I have stated you think the debt will be much more diminished on your plan, than if the present mode be persevered in. I might possibly agree that yours was the safest plan because it left little or nothing in the power of ministers, but it is impossible, I should think, to be so economical as the one now in operation. One error is immediately observable; you suppose that a 5 million sinking fund will only pay off 60 millions in 12 years, but you forget that it operates at compound interest, and therefore that its effect will be very greatly increased. Perhaps I may be wrong, and if I am you will be kind to set me right.2
Sir H. Parnell mentioned a plan to me which would have the effect of making the sinking fund available, and at the same time of placing it out of the grasp of ministers.1 It is as follows: Employ your 5 millions in making your perpetual annuities terminable ones, and you secure the object of extinguishing a large portion of debt in a period of short duration in the existence of a nation. Long anns. are at 20 years purchase, and 4 prcts. are at 25 years purchase in the market. Give 5 millions pr. Ann to the holders of 500 millions of 4 pcts. and they will agree to accept 25 million pr. Annm (instead of 20 million pr. Annm.) on the condition that the interest should cease altogether in 1860, the period at which the Long Annty. terminates. In 1860 then our debt would be reduced to 300 millions, and indeed might be altogether extinguished if in the meantime by a surplus of revenue a larger sum could be diverted to the above purpose. This will explain the principle: it might be desirable to extinguish a smaller sum in fewer years, by devoting the 5 millions to that purpose, or you might extinguish different amounts of debt at differently determinate periods—this you will easily understand.
I am glad you approved of the sentiments I expressed in my speech in Parliament.2 It is a great disadvantage to me that the reporters not understanding the subject cannot readily follow me—they often represent me as uttering perfect nonsense.
The country circulation is I believe very much reduced, and I trust it is issued by bankers of character and property. I have not much fear of their being shaken by a return to specie payments. If Cobbetts recommendation should again endanger the safety of the Bank of England in consequence of an extensive practice of hoarding sovereigns, which I by no means apprehend, it might become necessary to adopt the Ingot plan of payment once more.1 I should however be very sorry if the present system were not persevered in as long as it was practicable. Cobbett’s aim is mischief, but he will not be able to succeed in it, if the Bank manage their affairs with common discretion. The Directors are very ill calculated to regulate a currency situated as ours now is, and if there is anything to fear it is from their incapacity. I shall not fail to repeat my cautions to them from time to time when the subject comes under discussion.—Huskisson must have great influence in the situation which he fills, and he cannot fail to direct it usefully and scientifically.
I do not think that we shall examine evidence in the Agricultural Committee. We have got rid, after a long discussion, of a proposal made by Mr. Banks to devote a million of the public money to the purchase of corn—we negatived it. Some more absurd proposals are before us, but they I trust will meet with the same fate. The present corn law will I think be repealed, and another less objectionable, but still a bad one, will be substituted in its place. I have gained an important and powerful ally, in the Committee, by the nomination of Mr. Whitmore2 , who is a zealous advocate for the correct doctrines. On the other hand I have lost the assistance of Huskisson, who absents himself on the plea that Wodehouse made an attack on him in the House, but I think his real reason is that he cannot approve, and will not oppose, the plan recommended by the Government.1
The House broke up early this evening, which has given me an opportunity of scribbling to you. My letter is a strange jumble, compounded much in the same manner as my speeches. You must treat me as the House of Commons does; try to make out what I mean and excuse the manner of my expressing my meaning.—
With kind regards to Mrs. Trower, in which I am joined by Mrs. Ricardo I remain very truly Yours
[1 ]MS at University College, London.—Letters to Trower, LV.
[2 ]Trower’s plan is set forth in one of his MSS (now in the possession of Dr Bonar), which is printed in full in Letters to Trower, pp. 183–5. In substance, he suggested that individuals should be allowed to purchase a life composition for their assessed taxes, at the rate of interest of 5 per cent., and the proceeds be used to redeem 4 per cent. Stock at par. The deficiency due to the difference between the two rates of interest should be taken out of the sum annually appropriated for the Sinking Fund. It is assumed that the payers of assessed taxes are generally between the ages of 35 and 50, and the average purchase of the life interest about 12 years.
[1 ]Parnell expounded this plan in the House of Commons in March 1823 (Hansard, N.S., VIII, 536, 548); see Ricardo’s comments, above, V, 270–1.
[2 ]Cp. above, p. 166.
[1 ]See Cobbett’s Weekly Register, 2 March 1822, ‘To the Money Hoarders’. ‘It is for you to hoard away....The Bank can, youwill remember, stop paying in sovereigns whenever it pleases, until May 1823. There are persons, indeed, who will go and demand bars; but that is not so convenient’ (p. 530).
[2 ]William Wolryche Whitmore (1787–1858), M.P. for Bridgnorth; author of A Letter on the Present State and Future Prospects of Agriculture. Addressed to the Agriculturists of the County of Salop, published later in 1822 (London, Hatchard).
[1 ]Huskisson had announced in the House of Commons on 20 Feb. 1822 that, since he was accused of having mystified and misled the Agricultural Committee of the previous year, he would decline attending the committee on its reappointment. In the debate on 6 May he openly opposed the resolution on agriculture moved by Lord Londonderry (the leader of the House); immediately afterwards he offered his resignation as Commissioner of Woods and Forests, but it was not accepted. (See ‘Biographical Memoir’ prefixed to The Speeches of the Rt. Hon. William Huskisson, London, 1831, vol. i, pp. 84–5.)