In February,
1786, he was defeated on a bill for fortifying the dockyards at Plymouth
and Portsmouth. His defeat was largely due to the unpopularity of the
Duke of Richmond, the author of the plan, who had not gained in general
esteem by deserting his former party, and to the old prejudice against
increasing the military power of the crown. Yet it illustrates Pitt's
position at the time. It was a "loose parliament"; the majority voted
every man as he had a mind; Pitt had yet to bind his party together, and
his cold and repellent manners still hindered him from making
friends.[197] His power was strengthened in this session by the general
approval elicited by his bill for the reduction of the national debt by
means of a sinking fund. In forming his plan he received much help from
Price, a nonconformist minister, distinguished as a writer on financial
questions. When introducing his bill he was able to show that the public
revenue would exceed the expenditure by about L900,000, which he
proposed to raise to L1,000,000 by some new taxes not of a burdensome
nature, ample resources existing to meet a temporary excess in naval and
military expenditure caused by the late war. That the revenue would
continue to improve seemed assured by the increase in the customs due to
Pitt's measures against smuggling. Government might reckon on at least
L1,000,000 surplus, and that sum he proposed to make the foundation of
his new sinking fund. Unlike the sinking fund established by Sir Robert
Walpole in 1716, which had from time to time been diverted to other
purposes, his fund was to be kept inviolate in war as well as in peace,
and applied solely to the discharge of debt. To secure this, he proposed
that in every quarter of each succeeding year L250,000 should be paid to
six commissioners of high position, and should be used by them in the
purchase of stock. The interest of such stock, together with the savings
effected by the expiration of annuities, was to be invested periodically
in the same way. The fund thus created would then accumulate at compound
interest and become a sinking fund for the extinction of the national
debt.

The bill passed both houses without a division. The highest expectations
were founded upon it, for people generally, in common with Pitt himself
and Price, regarded the new fund as an infallible means of discharging
the national debt solely by the uninterrupted operation of compound
interest. That the applicati