The first class of security in the Share List contains all British funds, etc.; and the principal items in it are composed of the various classes of securities which make up the funded debt of the United Kingdom. The funded debt as at 31st March 1903 amounted to £640,086,000, composed of the following, the first three of which are quoted on the Stock Exchange:-

The above is the total of what is called the funded debt, but the total debt at 31st March 1903 amounted to a much larger sum - £798,349,000 - made up of the above funded debt and of the following classes of unfunded or floating debt. Of the latter only the War Loan is quoted on the Stock Exchange:-

The main distinction between the funded and unfunded debt is that the nation in the case of the funded debt is liable for interest only. It has the power to repay the capital at certain fixed dates; but is under no obligation to do so. For instance, the Government in power in 1923 will have the right, on 5th April of that year, of insisting on the holders of the £590,000,000 of 2 1/2 per cent Consols taking cash and giving up their securities; but the holders have not at any time the power of insisting on repayment. The only means they possess of realising their holding is that of selling it on the Stock Exchange for what it will fetch.

On the other hand, the unfunded debt is made up of sums borrowed by the Government for fixed periods, and in this case the country is liable for the principal borrowed as well as the interest; so that, shortly stated, in the funded debt the nation guarantees payment of the interest but comes under no obligation to repay the capital as long as interest is paid, while in the unfunded debt it also guarantees repayment of the capital.

In order to give you an idea of the development of the National Debt, I cannot do better than quote the following extract from the article on the subject in 'Whitaker's Almanac' for 1904:-

The National Debt

The National Debt amounted on 31st March 1903 to £798,349,190 gross and £759,943,282 net, being at the rate of £17, 18s. 7 3/4d. per head of the population of the United Kingdom; the annual cost for 1902-3 being £27,282,057, or 12s. l0 1/2d. per head. This amount is mainly the remnant of the growth of many years, and nearly all was raised for foreign wars. There was a trifling sum of £664,263 until the "Glorious Revolution" of 1688, which added nearly £16,000,000 to the Debt. Under Queen Anne the campaigns of the Duke of Marlborough added nearly £38,000,000, part of which was paid off in the time of George I. In the reign of George II. about £87,000,000 were added, but the first twelve years of George III. saw £10,000,000 of this paid off. The American War added £121,000,000, making the total nearly £250,000,000, which was reduced considerably until 1793, when the repayments ceased owing to the outbreak of the French Revolutionary War.

In twenty-three years £601,500,343 were added to the Debt for the purposes of the war.

The amount of the Debt in January 1816, capitalised in the manner adopted since 1835, was £900,436,000, the annual charge being nearly £33,000,000. With peace secured, efforts were made to reduce the Debt, and at the accession of Queen Victoria the amount stood at nearly £788,000,000, with an annual charge of £29,000,000. Small sums were paid off annually from 1837-1854, when the Russian War added £33,000,000 to the Debt. Repayments were made from 1858 onwards, and on 31st March 1899 the gross total was £635,040,965, being a decrease since the accession of Queen Victoria of £153,000,000; the annual charge having decreased in the same period from £29,000,000 to £23,000,000. The war in South Africa and the military operations in China together accounted for an increase in the gross amount of £149,482,000, the balance of cost (£67,684,000) being contributed by Revenue.

I should like to have been able to enter more fully into the history of the National Debt, and especially the creation of what is now called "Consols"; but the limits of time prevent my giving as thorough an explanation as one might otherwise desire.

I may refer, however, to the origin of this word "Consols." Originally duties and taxes assigned as security for a debt were called a "fund"; and, as you are doubtless aware, the Government securities were at one time familiarly known as "the Funds." Eventually as the debt increased a large number of separate loans were borrowed, each secured over different taxes, and consequently the National Debt consisted of a considerable number of so-called "funds." Mr Clare, in his lectures on Stock Exchange Securities, etc, gives the following further particulars:-

Some of the taxes left a deficit, while others produced a surplus; and the multiplicity of funds complicated the bookkeeping. It was therefore decided about 1715 to collect the various branches of revenue into three large groups known as the General, the Aggregate, and the South Sea Funds, each of which was charged with the payment of certain specific annuities. This arrangement, though still involving a separate calculation at the Custom House for each of the different subsidies, was a distinct improvement over the former system, and for some time worked well enough; but long before the end of the century the country had outgrown it, and further simplification was urgently called for. In 1787, accordingly, Mr Pitt pointed out to the fundholders that, as the credit of the country was committed to the fulfilment of all its obligations alike, the comparative priority of the various loans was more imaginary than real; and, on obtaining their consent to an amalgamation of the security, he abolished a distinction that had become practically valueless, and established one single fund to which he carried the whole of the permanent revenue, and to which he gave the name of "The Consolidated Fund." The principal and interest of the unfunded debt, and the whole of the perpetual annuities payable in respect of the funded debt, form a first charge upon and are payable out of this Consolidated Fund of the United Kingdom, without distinction or priority.