SOUTH-SEA ACT

The king having recommended to the commons the consideration of proper means for lessening the national debt, was a prelude to the famous South-Sea act, which became productive of so much mischief and infatuation The scheme was projected by sir John Blunt, who had been bred a scrivener, and was possessed of all the cunning, plausibility, and boldness requisite for such an undertaking. He communicated his plan to Mr. Aislaby, the chancellor of the exchequer, as well as to one of the secretaries of state. He answered all their objections; and the project was adopted. They foresaw their own private advantage in the execution of their design, which was imparted in the name of the South-Sea company, of which Blunt was a director, who influenced all their proceedings. The pretence for the scheme was to discharge the national debt, by reducing all the funds into one. The bank and South-Sea company outbid each other. The South-Sea company altered their original plan, and offered such high terms to government, that the proposals of the bank were rejected; and a bill was ordered to be brought into the house of commons, formed on the plan presented by the South-Sea company. While this affair was in agitation, the stock of that company rose from one hundred and thirty to near four hundred, in consequence of the conduct of the commons, who had rejected a motion for a clause in the bill, to fix what share in the capital stock of the company should be vested in those proprietors of the annuities who might voluntarily subscribe; or how many year’s purchase in money they should receive in subscribing, at the choice of the proprietors.

1720

In the house of lords, the bill was opposed by lord North and Grey, earl Cowper, the dukes of Wharton, Buckingham, and other peers; they affirmed it was calculated for enriching a few and impoverishing a great number: that it countenanced the fraudulent and pernicious practice of stock-jobbing, which diverted the genius of the people from trade and industry: that it would give foreigners the opportunity to double and treble the vast sums they had in the public funds; and they would be tempted to realize and withdraw their capital and immense gains to other countries; so that Great Britain would be drained of all its gold and silver; that the artificial and prodigious rise of the South-Sea stock was a dangerous bait, which might decoy many unwary people to their ruin, alluring them by a false prospect of gain to part with the fruits of their industry, to purchase imaginary riches; that the addition of above thirty millions capital would give such power to the South-Sea company, as might endanger the liberties of the nation; for by their extensive interest they would be able to influence most, if not all the elections of the members; and, consequently, over-rule the resolutions of the house of commons. Earl Cowper urged, that in all public bargains the individuals of the administration ought to take care, that thay shall be more advantageous to the state than to private persons; but that a contrary method had been followed in the contract made with the South-Sea company; for, should the stocks be kept at the advanced price to which they had been raised by the oblique arts of stock-jobbing, either that company or its principal members would gain above thirty millions, of which no more than one-fourth part would be given towards the discharge of the national debts. He apprehended that the re-purchase of annuities would meet with insuperable difficulties; and, in such case, none but a few persons who were in the secret, who had bought stocks at a low rate, and afterwards sold them at a high price, would in the end be gainers by the project. The earl of Sunderland answered their objections. He declared that those who countenanced the scheme of the South-Sea company, had nothing in view but the advantage of the nation. He owned that the managers for that company had undoubtedly a prospect of private gain, either to themselves or to their corporation; but, he said, when the scheme was accepted, neither the one nor the other could foresee that the stocks would have risen to such a height; that if they had continued as they were, the public would have had the far greater share of the advantage accruing from the scheme; and should they be kept up to the present high price, it was but reasonable that the South-Sea company should enjoy the profits procured to it by the wise management and industry of the directors, which would enable it to make large dividends, and thereby accomplish the purpose of the scheme. The bill passed without amendment or division; and on the seventh day of April received the royal assent. By this act the South-Sea company was authorised to take in, by purchase or subscription, the irredeemable debts of the nation, stated at sixteen millions five hundred forty-six thousand four hundred and eighty-two pounds, seven shillings and one penny farthing, at such times as they should find convenient before the first day of March of the ensuing year, and without any compulsion on any of the proprietors, at such rates and prices as should be agreed upon between the company and the respective proprietors. They were likewise authorised to take in all the redeemable debts, amounting to the same sum as that of the irredeemables, either by purchase, by taking subscriptions, or by paying off the creditors. For the liberty of taking in the national debts, and increasing their capital stock accordingly, the company consented that their present, and to be increased annuity, should be continued at five per cent, till Midsummer, in the year one thousand seven hundred and twenty-seven; from thence to be reduced to four per cent, and be redeemable by parliament. In consideration of this, and other advantages expressed in the act, the company declared themselves willing to make such payments into the receipt of the exchequer as were specified for the use of the public, to be applied to the discharge of the public debts incurred before Christmas, in the year one thousand seven hundred and sixteen. The sums they were obliged to pay for the liberty of taking in the redeemable debts, four years and a half’s purchase for all long and short annuities that should be subscribed, and one year’s purchase for such long annuities as should not be subscribed, amounted on the execution of the act to about seven millions. For enabling the company to raise this sum, they were empowered to make calls for money from their members; to open books of subscription; to grant annuities redeemable by the company; to borrow money upon any contract or bill under their common seal, or on the credit of their capital stock; to convert the money demanded of their members into additional stock, without, however, making any addition to the company’s annuities, payable out of the public duties. It was enacted, that out of the first monies arising from the sums paid by the company into the exchequer, such public debts, carrying interest at five per cent, incurred before the twenty-fifth day of December, in the year one thousand seven hundred and sixteen, founded upon any former act of parliament, as were now redeemable, or might be redeemed by the twenty-fifth day of December, in the year one thousand seven hundred and twenty-two, should be discharged in the first place: that then all the remainder should be applied towards paying off so much of the capital stock of the company as should then carry an interest of five per cent. It was likewise provided, that, after Midsummer in the year one thousand seven hundred and twenty-seven, the company should not be paid off in any sums being less than one million at a time.